Running Head: MANAGING PERSONAL FINANCES
Managing Personal Finances
Liberty University Online
GRST 500 Introduction to Graduate Writing
March 07, 2012
Due to the current economy and credit card-oriented lifestyle, it is vital to understand the importance regarding management of personal finances. Having a budget, ensuring debt is being paid off, readying an emergency fund, preparing for the college education of children, and saving for retirement are all essential portions in managing personal finances. Because of the mass amount of people in debt there are a decreasing number of individuals who are prepared for retirement. Managing finances is simply being a good steward of personal income. Having a budget is an extremely important foundation to managing personal finances. Through a budget, an individual can track past purchases and costs incurred, manage how much he can spend today, and take control of his future inflows and outflows. A good budget allows spending to be kept to a minimum and helps maintain control of inflows and outflows which frequently opens up excess cash to be used elsewhere (Vohlwinkle, n.d.). Budgeting is not as difficult as some make it out to be. It is also advantageous because, although spending cuts may have to be made, there will be more savings and less debt to worry about. Vohlwinkle discusses the fear people have in attempting the birth of a budget: The biggest fear that most people have when creating a budget is that they will need to suddenly cut back on all of the fun spending -- things like the occasional coffee or dinner out, movie night, or even the trip to grandma’s for the holidays. While you may find that you do need to cut some spending after putting together a budget, without actually sitting down and creating one, it is impossible to know what expenses need to be cut, if any. (Vohlwinkle, n.d.) Although budgeting finances can be a painful and tedious process, it is a process that should be done in order to ensure cash inflows are greater than cash outflows. The first step in creating a budget is computing total income. This includes the salary of a spouse as well as income from shares and dividends or interest on investments. Once the income is calculated, it is necessary to subtract the total expenses. The first money that should be deducted from a salary every week is the money that belongs to God. “Honor the Lord with your wealth and with the first fruits of all your produce.” (Proverbs 3:9, ESV). The Lord gives the strength that is necessary to work; therefore, it is only fitting that He should get a small percentage of the paid wages in order to further his work. After the tithe is paid, it is best to move on to the major expenses, such as mortgages and car payments, and take away the minor expenses last. Expenses must include bills, food, gasoline, and any other expenses that are incurred on a monthly basis. Since expenses such as food, gasoline, and even some bills can change on a monthly basis, taking an average of these over a few months will help monitor the expenses more closely. Once the expenses are subtracted, the computed number will be either positive or negative. A negative number suggests trouble and requires an individual to start cutting back. Negative numbers require a person to take action and control of his finances. Once the number is seen, it will be evident as to how much will need to be cut back. If the number is much larger than expected, take action immediately as opposed to worrying and becoming discouraged. By making a few small adjustments, one can easily turn a negative number positive. If minor changes are not enough to gain control of debt, it may be necessary to make a lifestyle change. Too many people live above their means; an individual who lives an extravagant lifestyle with a frugal paycheck will regret his or her unwise choices. A positive number does not mean that budgeting is being done...
References: Vohlwinkle, J. (n.d.). Budgeting Basics. Retrieved February 20, 2012, from Financial Planning: A Comprehensive Guide to Personal Finance Web site: http://financialplan.about.com/od/budgetingyourmoney/a/BudgetBasics.htm.
Vohlwinkle, J. (n.d.). Find Money To Pay Down Credit Card Debt. Retrieved February 20, 2012, from Financial Planning: A Comprehensive Guide to Personal Finance Web site: from http://financialplan.about.com/od/creditdebtmanagement/qt/FindMoney.htm.
Vohlwinkle, J. (n.d.). Why You Need an Emergency Fund. Retrieved February 21, 2012, from Financial Planning: A Comprehensive Guide to Personal Finance Web site: http://financialplan.about.com/od/savingmoney/a/emergencyfund.htm.
Vohlwinkle, J. (n.d.). How Much Should I Save for My Child’s College Education? Retrieved February 22, 2012, from Financial Planning: A Comprehensive Guide to Personal Finance Web site: http://financialplan.about.com/od/savingforcollege/a/howmuchcollege.htm,
Vohlwinkle, J. (n.d.). Planning for the Future - Making the Most of Your Retirement. Retrieved February 22, 2012, from Financial Planning: A Comprehensive Guide to Personal Finance Web site: http://financialplan.about.com/od/retirementplanning/a/PlanforFuture.htm.
Browning, E.S. (2011). Retiring Boomers Find 401(k) Plans Fall Short, Retrieved February 22, 2012, from The Wall Street Journal Web site: online.wsj.com/article/SB10001424052748703959604576152792748707356.html.
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