One of the reasons people falter and face a downtrend in their finances is that they always ignore the importance of taking a moment to recount their steps and do a personal financial review. This isn't limited to personal finance. Businesses also need to have it as a standing practice to always look at their finances and review them.
Businesses perhaps seem to be doing more in this regard. I can't imagine what the finances of a business entity will look like if they don't do a review. Some do their monthly. Others do theirs quarterly or biannually. By so doing, it becomes so much easier for them to see where profit is coming from and what needs to be done to improve the business.
On the personal finance level, doing a personal financial review is very important because it's a good way to look back at your income, match it against your expenses and see if the result you are getting is positive or negative.
What happens if the result is Negative?
For someone like myself, if the result is negative, that shows that I spent more than I earned and I will surely be gutted by that because it's not an ideal financial practice to have expenses that swallows up your earnings. In that scenario, it would be advisable to have a look at the things that make up those expenses and ask yourself important questions.
Did I have to spend money on this?
Did I have to spend this much on this?
It would be nice to ask these questions before spending on stuff, but if the deed is already done, asking the questions can still help keep you in check the next time you want to spend on stuff that doesn't tick as a necessity.
The thing about our finances is that our expenses significantly affects what we can achieve with the income we receive. If you manage to cut down on your expenses, it will be so much easier to throw the balance into places where it can yield juicy returns for you.
What happens if the result is Positive?
For the most part, if the result you get after matching your income with your expenses is positive, that shows that your expenses were not as high as your income. Once this is the case, it becomes easier to look for places where you can use the positive balance to make more money.
This is where investment comes into play for high-risk takers while Savings gets considered for risk-averse folks. You can also do the two at the same time by using a portion of the balance for investment while you throw the rest into your Savings. Portfolio management is a different thing altogether which we will get into some other time.
You get the point, right?
People think getting into a personal financial review is such a trivial act. However, they fail to understand that a proper review of our finances can help us make better financial decisions regarding our Expenses, Income, Savings and Investments.
We are already edging closer to the end of this month. We have just a day before we get into a new month and it will be nice for y'all to take a moment out of your schedule and review your financial performance for the month.
I've already done mine and I've made some adjustments about how I will be handling my finances in November. Go do yours already.
Thanks For Not Missing Any Full-stop Or Comma.
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