Personal Finance, Loans & Insurance

Most people do not spend time addressing their personal finances in sufficient detail ahead of unexpected and scheduled expenses. This causes significant financial crises for many families. This article addresses the issues of proper planning to avoid a personal finance crisis.

It is in the news nowadays all over the place about the home mortgage crisis that is crippling the housing industry in America. Elsewhere in the world, there is similar news about the real estate slowdown. Many families are unable to keep up with the increasing cost of energy as oil prices have been skyrocketing. To add to it is the expense of college education for children, car payments and other revolving credit card payments and the net result is a massive level of stress in the financial health of the family and a potential personal finance crisis.

The age old adage of prevention is better than cure is applicable one more time here. The only way in which one can avoid a personal financial crisis is by proper pre-planning. Keep it simple; one does not need to complicate matters any more than they have to be. Start off with your take home income and budget a certain amount for rent or mortgage, a certain amount for energy, food, transportation, education and miscellaneous expenses. You need to categorize each of these into further sub divisions and really pin point the budgeted expenses. There needs to be a savings plan for a rainy day and sufficient life insurance coverage expenses also in the event that the main breadwinner of the family passes away.

Once these expenses have been written down, then additional analyses need to be performed. If the income meets or exceeds the expenses, then you are in good shape. If the income falls short of the expenses, then you have simply only two choices. One choice is to cut down the expenses. The other choice is to find additional sources of income. There is no magical way in which you can finance yourself out of debt by borrowing additional money by any means. You do not want to get caught in the perpetual debt machine. Debt comes at a price and I cannot believe that there are people that borrow more and more to pay for things they cannot afford in the first place. Proper personal finance planning is absolutely essential to avoid crises in the future and one needs to be honest in drafting and executing such plans.

Copyright (c) 2007 Thomas Husnik

The field of corporate finance deals with the decisions of finance taken by corporations along with the analysis and the tools required for taking such decisions. The principle aim of corporate finance is enhancing the corporate value and at the same time reducing the financial risks of the company. In addition to this, corporate finance also deals in getting the maximum returns on the invested capital of the company. The major concepts of corporate finance are applied to the problems of finance encountered by all type of firms.

The discipline of corporate finance can be split into the short term and the long term techniques of decisions. The investments of capital are the long term decisions relating to the projects and the methods required to finance them. On the other hand, the capital management for working is considered as a short term decision that deals with the short term current liabilities and asset balance. The main focus here rests on the management of inventories, cash and, the lending and borrowing on a short term basis.

Corporate finance is also associated with the field of investment banking. Here, the role of the investment banker is the evaluation of the various projects coming to the bank and making proper investment decisions regarding them.

The Capital Structure:

A proper finance structure is required for achieving the set goals of corporate finance. The management has to therefore design a proper structure that has an optimal mix of the different finance options that are available.

Generally, the sources of finance will comprise of a mix of equity as well as debt. If a project is financed through debt, it results in causing a liability to the concerned company. Hence in such cases, the flow of cash has various implications regardless of the success of the project. The financing done by equity carries a lower risk regarding the commitments of the flow of cash, but the result of this is the dilution of the earnings and the ownership. The cost involved in equity finance is also higher in the case of debt finance. Hence, it is understood that the finance done through equity, offsets the reduction in the risk of cash flow. The management has to hence have a mix of both the options.

The Decisions of Capital Investments:

The decisions of capital investments are the long term decisions of corporate finance that are related to the capital structure and the fixed assets. These decisions are based of several criteria that are inter-related. The management of corporate finance attempts to maximize the firm’s value by making investments in the projects that have a positive yield. The finance options for such projects have to be done in a proper manner.

It is essential that you begin to save money for some sort of emergency than to have any cents at all. Managing your personal finance is important nowadays. With the industrialist society today, most individuals do not think twice with regard in getting a loan to purchase costly and unnecessary things. However, the slump has awoken most of these individuals and they learned to manage their finances.

