Personal Finances And How To Manage Them
The one thing you need today is money. Despite the many motivational sayings that money can’t buy you happiness, what money can give you is the essentials you need to survive in the world today. Everything from a roof over your head, to utilities you need to stay clean and healthy to food to nourish you, comes if you have money. This obviously means that if you have money, you need to manage it. Kudos to those who make sure that the money they earn is spread out over their daily needs. And for those who can’t do it, there’s always options.
Borrowing money has long been the easy out for those who are short of money. And while it is an easy out, borrowing comes with the promise of having to pay it back. Sometimes, you have to pay back with interest, and if you’re really lucky you manage to get a goodwill loan from a friend or a relative that you need to pay back at your own convenience without interest. However, these kinds of loans are hard to come by and even harder to repay because you need to repay the amount in full.
Financial institutions are usually the place that one can go to in order to borrow money for personal needs. There are many kinds of such institutions that lend money to needy customers. Loans are broadly classified into two categories:
- Personal loans
- Business loans
Personal loans are those which an individual takes from a financial institution in order to fulfill certain pressing financial commitments for which they are running short of funds. These loans are lent at a high-interest rate and have to be paid back within fixed window of time. In order for someone to borrow money, they need to have what is known as a credit rating. This rating will inform a financial institution about the individual’s capacity to pay back a loan. When a credit rating is high, the individual is given a loan immediately.
There are instances of bad credit ratings as well, and these can’t be helped because of exigent circumstances in the case of each individual. But the thing about credit ratings is that they are flexible and can be changed over time. When a person with bad credit is given options to pay back their outstanding debt, and when they honor their commitment to the lending authority, their credit scores improve slowly and steadily.
These kind of loans are given to those individuals whose borrowing capacity is measured by their paycheck. The amount of the loan is measured against the amount they receive every month as salary along with the interest rate added by the lender. These loans are usually a guaranteed payback and lenders who have bad credit scores are also eligible for these kinds of loans. Payday loans are offered by non-traditional financial institutions as well and these places also give loans to people with low or bad credit scores. These lending operations have eased up the burden on many individuals, however, one must borrow from them with caution as they aren’t governed by the formal legislature.
This kind of loan is to be paid back within a year. This is more of a one-time deal and is more often availed by small businesses who cannot get a line of credit from a formal financial institution. However, those who default on these loans are often faced with severe consequences.
How To Manage Money
The simple goal for an individual who is earning money is to not be in debt. Even if it is a credit card bill that the need to pay back, the goal is to ensure that every month, all their money is accounted for and there is some amount, however small, that is set aside as savings. However, there are times when life doesn’t go to plan, and we are faced with situations that require some extraordinary measures to help us tide over them. In these instances, it is best to make sure that the money borrowed is enough to help one through a crisis. When you get back on your feet, the goal of managing money well should be on track again.
Lending from time to time is not a bad option. However, when it is limited to emergencies, you are often better placed in terms of money and savings.