9 components of personal finance

There is a lot more to an effective financial plan than balancing your checkbook and sticking to a budget each month. You should be creating a financial plan that aligns with, and helps you achieve your life goals. To get and stay on the right track to those goals you need to address each aspect of your finances.

Income

You can’t rightly think about how to handle your money if you don’t have any. Take a look at all your sources of revenue, not just your paycheck and never get comfortable with how much you are earning. The more that you earn the easier all the other aspects are to plan for.

Taxes

Everything that you earn is going to be taxed, but you can be better prepared if you plan for it. Get familiar with your state taxes and take advantage of any possible tax relief or personal deductions.

Insurance

You have to have insurance to help cushion any unforeseen events that may result in car or home damage, injury, illness, disability or time away from work. There is no way to know what will happen in the future and insurance is a safety net you can’t live without.

Debt

You can incur debt for many reasons and not all kinds of debt are bad. Home loans and student loans are investments and are important for your financial future. Bad debt comes from buying things that aren’t needed and it can add up fast. Knowing the difference is important but both need to be paid off in a timely manner.

Expenses

Your expenses should never be higher than your income, that only leads to bad debt. Keep a close eye on your spending so that you can identify areas that you may be able to cut back on.

Savings

Savings are best viewed as an expense. Making it a habit to always (if not automatically) deposit a part of your income will yield the best results. You are making a deposit that will pay for your future with the added benefit of earning interest.

Retirement

It is never too early to plan for retirement. The savings accounts and benefits available to you will vary by location and employer, but you can’t afford to waste time investigating your options.

Investments

When you’ve saved enough money, the best option is to invest it and let it grow even further. There are many tools and professionals available to help you understand and implement your investment strategy wisely.

Yourself

Arguably the most important part of your financial well-being is you. Invest in your education, your experiences, your skillset and most importantly, your health. Keeping yourself healthy can save you thousands of dollars in medical expenses, and keep you earning longer.