The financial industry has been one of the hardest hit by the current wave of technological developments. New improvements in software programs and machine learning as well as computational power have made financial services more accessible to the public than ever before.
The democratization of financial services means that the average person can familiarize themselves with personal finances and financial planning in ways people could not even imagine just a decade ago. As the industry has had to and continues to adjust to these changes, consumers are being increasingly acquainted with the basics of personal finances.
What are “The Basics”?
The first thing to understand about personal finances is the concept of a financial plan. This is a roadmap for your finances that you follow in order to best position yourself financially in preparation for retirement. A financial plan establishes where you are, where you want to be when you retire, and how to get there.
The next concept to understand is debt management. Making sure your debt is under control is key to maximizing wealth. By understanding how to manage debt, your liabilities can be minimized whilst your assets are maximized. The less debt you have, the more money you can use to save up or spend on the things you want. There are several options for quick debt solution that can be resorted to, to manage debts.
Your rate of return is also something you need to know and control. Even a small difference in return rates can mean a big difference over the course of several decades. It is always beneficial to choose a product that has a higher rate of return if all other things are equal. Managing transaction costs can also help in this regard.
Something else people should know is the concept of budgeting. Budgeting will allow you to know how much money is coming in and how much is going out. You can then control these two in order to properly allocate funds to where they need to be in order for you to reach your financial goals.
How Technology Helps
Traditionally, if you wanted to start a budget, you would have to sit down and think of anything and everything you spend your money on in a month and painstakingly write down every line of expenses on a piece of paper, tally up the total, and then figure out how much you made in a month and see if the numbers were sustainable.
If there was a surplus at the end of the month, you could worry a little less. If the opposite was true, you got to worry that much more. Changing numbers on each budget item would then involve changing the final expense numbers by hand as many times as you changed each line item’s amount.
Fortunately, with the arrival of the 21st century, there are programs that exist which make this process lightyears easier. Even a simple excel spreadsheet takes away countless hours of needless headache from your busy schedule. And in recent years, budgeting software has become truly sophisticated and has made being financially responsible a breeze.
Also, you can try this new concept of virtual bookkeeping where you can hire professionals that will take care of your accounts from a remote location. This is actually secure and cost-effective as all your work is been taken care of online through a secure network.
Instead of manually erasing every number you change or having to make countless drafts, budgeting software simply changes all relevant numbers the moment you change a line item. Not only that, many programs will go through relevant categories and provide recommendations based on your personal financial situation so as to minimize guesswork.
How to Get Started
Before choosing a certain budgeting software program, you should probably look around before settling on one. What works for someone else might not work for you. This is because everyone has their own unique financial circumstance that might require very different strategies to tackle.
For example, Mint is a very popular budgeting program that has a wide range of services. However, based on your specific needs, you might have to consider alternatives for Mint simply because your unique situation calls for it.
Once you have finally settled on the right budgeting software, simply proceed to provide the information needed to properly assess your financial situation. Of course, feel free to omit information you do not feel comfortable disclosing. Just remember that the more information the budgeting program has, the more it will be able to assist you.
Once the plan is set into motion, it then becomes a matter of self-discipline in sticking with the plan. Sticking to a budget will go a long way in this regard as it will make it easier for you to meet all your financial obligations and, after a number of years, you will start to see your efforts bear fruit.
A Final Takeaway
The proliferation of technology has made possible the democratization of more and more products, chief among them budgeting and financial services. As technology continues to improve, more and more people will be able to gain access to financial services and the ones already in will be able to access an ever-wider array of services as well.
Increasingly, the main barrier to improving our lives will simply be ourselves. It will be increasingly up to us as individuals to set a target of where we want to be in life, make a plan on how to get there, and, most importantly, have the discipline to see it through to the very end.