In my first post on this topic, i covered the basic foundations of managing personal finances which are to understand your assets, liabilities, income & expenses.
Before diving into any further detail with this information i think it would be a good idea to step back and think about your financial goals:
Step 4) Consider your goals
These will be different for every individual, and may be vague (eg financial security), specific (saving up $xxx for a property deposit), long term (retirement planning) or shorter term (eg planning for travel). It could even be as simple as just gaining confidence in how to understand and manage your finances more effectively.
My goals probably cover all these. For example, in the longer term i'd like to get myself into a position where i can have a comfortable (and hopefully early!) retirement. In the medium term i'd like to have financial security and to be able to provide for a family. In the short term i'd like to make sure i can live comfortably and happily but without going too crazy and jeopardising the success of these longer term goals.
An important point to recognise is that these goals will and do change through life, so whilst it is worth stepping back and giving them some initial thought, the process shouldn't be too rigid.
Once you have an idea of your goals, you can start viewing them together with your current position (assets & liabilities) and your outlook (derived from your income & expenses) to shape the current & future financial decisions needed to achieve these goals.
We'll save more on that for next time...