Personal Finance And Personal Financial Planning

The entrepeneur must always be prepared for the unexpected, such as illness. To ensure that you can take time off work for sickness if necessary, you need to get your finances in order. Personal financial planning is just as important as business financial planning. In this section we will concentrate on your personal finances.

Resource 5

5.1 What is personal finance?

The various ways and methods you use to obtain money and the things you spend it on are what make up your personal finances. It implies not only the various channels through which you acquire funds for your personal use, like work, loans and credit cards. It also includes the process of budgeting, saving and spending (expenditure).

Regardless of how much money you are

● Should I plan for my child’s education, or should I let him seek his own scholarship applications and apply for a student’s loan?

This section covers the following areas in personal finances:

Cash flow management: This is working with the actual cash that you have - not assets nor money that may still be coming in, but strictly with the cash that you have. This will give you a very good idea of what you can and cannot afford to do.

Investment planning: Once you have determined the amount of money you would like to save, you should consider what to do with your savings. Always aim to receive a higher return than you would have earned through your usual savings account. An investment strategy has to be mapped out so that you will have greater success in meeting your desired financial goals.

Insurance planning: Insurance planning is required to ensure that all your assets are protected and that your family members are well shielded by having sufficient insurance coverage. Insurance can include:

● income insurance (should you not be able to work, this insurance will pay you a

When old age symptoms appear or you have reached the mandatory retirement age, you will need to retire. Hence, having a retirement plan, regardless of your age, is essential!

Estate planning (writing a will):

Having an estate plan or a will ensures that your wishes for the future are carried out. In addition, an estate plan or a will can provide financial security for your family, ensure your property is preserved and avoid dispute among family members.2 Plan and prepare a personal budget

A budget is a guide, not a constraint. A budget does not have to be a restrictive plan which deprives you of what you want. In fact, a reasonable budget allows you to do what you want. It allows you to use your resources where they're most needed, so your personal finances will be managed and controlled. Creating a financial plan allows you to control your cash flow instead of it controlling you.

Before we can fully understand how to create, what influences, and how to adjust a budget, we need to understand the concept of budget itself. The following are a few definitions of what a budget is:

● A sum of money allocated for a particular purpose - "the business runs on a budget of R20 000 a