What Are Personal Finances?
Personal finance is such a broad field, and it affects people in different ways because we all have our unique circumstances. Topics that fall under the personal finance umbrella include saving, budgeting, investing, and managing debt (among others). But our income and expenses drive the factors and considerations that feed into each of these areas, as well as the stage of our lives we are in. Sacrificing a small portion of our time to get a true view of our finances can help us to feel more confident in understanding our financial picture and allow us to put steps in place to achieve our financial goals. I want to use this blog post to help you understand why taking small steps to improve your understanding of personal finance can lead to life-changing results.
My Introduction to Personal Finances
During my final year of university, one of my housemates recommended a book to me called ‘Rich Dad Poor Dad’ by Robert Kiyosaki. You may have heard of the book, or perhaps read it; it is one of the most popular personal finance books ever written. It changed my perspective of my financial situation. After graduating from university I started my first job and as you may have seen from my first blog post , I got paid and had no idea where to put my money. Between work, my social life, and studying for professional qualifications I watched countless YouTube videos and read various books about personal finance (UK and US-based).
As I gained knowledge of key areas, I was able to apply them to my own life and my needs and wants. Drawing knowledge from different sources really helped me to get a grip on my personal finances, plan how I would allocate my monthly pay (ensuring I was not limiting myself but also working towards my savings goals), and feel more confident with money. It has changed my view of money and transformed my life for the better. It has also helped me to offer tips to friends and family which is an extremely fulfilling experience.
The Benefits of Understanding Personal Finances
Investing time in understanding our finances will bear fruit over the long term. The cost of living crisis in the UK has put the spotlight on personal finance with many individuals and families having to make tough choices. Therefore, getting an understanding of our income and expenditure has never been more important. Once you gain insight into where your hard-earned money is going and take action where you feel necessary, it will help you feel in control of your money rather than feeling like it has control over you. This is one of the major benefits I have noticed.
The Money and Pensions Service share through their own research that financial well-being is linked to lower stress regarding money which as a result, has positive impacts on our health. This emphasises the need to tackle our understanding of personal finance head-on.
Why is it so Challenging?
Firstly, like with many other things, it can be easier to ignore it rather than face the reality. Frustratingly, we are (in the UK at least) never taught about personal finances in the education system and as such, we are not provided with the skillset to be confident with our finances. Topics such as debt, mortgages, savings, and investments are likely to affect every one of us in one way or another at some point in our lives, yet the onus is on us to be proactive and learn about them. We are inherently at a disadvantage when it comes to some of the most important things we need to know in our lives.
Not only this, but it is all made out to be so complicated. Why? You don’t need to become an expert, I truly believe that you just need to understand the basics to enact positive change in your life. Just spending a few minutes a day or even a week learning about something new will be a valuable investment that I am sure you will thank yourself for in the future.
Final Thoughts
I get that it’s hard to motivate ourselves to understand this ‘money’ stuff, but as you can probably tell from what I have written so far, it really can change your life- it certainly has for me. So I encourage you to devote a little bit of time to improving your knowledge in one area of personal finance. I will aim to offer as much educational and supportive content on my blog as possible. Good luck!
