What is personal finance?

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Some believe that personal finance is about investing. Talk to them about finance and it is all about the latest market developments and the best stocks to buy. Some believe that personal finance is about retirement planning. To them, it is about building up a substantial nest egg, so that they can enjoy their lives in their later years. Others believe that personal finance is about getting all sorts of financial products. For this concern, they have this insurance policy; for that aspiration, they have that structured product.

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The state of the world of personal finance is fragmented. Like scattered pieces of a jigsaw puzzle, the average individual who does not receive formal training in personal financial management doesn’t know where to look. Each piece he chances upon, he sees it as the whole.

Personal finance cannot be understood apart from what it is intended to achieve. Only when one or more objecties are established do the mechanics of personal finance make sense.

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The objectives underlying personal finance give rise to the processes of personal finance. Minimally, the objectives would include financial adequacy over the course of an individual’s life, under both normal and adverse circumstances. Then there are more lofty ambitions, such as becoming rich, retiring early, or having an excess in order to help the less fortunate. While each individual is unique in terms of the specifics of his needs and goals, one common denominator unites every single individual – finance. Beyond that, mortality; and perils that threaten to derail one’s financial future. These give rise to the disciplines relevant to personal finance.

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An individual typically has a myriad of needs and goals, all competing for the limited pool of financial resources one has. Each of these taps on a different discipline of personal finance, making some form of harmonisation necessary. One cannot make do with a mere collection of processes, for a bunch of processes randomly thrown together may result in friction. Worse, they may work against one another, like a car having a pedal that activates both the engine and the brakes at the same time. A flurry of activity occurs, but the car goes nowhere. The only things it produces are a lot of smoke and noise, alongside frustration and disappointment.

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Evidence of a poorly blended collection of processes include insuring to the point that it positively hampers the achievement of financial freedom, investing despite carrying unsecured debts, or watching one’s budget to the point where far greater financial returns could have been obtained if one were to direct one’s energies elsewhere. Such actions are good from the narrow perspective of a particular discipline, but are counterproductive in the greater scheme of things.

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The Financial Machine^TM is a harmony of processes working in concert in order to deliver the desired outcomes. Each process finds its place within the whole, so that the desired outcomes are delivered efficiently.

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Those familiar with the concept of compounding understand the vast difference it can make over a lifetime. A 1% difference in efficiency can make all the difference between having to sleep on the streets in one’s old age, and being adequately provided for till the day one returns to the Lord. A 2% difference in efficiency can make all the difference between living a life of fulfilled dreams and one that is merely concerned with subsistence.

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These small percentage differences are not too difficult to achieve. All that is needed is some time and effort in assembling one’s Financial Machine. And for this small investment of effort, it will yield results equivalent to years of labour.

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For a holistic approach to personal finance, attend our Workshop, or obtain a copy of The Financial Machine.