There have been many articles written regarding getting personal finances under control. From putting money away every week, to using the envelope system for bill payment, to creating a budget there are many avenues that can be taken. One thing that does not seem to be stressed enough is why it is so important to get finances under control. Sure there are numerous ways to do it, but what is the point?
One of the main reasons to get finances under control basically boils down to the milestones that are reached in everyones life. If the money is not properly attended to then reaching such milestones could be delayed or not happen. Some of these milestones can include living away from the birth home, being able to actually go out and do things while attending college, and retiring at some point in the future.
Another reason to become disciplined with money has to do with the desire to purchase items of enjoyment. Some items are considered small-ticket purchases and these include buying electronics, entertainment systems, and dinners out. Other items can be considered big-ticket merchandise and include vacations, boats, or expensive cars. When making some purchases this can be done using credit.
To obtain credit many places will review the buyer’s credit history and look at their credit score. This score is a measure of the buyer’s credit worthiness and gives the seller a chance to look at the buyer’s past habits. If the buyer has been good with their money, paying bills on time and using credit wisely, the score will reflect this and show the seller that they are a good risk.
A final reason to become diligent with finances is simply for stress relief. When it is known where the money is coming from and where it is going then plans can be made and target dates can be set for goal achievement, whatever that may be. By understanding how much money there is and what areas will require payment then there will be a clear understanding of how much is left or not left. If it is found that more money is going out than coming in, this is a wake up call that something needs to change. If nothing changes then a hole will be dug from which it could be too deep to recover.
By Catherine Monreal
Catherine received her B.S. in Finance in 2006 and is currently pursuing her M.B.A. in Finance.