Personal Finance and Its Importance in Today’s Scenario: Learning the Art and Basics of Personal Financing
In today’s ever-changing world and with the Covid-19 pandemic going on, having basic personal financial skills is one of the most valuable things you can do to live a healthy, happy, and secure life.
Personal finance teaches you how to handle your financial situation and establish a life of wealth in the future and be able to finish your goals. The successful investor, Warren Buffet, has been quoted often when it comes to managing finances and investments. One of his famous quotes is: “The most important investment you can make is yourself.” The quote speaks for itself. The money spent on enriching your knowledge and skills is money well spent. When it comes to personal finance, the best investment would be to invest in your financial literacy and your knowledge in personal finance. Let’s look at some of the points highlighted:
Income generation, budgeting, and spending: Net worth is one of the most important measures of wealth. It is the amount that remains after a household's debts are subtracted from its assets. During this decade's housing bubble, housing values rose faster than mortgage debt. Consequently, net worth grew substantially - up 18 percent for the average household between 2015 and 2020, after adjusting for inflation. The gain did not last, however. The World Bank estimates that by October 2020, the median net worth for the average household had fallen to AED99, 000 -3 percent less than in 2015. Householders under age 35 (the oldest Millennials turned 35 in 2020) saw their median net worth plummet to AED 1 1, 800 in 2007 - 24 percent below the level of 2015 after adjusting for inflation. Behind the decline in the net worth of the youngest householders was the growing share with debt, in part because so many young adults now have student loans. (Bair, 2020)
Asset Creation and Investment: Between 2015 and 2020, the value of the financial assets of the average American household rose 14 percent after adjusting for inflation - to a median of AED28,800 according to the Federal Reserve Board's Survey of Consumer Finances. The median value of the financial assets owned by householders under age 35 grew at a faster clip - up 19 percent during those years to AED 6,800. The value of non-financial assets owned by householders under age 35, however, took a 13 percent dive during those years. In 2020, the median value of the non-financial assets owned by householders in the age group stood at a modest AED30, 900. (Bair, 2020)
Savings and Family Security: It used to be called saving for a rainy day, however, sudden financial changes can still throw you off track. It is good to have some investments with high liquidity. These investments can be used for emergencies or educational purposes.
I would suggest to all readers out there that instead of social media scrolling, imagine how much you could learn if you spend some of that time to improve your financial knowledge.
Bair, Shara Kelly. 2020. Exploring the Perceptions of the Influence of Faith-Based Training on Financial Literacy. North Central University Publication, pp: 45-80.