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Most individuals are not proficient at managing personal finances. Although, management an easy task, usually only for some people who have the experience with managing their finances. In contrast, others find it a daunting due to lack of knowledge. Because, the economy have transfigured drastically since the1980’s, and the cost of living, insurance rates, and interest rates on student loans have all increased along with health care having doubled, managing money well has become more difficult. Therefore, it is imperative to acquire the skill of managing one’s personal finances. Through budgeting, saving and advice from a financial planner will ensure any individual financial success and stability.
As an accountant, I know the key to gaining control over personal finances requires a realistic budget be in place. A budget involves several important steps. First, total all sources of monthly income; second, prioritize expenses from most important to least like, mortgage, loans/cost, and automobile, utilities to cell phone and cable expenses. Finally, measure the monthly income versus total amount of expenses. If the monthly expenses are more than income received, this signifies living beyond one’s means. Most people should understand that “Budgeting, either by a formal or informal plan, is a first step in deciding what needs and wants must be meet and what resources are available” (Brown, 2007, p. 316). After all, conquering financial stability gives one the ability to control savings, as well. However, setting a budget is only the beginning of structuring finances. In order to uphold a budget one must stay focused on their needs instead of wants. This focus is often extremely difficult to gain or maintain.
Bad spending habits for long periods make controlling finances complex at times. Compulsive shopping, obsessive credit card shopping, and over spending are all bad spending habits. In contrast, learning from experience, good and bad can be the best teacher. In my mind, the triggers of bad spending habits are due to easy access of cash, misuse of credit card, and compulsive shopper, as well. First of all a person has to identify what influence bad spending habits. Next, analyze ways to correct the problem. Finally, develop a plan to prevent over spending. Recognizing how financial mistakes were easily done will help better understand how to avoid the monetary miscalculations in the future. Most consumers have a savings account for emergencies, like unexpected medicals bills, a change of resident, or decrease in one’s pay.
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Effective money management
Brown, B. J. (2007). Financial literacy. In B. S. Kaliski (Ed.), Encyclopedia of business and finance (2nd ed., Vol 1, pp. 315-317). Detroit: MacMillan Reference. Retrieved from Gale Virtual Reference Library.
Bernard, T. S. (2013, July 27). A start-up aims to bring financial planning to the masses. New York Times, p. B1 (L). Retrieved from New York Times database.
Ramsey, D. (2010). The Money Answer Book. Nashville, TN: Thomas Nelson.