Finances: Planning your assets for the long term is essential to guarantee economic security in the future. Establishing well what your investment term is, having liquidity to prevent unexpected expenses, retirement or the diversification of your assets are just some of the necessary measures to know how to control and direct your economy.

Finances

In the same way, the savings and the performance generated by it are two added factors that can respond to your future needs.

Functions of finances

The main functions of finance are distribution, control, and accumulation.

1. Distribution function

The distribution function of finance is expressed through the process of using money, previously accumulated, to meet the relevant needs and requirements of the economic system in terms of financial resources.

This function forms monetary income and accumulation in the creation of social products.
Due to the distribution function, various processes of redistribution of the value of the social product are carried out in all structural units of the economy (in the sectors of material production and in the non-productive sphere) and at different levels of economic management.

After the main distribution of finances, there is a redistribution of the same, which is carried out by the State for the formation of its budget through various taxes, mandatory deductions, and fees.
Thus, the distributive function is necessary for reproduction, the formation of the spending part of the country’s budget, as well as the finances of individuals.

2. Control function

The important role of the control function is the possibility of analyzing aspects of the activity of the subject of management.
The control function of finances is manifested in the control of the distribution of the value of the product at the various stages of its transfer to the appropriate funds and its spending for the intended purpose.

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The control function is performed by the financial control mechanism.

Applying the control function, it is possible to assess at the state level the efficiency of the use of funds for social policy, the investment activities of companies, and the viability of family expenses.

3. Accumulation function

The accumulation function of financing is a process of formation (accumulation, mobilisation) of funds necessary for the operation of any economic system.
This function can manifest itself in the formation of the country’s budget, in the formation of total income in the budget of the company and the family.

Financial functions occur in each of the types of finance that exist: business, household, and public.
The distribution function becomes visible in the use of money, which also favours different redistribution processes in the economy, the control function is responsible for analysing the effectiveness of the funds and the cumulative function creates the necessary funds for the economic system.

Ways to better manage personal finances during a crisis

The corona pandemic has taught the importance of saving money for the future; and it is that you will never know when you may need extra money for your health, support your family or perhaps start a business that allows you to achieve the economic stability you need.

It is important to continue taking care of your finances so that money is not scarce when necessary.

Here are some tips!

Control personal budget

Let’s learn how to manage a monthly personal budget. That way you will be aware of how much money you receive and how much you spend each month.

This will allow you to avoid overspending, as well as recognize those ant expenses or ghost expenses that do not allow you to save, pay off your debts or grow financially.

Analyse how revenue can be enhanced

With the personal budget done, you can know if the money you receive each month is enough to pay your expenses, debts, and save, or if you need to increase your income. If the latter happens, it is important that you have the ability to analyse how to increase them.

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For example, you could get a second job, start a business, offer services in a private way, invest in the stock market, mutual funds or invest in property.

Investing in property is a much more secure and safe option than any other. Always check the future value of property with the help of a house price growth calculator before purchase.

Reduce debts

One of the big problems that do not allow you to save is the debts that you have accumulated. It is important that, in order for you to start generating a savings fund for the future, you can reduce your debts.

The first step is not to increase the amount of debt you have, in that sense, let’s avoid using credit or requesting loans unnecessarily.

And, secondly, evaluate which are the most expensive debts to give priority to payment; that is, not only pay the monthly instalments but a little more. That way the time to cancel it will be shortened.

Settle penalised debts

Finally, if you have debts that have already fallen into arrears, or have been notified in the credit bureaus, what you must do is liquidate them as soon as possible to recover your financial health.
Ten basic steps to plan personal finances

Different personal finance experts have developed a financial decalogue that can help plan the finances of any individual or family group:

1. Save for the long haul

  • Think about your future.
  • Get started as soon as possible.
  • Create a security fund for contingencies.
  • Take advantage of compound interest.

2. Plan

  • Determine rigorously what your financial situation is.
  • Consider your income-generating capacity.
  • Ask yourself: What are your goals for saving?
  • Make a budget: Know your real economic situation, month by month, and observe in time the impact that the big decisions will have on your life (living as a couple, having a child, changing flats, living abroad).
  • Think about your retirement: work towards a healthy situation starting at age 65.

3. Find an advisor

  • Count on the indispensable support of financial advisors and planners you trust.
  • Go to them throughout the investment process.
  • Demand maximum information and transparency.
  • Consider looking for a bank that manages your assets (for high capitals).
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4. Define your time horizon

  • Invest based on the terms and risks you can bear.
  • Think that the real risk for a saver is not achieving their goals.
  • Keep in mind the long term, do not be influenced by the latest news.
  • Don’t neglect your income.
  • Control your expenses.
  • Ensure the risk of your economy: anticipate unforeseen situations that could sink your economy or that of your family ( prolonged unemployment, divorce, accident).

5. Diversify

  • Diversification lowers risk.
  • Use a variety of assets, markets, and geographies.

6. Maintain emergency liquidity

  • Set aside a sufficient amount to cover unforeseen events.
  • Have that liquidity in case of need and not other investments.
  • Avoid over-indebtedness.
  • Watch out for high and/or variable interest rates.
  • Check credit cards.
  • Avoid instalment payments with high interest.
  • Use debit cards.

7. Be disciplined

  • Dynamically review and adjust your portfolio.
  • Reduce risky assets over time.
  • Acquire basic knowledge of taxation: Personal Income Tax, VAT, Social Security, Corporate Tax, deductions, bonuses, taxes, and fees. Taxes and fiscal policy have a great impact on your economy.

8. Contribute periodically

  • Maintain your investment plan over time.
  • Make regular contributions, enhance results and reduce risks.

9. Evaluate the results correctly

  • Sacrifice the certainty of short-term returns for the potential of long-term results.
  • Consider the impact of inflation, for this, you must take into account the real interest rate.
  • Reduce your tax bill.

10. Select the right products

  • Consider investment funds that offer great advantages.
  • Diversify and build a portfolio.

Conclusion

You don’t need to be an expert, just have a clear idea of ​​your current finances and develop a plan from there. If decisions get a little more complex, whether it’s about business or investment, you can consult a trusted financial advisor with whom you can build a long-term relationship.

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Author Bio

Name – Jonathan Veers
Jonathan is the founder of SPV Mortgages. He can help you find and secure the best limited company mortgage options to push your property investment dreams forward. As specialist mortgage brokers with over 10 years of industry knowledge, he has helped experienced landlords and first-time investors across the country; saving you time and money in tracking down the best rates.


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