How Important is Personal Finance?

By Puja Shah. Edited by Arjun Chandrasekar.


From online shopping to buying a home, personal finance is used everywhere and it is important that you take the time to not only understand it but learn why it is important. As said by Investopedia, “personal finance is understanding, saving, investing, and managing your money.” It includes things like investing, budgeting, banking, and planning for the future of your finances. It controls much of our day-to-day lives and future and is connected to nearly any aspect of our lives. For example, one must use this to make sure that they don’t overspend at places like clothes and then fall short on money on important things like rent. As you can see, personal finance is very important and you should make sure you understand it. If you are still unconvinced, here are 6 reasons as to why it is important. 

  • It allows you to support your needs. 

When you understand how money works, you understand how to spend and save it and how much to budget on certain things that you need, and what those things are. This allows you to fulfill needs such as paying for rent, groceries, and more.

  • You understand what to do once you earn money.

Oftentimes when people earn money the first thing they go out and do is spend much of it on things that aren’t worth spending the majority of their income on. This leaves people short on money for things they actually need or may need to save money on. However, if you know about what to do with your money after getting it, by setting spending limits, saving goals, and how much to contribute to things like investments and retirement, then you are setting yourself up for a better, more stable lifestyle. 

  • It allows you to maintain a secure lifestyle.

Knowing about how money works allows you to understand how to prevent and what to do if you are ever in financial turmoil. This can be through having adequate insurance and not misusing your credit card. 

  • It helps you avoid debt. 

By knowing what can cause you to owe money to others and what may be doing so is important to know so that you don’t fall into that or are able to dig yourself out of that hole. Being in debt is a bad thing because it leaves you owing things to others and it can be quite difficult to pay off, the larger it gets. It can also help you find a way and have a plan for getting yourself out of the debt that you may be in. 

  • It helps you grow your money. 

Once people understand how to manage their money, many turn to investing. This is a method by which people can take a certain amount of money and try to increase its value by putting it into an investment such as a stock, bond, or real estate. In order to invest, you must be financially literate in order to make the best decision on what, when, and how much to invest into things so that you are able to make the most out of what you are putting in and get the best possible return. 

  • You can live a better life. 

Knowing financial literacy allows you to not be under the constant stress and pressures that are brought along with not understanding how money works and its following issues. By knowing how money works and all your available options, you can make the best, most well-informed decisions and that can allow you to not be stressed about what to do and enable you to be happier and safer especially when unplanned situations arise since you will be well prepared for them.


In conclusion, personal finance because it allows you to take control of many aspects of your life so that you can live the life that you want. If you found this article informative, be sure to like and comment!

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