Basic Lesson for Beginners

People always do not know how to start managing wealth efficiently. Here are some basic concepts for you to monitoring or revaluating your money.

1. Assessment: One's personal financial situation can be assessed by compiling simplified versions of financial balance sheets and income statements. People may ask, "Why I need to write statements about my finanicial situation like what corporates do? My wealth is not that much." However if you hold statements on hands, surely it can help you to have a clear mind on how much you have or what kinds of asset you are holding. A personal balance sheet lists the values of personal assets (e.g., car, house, clothes, stocks, bank account), along with personal liabilities (e.g., credit card debt, bank loan, mortgage). A personal income statement lists personal income and expenses. It can help you to know how much you earn and how much you spend and you can make a balance on your wealth. :)
   


2. Setting goals: Three examples are "retire at age 65 with a personal net worth of $200,000", "marry before age 30 with a budget of $150,000" and "buy a house in 5 years paying a monthly mortgage servicing cost that is no more than 25% of my gross income". It is common for you to set up several goals, some short term and some long term. Setting financial goals helps directing financial planning. And importantly, you know what you want to have.
   


3. Creating a plan: The financial plan details how to accomplish your goals step-by-step. It could include, for example, reducing unnecessary expenses, increasing one's employment income, or investing in the stock market. These can help you to achieve your goals as soon as possible.
   


4. Execution: Execution of one's personal financial plan often requires discipline and perseverance. Many people obtain assistance from professionals such as accountants, financial planners, investment advisers, and lawyers.
   


5. Monitoring and reassessment: As time passes, one's personal financial plan must be monitored for possible adjustments or reassessments. Time must be spend on here as to monitor you are walking towards your ongoing goals. :)

These are the basic knowledge for you to step into the personal wealth management area, remember to ask first if you begin to invest. ;D

Reference:

http://en.wikipedia.org/wiki/Personalfinance

http://www.invested.hk/invested/en/html/section/elearning/tools/video/video_index.html