Importance of Personal Finance

The greatest importance of personal finances is raised as a strategy to carry out the management of a heritage or savings at the individual/family level so that in this way they are in the best conditions to plan their financial status for the future. In addition, it allows the design of various strategies in the investment or savings so that the capital can be revalued, especially in the medium and long term.

This action in the domestic economy means that one can have greater and better control over the capital, which results in one know at all times what must be done with it: purchase of goods, term investment or even borrowing against non-expenses expected. Not in vain, its fulfillment will help to be in a position to meet some objectives, such as, for example, be better prepared for retirement, assume household expenses or think about the future of children more little ones.

Purpose of this strategy

In any of the cases, this is a very effective support so that its holders can make the best decisions regarding the state of their personal accounts and assets in general. In the same way that its implementation will provide them with sufficient mechanisms to take initiatives in their relations with the money: save, invest and even the level of spending that they can bear, with the priority objective that the patrimony improve year after year. This task can be formalized directly by those involved (if they have a good culture financial) or through a specialized advisor that will be provided by your bank or entity financial.

Its relevance is also based on the fact that it is a performance that provides administration on all kinds of goods (monetary or not). And if it is not known how to manage it correctly, it can lead to certain risks on the users' assets. In the same way that personal finances are configured as the necessary tool to prepare the budget of any family unit, whatever its composition. In the sense that it will help to balance the table of income and expenses to determine a higher level of savings and avoid the deficit in personal accounts.

Another aspect that must be valued in this class of monetary management is the one that has to do with its flexibility. Depending on the client's profile (assets, objectives pursued or medium and long-term goals), an individualized strategy can be developed. not only in the choice of financial assets, but also in the most profitable investment areas.

At the same time that you can opt for active management (when you want to exceed the returns of the markets financial) or passive (to replicate an index or sector in equity markets, such as in the bag). Likewise, the profile that each user may present is particularly relevant: aggressive, intermediate or defensive to design this strategy, because depending on this important variable, the portfolio can be oriented towards one or another system in the investment or the saving. In other words, for a conservative profile, a portfolio based almost entirely on financial assets based on variable income will rarely work. To the point that this choice can be very negative for your personal interests.

Personal finance goals

In the first place, try to manage the assets correctly based on the economic situation of each economic moment. His administration in a recessive period is not the same as in an expansive one.

Another of its most relevant purposes is to achieve its maximum return, generally placing the capital in the most appropriate financial products and services of the moment. Especially through a strategy that allows the diversification of money. That is, in different financial assets so that capital can be preserved in unfavorable scenarios in the financial markets.

Without forgetting that this system in the monetary administration affects the search for financial stability by families. Through a reduction in debts (and to a certain extent in expenses) and a notable increase in income. Trying to make the surplus in the accounts as large as possible. While as a consequence of the application of all these factors it will cause the managed balance to increase year after year and in accordance with the interests of its holders.

However, it is convenient not to confuse personal finances with the so-called corporate ones. Because in the latter the purpose pursued is to optimize the financial health of the company itself. At the same time, they promote the best decisions for the benefit of the company. And that will generate that in the end it will help to preserve corporate results.