Family Financial Management - Essay Example

The notion of personal financial management is considered to be quite crucial in managing the funds in a particular family. The related theory of this notion is further considered to be grounded on the supposition that a certain family functions similarly to a management system and being a throughput poses an influence on the factor of satisfaction. Throughout the 1990s till date, the subject relating to financial education witnessed growth and popularity in the plans of community groups, government agencies, educators, policymakers, and businesses. The escalating concern regarding the field of financial education is known to be triggered by the augmenting intricacies concerning such financial products along with the growing accountability of the individuals concerning their respective financial safety. Contextually, individuals who are financially aware are considered to make effective financial decisions about each of their respective families. Hence, proper and sound planning is believed to boost economic stability along with the well-being of the families of the individuals.

Managing the finance of a household appropriately is considered to be quite crucial as it saves the family from unstable and unsecured financial situations. Adequate and proper personal financial management would thus ensure savings for the household. These savings will prove to be a great security and sort of assurance in case of any kind of unanticipated turndown related to a decline in income or an unforeseen expense. The aspect of personal financial management is regarded as an integral division of households especially with low or modest income. These households with such incomes need to exert grave attention towards effectually managing their finances as they even do not qualify for accessing the customary credit sources. These kinds of houses are believed to exist without any sort of financial safety margin and thus should often swap the duty related to imperative payment against another. It has been stated in this regard that living without any type of financial safety margin proves to be worrying which is gauged to entail the chances of taking a harsh toll.

The knowledge of personal financial management is believed to assist low-income households to enhance their respective record of credit along with ensuring building savings. The households with lesser income are found to lack in savings as they underrate the achievements from obtaining savings or even misjudge the related costs linked with trimming down present spending. Practices related to personal financial management make it necessary for individuals to make a record of household expenses for a month in several groups. This is believed to offer the individuals a brief picture of the way through which the incomes of the households are distributed. This application or practice is considered to be essential as the absence of such methodical application leaves the majority of the individuals with the least thought regarding the portion of their respective incomes that are found to be engaged with the buying of daily consumables including newspapers, gasoline, and outside meals among others. The individuals are further measured to lack this definite form of information as the mentioned kinds of expenses are found to be made on a weekly or daily basis in small proportions. The nature and amount of such expenses make them simple enough to be neglected in terms of their collective share of an annual or monthly financial plan. It has been further mentioned in this consideration that the breakdown of the information about the daily expenditures incurred by a particular family facilitates in illuminating to the individuals concerning the areas where the households require to trim down their everyday expenditure, for instance, getting lunch from home rather than getting it from outside which might result in effectively saving the expenses.

Conclusion

Concerning the above discussion, it can be well comprehended from the above-made discussion that the concept of personal financial management holds serious implications for households. It aids in encouraging savings for the households to be competent to cope with any sort of unforeseen emergencies. Apart from this, it also aids in improving the past credit record of the households which makes them capable and qualified to avail conventional credit sources.