Organizing Your Personal Finance

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Organizing your personal finance is a more involved task than collecting your monthly salaries and then spending on essentials (and non-essentials!) with or without a budget or a plan.

Organizing your finance properly is concerned with three things – caring for the present, settling the past burdens and planning for the future;  you need discipline, time to be allocated for organizing this work and a reasonable amount of record keeping, paper work (or computer work) and systematic  updating for this purpose.

Your existing financial resources and the incoming financial revenues (earnings) have to be properly disbursed in three channels – one, to run your family on a daily basis to cover basic needs of food clothing and shelter; two, to service your past debts and three, to invest and save for the future.

To meet the inevitable spending on food, clothing and shelter and also to a fair extent on additional comforts and luxuries (travel, holidaying, entertainment etc) you must have sufficient income and ideally that income should be more than the expenditure. For organizing your finance on this “present” aspect, you need to keep income and expenditure accounts, draw up budgets for spending and also have the physical and mental discipline to limit your spending within the budget.

Tracking your current financial activities

Keeping an account notebook (either as a physical notebook where your write down or in your PC in the form of a spread sheet) is a must for this purpose. Your account book should have, other than cash in-hand and cash expense entries, a separate section for recording all your bank transactions. While it is fine that technology has made many things simple (mobile banking, tracking bank account through Internet etc) there is nothing like a written record to make sure that you don’t forget any information on checks issued by you or checks received and deposited in bank. Periodically, your account note book must be tallied with your bank statements.

Tracking your debts

It is important that you have clear written records of your debts, deferred payment advice to credit card firms, monthly installment payments due to you on your hire purchase, home mortgage/ loans etc.  It is essential that when you draw up your monthly budget, you make provision for repaying your debts promptly on date so that you are not charged with any penalty nor burdened with excessive debts that can grow unmanageable.

Securing your future

“Let your first expenditure be a saving” so say the wise men.  The most important part of organizing your finance is to organize your savings, periodic and one- time investments, purchase and sale of Mutual funds/ shares, investments aimed at tax saving, Insurance plans etc.

Certain websites can be extremely useful in organizing your personal investments and tracking the Return on Investment, current asset values, the extent of capital growth on the investments etc. One such very useful website is “moneycontol.com”.

  People who are basically lethargic and undisciplined may think that such systematic record keeping and tracking is boring and can potentially rob one of the joy of carefree earning and spending. But if one wants peace of mind and a sense of security on financial standing, properly organizing one’s finance and monitoring them through systematic record-keeping is of paramount importance.

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