Look into the Future, Finance in Your Personal Life

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  1. Accounting, aka Storytelling, in Personal Finance

When predicting the future, knowing that you will be wrong is not an excuse to avoid trying!!

Harsch Shivam via Pexels

What the Heck is Finance?

Finance is the catch-all-field that your cousin who went to business school works in. You do not really know what he/she does, but it is something to do with business.

The world of finance is filled with the people you see in suits on the train or driving by in fancy cars that you will only ride in if you accidentally order an Uber Black.

While finance is truly only understood by those that live and breath it every day, there are crucial lessons that can help simplify your personal finances.

You Do Not Need to Know ALL of Finance to Get Started

The finance industry is generally broken down into two categories:

1. Money Management, and

2. Acquiring Funds.

Money management is an area that is relevant to your day-to-day personal finances. Should you get a credit card? Should you pay off debt, save or invest excess cash?

Acquiring funds is critically important for large, one-off purchases (e.g., a car or home). Unless you plan to buy a house for straight cash.

Do not let corporations and the government be the only ones to take advantage of the lessons learned from finance. Incorporate these two categories into your personal finances.

FP&A in Your Life

Financial planning and analysis utilizes forecasts and budgets to assess and project financial health.

Use accounting to understand where you currently are financially.

Use finance to understand where you are going and how you are going to get there. While there are a lot of numbers involved, finance is primarily concerned with why you are doing something and how you are going to accomplish it.

What to Do Moving Forward

It is impossible to perfectly predict your future personal financial decisions. However, not knowing where you are going is much worse than being slightly off in your predictions. Take advantage of FP&A and create forecasts/budgets. Then refine those forecasts/budgets as you compare them to the reality of your personal finances over time.

Please reach out to [email protected] with any questions or suggestions for other personal finance topics to cover.