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Getting Personal About Your Finances

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It’s time to put the phrase “personal finance” in your vocabulary.

If the phrase “personal finance” makes you think of long, boring discussions about stocks, bonds and interest rates, well, your impression is partially correct – all those subjects do have their place in the vast world of money and finance. In most ways, however, the emphasis on personal finance is on the first word, “personal,” which means it’s all about what you do with your money. And what could be more interesting than that?

Exactly What Is Personal Finance?

Simply put, “personal finance” is every aspect of your life that deals with money – everything from buying a ticket to the movies, to finding an affordable apartment, to leasing that new Beetle you’ve had your eye on, to putting money into a retirement plan. Your personal finances affect your relationships, your lifestyle and, very possibly, your perception of yourself. Eventually, it will influence where your kids will go to school and the quality of your retirement.

Understanding Personal Finance

On the surface, personal finance sounds complicated. It sounds scary. It sounds like something we’d rather not have to deal with. So we let our hard-earned money lie in a bank account, making little or no interest, while we go about tackling the finer aspects of, say, parasailing.

It’s not that we can’t learn about personal finance and managing our money. We don’t learn about them because we think personal finance – taxes, insurance, investment and interest – is only for people who have a lot of money. In reality, it’s just common sense.

As you move through different stages and situations in your life, you’ll need to know different things concerning personal finances. So let’s take you, for example. You’ve just landed your first job, and maybe the salary isn’t as much as you had hoped. In fact, you’re trying to figure out how you’ll get enough money together for a security deposit on that apartment you’ve been looking at. You need to worry about budgeting your income to meet all your expenses, finding some transportation to and from work and paying off college debt.

Personal Finance Is Not Just for Your Parents

Who needs to think about personal finance? Anyone with any money at all should be concerned about where it’s going and whether it’s being managed to its best advantage. Sure, that includes your parents, but it also includes you.

The decision to not save or the lack of a decision to save occurs for various reasons, including the following:

  • You’re too busy having a great time spending the first real money you’ve ever made to worry about saving any of it.
  • You figure you’ll have plenty of time to worry about saving later (like after you get married).
  • You’ve got an apartment, a car and plenty of spending money; what else could anyone want?

You can take shortcuts when it comes to your personal finances, or just ignore them altogether and things will be OK, for a while. After you’ve rounded up the security deposit, you probably can get by just paying what you owe and stashing any leftovers in a savings account.

However, these carpe diem attitudes offer no security or comfort for later in your life. In the back of your mind, you probably know you should be saving some money. But you’re not too worried about it, as you’ve got steady income and no responsibilities. You figure you’ll probably be married in five or 10 years and then you’ll have to get serious about many things, money included.

Even if you can’t save a lot, you should be saving something in your 20s and 30s. No one’s saying you have to save half of each paycheck. Small savings do add up.

Money’s Not a Dirty Word

Although sex has become an acceptable conversation topic, talk about money is still somewhat taboo. Studies have shown that parents are more likely to talk with their kids about sex than money (and you know how reluctant most parents are to talk about sex). Money is seen as a “private” matter, best left to intimate (or angry) discussions between partners, spouses, or financial consultants and clients.

OK, it’s reasonable to think you don’t want the guy living two doors down the hall to know the amount of your weekly paycheck or the balance of your savings account. But what could be wrong with a little 401(k) discussion among friends? Or an intelligent talk about leasing your next vehicle instead of buying it?

So, next time you get together for a drink with some friends, test the waters. If they all move away from you or pointedly change the topic of conversation, you’ll know they’re not yet ready for money talk. But who knows? You may start a lively and interesting conversation and add a new dimension to bar talk. You might even learn something.