7 Goals of Personal Finance

Personal Finance

“Money is only a tool. It will take you wherever you wish, but it will not replace you as the driver.” – Ayn Rand

Personal financial planning involves more than just living within your means. You have to start early to save for many purposes in life. There are goals such as buying a car, a house, maximizing your investment to accumulate a fund for children’s education, and retirement. You also need to avoid or reduce the risks of losses to your wealth and earning power. Lastly, you need to make arrangements to distribute your wealth in an orderly fashion before you are no longer around. Here are the seven goals in personal finances:


1. Eliminate high-interest debts: The first all-important goal is to get rid of all debts. Don’t think that you still can save while having high-interest debts such as credit card debts. The amount of interest earned which is way below 4% for your FD compounded annually just cannot keep pace with 18% interest charged on your cards compounded monthly Just remember that compound interest is a double-edged sword. At this juncture spend only on basic necessities until your outstanding debt is fully settled.

2. Budget: A budget is to allocate your spending within the limit of your income. A meaningful budget is one that includes savings, household expenses, and other monthly commitments such as insurance, installment payments. Follow the budget faithfully to avoid impulsive and unplanned spending

3. Income: The goal in this area is to increase your take-home pay from your normal employment. The other area to look into is to create passive income streams. On the common source of passive income is to collect rent from the property. The ultimate goal is to work less and earn more.

4. Expenses: One way to track your expenses is to look closely at your monthly credit card statements. Identify expenses that you can go without or reduce. Take advantage of tax relief and rebates to reduce your tax liability. Be able to distinguish between good debts (such as a loan to buy a house) and bad debts (use your credit cards to buy what you want and pay only the minimum amount).

5. Savings: Take advantage of regular savings and start saving early and allow compound interest to work wonder for you. The money you have saved is to earmark for down payments for a car and a house. Part of the savings is also used to invest and create a fund for your children’s higher education and for your own retirement

6. Protection: It is to safeguard your wealth such as your house from fire and other damages. Buy adequate property insurance coverage so that the risks are passed on to your insurers. You also need insurance cover to reimburse you for accidental and medical expenses and disability to carry on gainful employment

7. Estate planning: The aim of estate planning is to arrange in advance the transfer of your wealth to those you have in mind in a hassle-free way


Personal financial management is a long term activity. Things cannot happen overnight especially savings and investment. Be disciplined to monitor your personal finances on a regular basis. Make changes to suit changing conditions as you move along in life. The most important thing in life is to avoid gambling and not to incur unnecessary debt. These will lead to bankruptcy eventually.