Personal finance is the managing of money on an individual level. It involves the financial decisions on how a person manages their income, savings, credit, investments, security and insurance.

Income is the money that you receive in exchange for providing a service or from selling something of value. It can be via a job as an employee, a business you operate, property you sell or lease or from self-employment.

Your income is what you end up with after you have paid all the appropriated taxes.

Saving is the decision to set aside part of your income to use in the future. There are different ways to save. Some of the common ways involves saving cash in a piggy bank at home, opening a savings bank account or via a credit union or loan the money to someone to receive it at a later date with interest. People save for many different reasons. Some of the common reasons included: buying a home, a new car, education costs, wedding, future children etc. The amount saved is affected by the duration of time it is saved for, the interest rates and the rates of inflation.

Credit is the ability to borrow money or have access to goods or services from creditors (a financial institution, merchant (seller) or service provider). When a creditor gives a person credit, it is usually by way of a contractual agreement, in which the borrower (you) receives something of value and agrees to pay for it later, usually with interest. Personal credit, is the credit that is available to one person. It can help an individual in so many ways.

The most important part of financial success is taking responsibility for your financial future. Becoming financially literate and educating yourself on how personal finance works is a great first step. Ultimately, you are in control of your financial future and the choices that you make that can impact you positively or negatively.

With personal finance it is typically recorded on ow you manage your credit accounts with businesses and your relationships with financial institutions such as banks and credit card companies. This record is collated into a credit report. A credit report is a summary of all your credit relationships, accounts and personal information such as your name, date of birth, address history. It acts a scorecard to give businesses and financial institutions an indication of your level of financial responsibility and financial history.

What is really important is to be aware of this credit report. Many people make the common mistake of not tracking or reviewing their credit report. This can often lead to wrong information on your credit report being unnoticed or correct information being overlooked due to the lack of interest for your credit report which can have a detrimental impact on your personal credit. If a payment is recorded late or missed it has a negative effect on your credit report and credit score, a number that sums up your credit worthiness. It is important to monitor this score as this impacts the decision on whether to give you personal credit. Likewise, if you pay on time and stay within credit limits, over time your credit score increases, showing you are a trustworthy person to give credit too.

Personal credit is needed to obtain credit for all types of reasons. Some of the common reasons are:

• To get a mortgage to purchase a property
• To get a credit card
• To finance a car
• To get a bank loan
• To get a retail store card
• To get a job

In many cases people don’t realise that sometimes employers want to see your credit report and review your personal credit to see how you manage your finances; and how responsible you are with your finances and relationships with businesses. This can sometime indicate how trustworthy you are and influence an employer’s decision whether to hire you. If they see you are a responsible person who pays their bills on time each month; someone who manages several relationships with financial institutions by staying within credit limits, not utilising too much credit (explained below), then they are likely to judge you as trustworthy and hire you. If your credit report shows that you are always paying your bills late (your creditors), or you are overs spending and over utilising your credit limits this may indicate you are irresponsible and not trustworthy.

Income
Understand your income, what are you receiving each month after taxes.

Expenses
Be clear on what your current living expenses are ie food, housing, utilities, travel etc. Then determine how much you have left after everything is covered.

Create a budget
Once you know what your income is and your expenses, you can create a budget to that prioritises what your needs are versus what your wants are. This will help you to outline what you can and cannot afford. You list your income and expenses. Your expenses should be less than or equal to your income.

Review Credit Report

Review your credit report regularly to know what information is being collected about you and your financial history. Verifying all this information is accurate is important. You can request your credit report for free once a year by visiting ….. You can also subscribe to credit reporting agencies to receive updates on your credit report any changes that have been reported. The three international credit references agencies are Equifax, Experian, TransUnion. All three will have a credit profile on which will include your personal information to identify you and your credit history, each producing their own individual credit scores. So sometimes it is helpful to check all three for accuracy, although generally the information between them is often the same. But some creditors only report to one agency which may mean they have different information on your profiles.

Investing involves the purchasing of financial assets with the objective of making a profit from these purchases over a period of time. The right investment has the potential to significantly increase financial wealth in the future. Investing usually requires a long-term financial goal that provides a plan of when and how to invest. Part of investing is to understand risk as there is always the risk of losing the money invested or no profit being made. Investments have to be evaluated for the level of risk.

There are different types of investments. These include real estate, stocks, bonds, mutual funds, currency and commodities. The type of investment option that is chosen should depend on an individual’s long-term financial goals and risk assessment.

It is often necessary to seek professional help and advice when getting involved with investments.

Protect yourself from identity theft. Shred letters, especially those from financial institutions or anything with identifiable information, i.e. your date of birth, personal tax numbers like national insurance or social security numbers.

Don’t provide personal information over the phone, email or mail unless you can confirm it is genuine and with a known trusted reputable company.

Never click on links sent in unsolicited emails or text messages, even when they may appear genuine. Utilise online security, such as firewalls, anti-spyware software. Keeping apps and software up-to-date.

Keep personal information secure online and at home. Do not share passwords or login information with anyone. Keeping documents at home in a secure place. You can purchase safes for your home for this purpose.

Get adequate insured for personal possessions and assets such as property and cars. 

1: https://themoneycharity.org.uk/money-statistics/

2: https://www.statista.com/topics/1203/personal-debt/#dossierKeyfigures

3: https://www.statista.com/topics/1203/personal-debt/#dossierKeyfigures

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