The Reason Personal Finances are Hard to Understand

Einstein's Theory of Relatively can be understood only by a few great minds located on different parts of the world. Personal finance, on the other hand, can be understood by plenty individuals everywhere – but that doesn't mean everybody. To date, there are still lot's of humans, like yourself, dumbfounded by the whole idea of personal finance. The reason behind that is the annoying jargon they use, concepts that can't be so easily understood by the average person. That's what causes hesitation amongst many when it comes down to availing financial services, and sometimes even leading them to pay more than what they really have to.

Some lending companies, perhaps all of them, would love to keep it that way. Watching out for their own personal interests is the standard operating procedure, or in other words, getting the better end of the deal. If you don't wanna end up in the dinner plates of these wolves, it's best you educate yourself – do you even know what personal finance is? If you don't, here's what you've got to know: personal finance can be broken into 3 simple parts, the first being understanding the financial position you're in. Ask yourself what kind of mess you're in at the moment.

Taking into consideration the amount of bills you have the pay and your total debts will give you a hint about your status. What you do next is “add” things up, and more or less, give an assessment on how deep in the gutter you are. You don't have to use some fancy financial tool or hire a financial lawyer to tell how bad things are going for you, all you need to do is calculate using simple math. 2nd part is the prediction of your short-term and long-term needs – what will you be needing/paying for a few days for now? What about at the end of the month or even in a couple of years? After gathering all the info you'll need regarding that, you are now ready to put into action your financial strategy.

These are the “ideas” you'll come up with in order to yourself out of the “hole” you got stuck in. One solution that'd probably come in handy would be taking up a loan – as a review, there are two parties involved here, namely the lender (the loaning company) and the borrower (you). You borrow a certain amount of money, which you'll be using for whatever need/s that you may have, and pay it back. How long will you be given to pay the guy back and how much? That'd depend entirely on the terms you two agreed on, and the type of loan you availed.

There are 2 types of loan, namely secured and unsecured. A secured loan has a lower rate of interest, and gives you a longer time frame to pay it back. The reason for that is you put up collateral, which means they get to keep that collateral if you violate the terms you agreed upon. The second type, unsecured loan, doesn't require you to put up collateral. But they compensate that by raising the amount of interest you pay, plus you're given a shorter time frame to pay them back, not to mention a lesser amount of money for them to lend you.

These are only the basics, for a more thorough understanding of the topic, check out the other articles we've got written here. Important reminder: never be too eager to get into something you haven't a clue about – you'd only wind up regretting it.