Personal finance is indeed a tricky subject. Most people know the importance of managing their personal finances properly, but only a few can actually do it right. In order to maintain control over your personal finance, you need to understand these three keywords: income, saving, expenses.

Personal finance management starts when you receive your income. It can be your salary or additional income, all income must be managed properly to produce better personal finance growth. Income can be developed if you have investments, and the only way you can invest your money is by saving part of your income (or take leverage by borrowing money to fund your investments, with additional costs and risks involved) and use it as capital.

Saving is what most people don’t understand. If you are still spending money and save what you have left, you are doing it the wrong way. What you should do is determine certain amount that you would like to save each month, and set that amount aside before you spend your income. If you determine a 20% saving out of your total income, then you should save the 20% first and not later. This way, you can be consistent with your savings and you can avoid temptations to spend all your income and save none.

Of course, you need to also manage your expenditures. There is a huge difference between needs and wants. You should put needs at higher priority, and set wants aside for times when you actually have the extra money to pay for them. There’s no need to buy new suits, especially using your credit cards, if you don’t really need them. There will be time when your personal finance is strong enough and you can actually afford everything you want, but if you are not in such condition then you should stick to more needs and less wants.