There are several ways to know when it comes to managing personal finance. The following are some of the most vital ways that you need to understand to get you started. The first thing you need to consider is to organize your budget. Remember that organizing your budget will aid you to limit spending too much. You need to total your net earnings from all of your sources, such as alimony, mutual funds and your salary.

After you total your net earnings, make a list of your entire monthly expenses and how much the cost of each of your expenditure. These expenses will include all of your monthly bills, household budget, insurances and even your shopping allowance. This is the best way to know how to adjust your expenditures and formulate an estimate of your definite monthly fixed cost.

The second in line is to save your money. After you organize your budget this is the time to save your money. The first way that was mentioned above will only give you an idea of where do you spend your money. Depending on your profits, open a bank or saving account and give an appropriate percentage of it in your account. This will only be used in case of emergency.

The third thing that you need to consider is to invest your money. Keep in mind that investing is a best way to earn an extra income and to help you more to manage your personal finance. One of the finest places to make an investment is a reputed firm that offers mutual fund because there is a lower risk involved when investing in this kind of fund than to other means of stock.

Lastly is the insurance. This is also a best way to secure your own future. It also lessens the jeopardy of needing to take out your saving or bank account in case of emergency. You also need to at least make insurance for your life, car and house. Select a company that has a very good reputation and has a best rate that can suit your profits to prevent non-payment and wasting your money.

We all prepare for natural disasters by packing an escape bag, putting away supplies and buying insurance. Natural disasters are just a part of the cycle of life. Just as we prepare for them we must also prepare for those times in our lives when disaster strikes our personal finances.

Just like the other protections, we must have insurance (income stream), supplies (cash available to outlast a financial storm) and an escape plan (for when you have no other options). This plan will see not only through natural disasters but through financial and life disasters. Let’s get our plan together.

How do you pack and escape bag for financial disasters. In short what this means is to bring all of your personal and financial life together and having backup copies that you store somewhere safe. Store things like your financial documents also things like photos and videos of your assets in the same safe storage. At first this will seem like an over whelming task but once you have all of your records up to date then it is only a matter of keeping everything current.

Although this is not an exhaustive list it will give you somewhere to start:

· Birth, death and marriage certificates

· Social Security Cards, passports and credit cards

· Medical records, identification (drivers license)

· Recent bank statements, copies of you mortgage(s) and property deeds

· Car titles, insurance policies and insurance contact information

· Three years of the most recent tax returns

· Wills trust and powers of attorneys

· Names and contact numbers of executors, trustees and guardians

· A list of financial advisers along with contact information

· All user id ‘s and passwords

· A household inventory with cost and age along with a description

· Copies of receipts for expensive items and items that hard to replace.

Store these items either in a safe deposit box or in a secure online backup service. If at all possible use both.

Next is to have backup supplies. This will mean to have at least 6 months worth of monthly cash easily available. When your income is destroyed your personal finances are immediately in danger of being destroyed. If you are not prepared it may take up to 10 years to recover.

You should have at a minimum 6 months of income in an account that is readily available. Do not just put 6 months worth of expenses in this account but your full income of 6 months. This way if you have to draw it out to a full year you can lean out your expenses and survive.

Be prepared during this time to take on part time work and odd jobs to keep from using all of your cash on hand because when the crisis is over you will have to replace this cash again.

Finally, how do you have an insurance policy to prevent a personal finance disaster? Create a second income or even a first income that you are in control of and that will continue to provide you income no matter what happens in your life. Learn to invest in yourself and to be in charge of your own destiny.

Today more than ever, you can be a small business owner whether it is something you do part time from home or with an online virtual business. These types of businesses require very little startup capital but do require that you invest time and energy.

Find something that you love to do and can have fun at. If you love it someone else will as well and they will want to know what you know. What better way to weather a storm than doing something you enjoy.

This will also grow your savings and help you to build a retirement plan for later in life when a disaster would be harder to escape. Always think to the future.

To find out more tips on your personal finances and retirement planning and savings planning see the resource box below.