Personal Finance

Have you ever realized that numerous personal demands compete for your hard-earned income? Groceries, credit card bills, electricity and gas bills, car note and insurance, retirement, college tuition, holiday gifts, clothes, kids' clothings and other necessities, home renovations, and the great mortgage!

All depending on your SALARY! I bet it makes your head want to spin sometimes and drains your wallet or bank account! A little knowledge of personal finance will go a long way to educating you on how to allocate your minimal resources to achieve maximum results.

Literally speaking, personal finance means organizing one's finances to meet one's personal needs. It is the application of financial economics in making personal financial decisions. It takes into account your sources of income from mortgage loans, routes of expenditure, emergency accounts, retirement accounts to minor expenses like movie tickets.

Personal finance involves keeping income and expenditure records, and budgeting based on those records. The core task of personal finance is to get a firm grasp on the flow of household income. For most people, salary (or wages) from a job is their largest source of income.

Income includes two kinds of payments: Regular income and irregular income. Regular income includes all payments of fixed amount that you receive weekly, monthly, or yearly. On the other hand, irregular income are payments that vary in amounts that you may or may not receive more than once.

Examples of types of Regular income include:

Salary:This is your regular income from your regular job. This excludes tips and bonuses. Support Payments: This payment may be in the form of child support, unemployment benefits, workers' compensation, disability income replacement through your disability insurance, and alimony.

Retirement income: Retirees usually receive pensions or social security benefit payments. You may also withdraw money from the retirement accounts you funded while you worked. These may be in the form of 401(k), IRA, or Keogh plans.

Investment Income: This includes payments from your investments such as tocks, money markets, mutual funds, bonds, treasury securities, etc. Examples of Irregular income types include:

Capital Gains: This refers to an income from the sale of investments such as stocks, bonds, and real estate.

Tips and Bonuses: This refers to income from performance bonuses, sales commissions, and tips. Self- Employment Income: If you are self-employed and your salary depends on your business profits every month, you belong to this group. For instance, if you are a writer, and you received royalties from the sale of a book you wrote, the income belongs to this category.

Miscellaneous income: If you inherited money, trust fund payments, won a lotto, or received income from your vacation home rental, the income belongs here. Personal finance basically involves everything in your life that has to do with money: buying groceries, going out to a club, buying movie tickets, renting a house, buying a new car, or buying a new house.

In fact, putting your finances in order will not only save you a bunch; but it will also put you on the path to financial freedom. In order to put your finances together in such a way that it will work for you, budgeting is crucial.