personal finance essay example

personal finance essay example

Personal Finance: Building Wealth and Financial Freedom

1. Introduction

Actually, this is a bit of a lie. I am writing about the open-source, collaboratively created decision engine called “What Would You Do? How to Build Wealth: A Decision Tree Quantifying Personal Finance Literature.” The decision engine allows users to rank various methods for how to build wealth. It provides the advice above for the “U.S. personal finance literature” with axioms that most would find to be laughable. However, if you wanted to refocus from the entire U.S.-centric literature on personal finance and use the decision engine to assist you in exploiting the literature that has been summarized in a particular way, then there may very well be a set of reasonable axioms that you would accept.

How to build robust personal finance: The personal finance literature presents many rules of thumb, claims, and advice for managing your economic life. How do you separate the durable insights from those that do not replicate? Now you can straighten this out because the following sentences are being written about a tool that can help you make sense of the U.S. personal finance literature. You can trust it because the advice is dictated by a set of assumptions that are largely immune to empirical tests; that is, the advice is religious and there are no opposing sects. To aid in sorting the literature further, our advice is also dogmatic: given enough skill as a philosopher, you can reconstruct the assumptions such that following the advice is an ethical imperative.

2. Importance of Personal Finance

Your future income stream is probably still one of your top wealth-building tools and should be significantly protected. Opposite to what is said on many occasions, avoiding debt where you can is not necessarily smart. The more leveraged you are, generally, the greater the potential risk to the value of your assets and the larger the overall financial pressure on your financial position. On the other hand, when debt is used properly to finance investments in assets that create more wealth over time than interest, it results in expanding the level of personal prosperity. Unfortunately, today’s financial world is extremely complicated, and the establishment of prosperous finances is no longer just a matter of savings. In fact, a stopper in money, especially when savings were financed almost nothing, actually meant that a faster route was to go ahead, which is to protect your purchasing power by creating a habit for managing financial resources. Rather than being an element of your life at the end of the financial planning initiative, actively managing the risk of life requires actions along with time in advance.

Personal finance: Building wealth and financial freedom. A real impact on personal wealth is not determined simply by how much you make, but by how you manage what you have. Whether you are a young person fresh off campus, a newly married couple, or a rising middle-class family, translating your hard-earned income into wealth is a very important issue. This book addresses in detail, in a way that is easy to understand, by applying word concepts and a step-by-step approach to properly manage what you earn. This book has at the end of each chapter. It is a valuable tool that is fundamental, practical, and highly effective. It is the application that is mostly the cause of most failures among investors, no matter how good the entire advice is. Remember, the time to plan is now! There is no secret way to get rich quickly and easily.

3. Strategies for Effective Financial Management

He can help you to determine various approaches that could help you to solve your problem in an easy manner. There are many approaches where you can borrow cash but with less trouble. Thus, the many calls you take will be in a short time and these calls that you may receive are day to day issues. He should answer you on time and he should be accessible on the phone or should have a calling facility. You are placing a confidence in him as your finance planner and he should be available when he is needed. Your finance planner should have your welfare at his best interest and only if he realizes that, you are in the good hands. If he makes a portfolio for you, a copy of the portfolio should be in your file, so that at any time, you will question and get the right answers on the portfolio.

The first step in deciding a plan to get out of bad finances is to hire a finance expert. Such an expert will use his specialized analytical tools and figure out the present position and also the expected future position. In some cases, the doom may be near and the expert may suggest a bankruptcy plan which actually may be the only way out. The finance expert is familiar with the finance tools, knowledgeable about financial products and can structure a plan that indeed has more chances of succeeding. The expert can help you to borrow some cash for meeting some urgent demands and such requirements become crucial when immediate solutions are required. Also, before taking any calls, the expert will gauge how much cash can be managed in the existing portfolio and what are the steps one needs to take to get some fast cash and from where.

4. Investing for Long-Term Wealth

You don’t have to take and pass any certification exam before you can begin to invest in the stock market. However, on your journey to become a successful stock market investor, you must look for appropriate learning opportunities to help you in developing the necessary investment skills. These opportunities could be in the form of a formal education in finance or an informal discussion with some of the successful Indian investors. You should also read the investment books that were written by some of the investment gurus. Such materials will also provide you with information on when to sell stock and when to buy stock.

Stock picking investment does not require that you pick individual stocks of particular companies. You could also invest in Index Mutual Funds or Index Exchange-Traded Funds (ETFs). An index fund or index mutual fund is a pooled investment fund that is passively managed. Instead of attempting to look for market-beating results by trying to select and time individual stocks or other securities, managers of index funds attempt to replicate the returns of specific indices. Index funds are a form of passive management. Investing this way provides immediate diversification simply because each fund contains all the stocks or bonds in the index, allowing the risk to be spread out and minimizing the chances of loss resulting from any one recommended stock. You could have a mix; e.g. 50% in Indian stock index, the NSE Nifty; 40% in the BSE Sensex and 10% in Gold.

With discipline and a long-term view, investing in the stock market is generally considered as the best way to build wealth and achieve financial freedom. No one picks the tops or bottoms with any regularity, and even great companies often see their share prices plunge during the market cycles and/or economic downturns. It’s important to get started small and grow your investments through a process of saving and continued investment in the market as it presents opportunities.

5. Conclusion: Taking Control of Your Financial Future

The millionaires I have studied were either business owners or successful salesmen—most often both! So this may be my opinion only, but remember, if you don’t think you should be a business owner or salesman, you don’t have to be. I see success as identifying what you are interested in and then using that interest to make your dreams come true. Some of us are less ambitious than others and would just rather do a job and talk to people around us. If you feel that is you, just keep saving and build up your money. You can still be a millionaire by the time you retire! As you have learned, most of the millionaires (about half of the 1,000 were listed) listed their profession as welding foreman, schoolteacher, hardware store owner, cable guy, copper miner, sand & gravel salesman, fireman, mailman, electrician, plumber, machine operator, farmer, FBI agent, beautician, insurance agent, water inspector, fur trapper, along with numerous other vocations.

Whether you have a lot of money or a little, the principles are the same. And the first step to increasing your money is to write everything down, so you can see which areas might need some attention. You are one of the few people who have taken control of your financial future. For this reason, you should feel good about yourself. Also, in the words of author Robert Heinlein, who stated: “Decide carefully, exactly what you want in life, then work like mad to make sure you get it!” There is nothing you cannot be, or do, or have. Control your own destiny! My prayer is that every person who reads and applies this book will become a financial success—regardless of his present situation!