Everyone’s personal finances are important to achieving personal goals and success. With this in mind, each person should take care of their personal finances, but this is not the case when it comes to the few people who do not have a personal budget, or those who live beyond their means without paying attention to their personal finances. When should you start managing your personal finances and why?

Franco Modigliani, Nobel Prize in Economics in 1985, developed the life cycle model in which he analyzes the consumption behavior of an individual during his life. He takes into account in his analysis changes in the individual’s income and savings. We proceed to the study of the various facets of the economic agents of personal finance during the different stages of his life. The author divides the period of life into two parts, which is activity and inactivity or retirement. The period of activity that includes both sides reveals changes in the personal finances of individuals. During the first phase, your personal finances are not very good because your consumption is very high, sometimes exceeding your income.

They are using consumer credit through credit cards and have no equity. During the second phase, people borrow to buy consumer and investment goods. Indeed, they accept credits for the purchase of automobiles, credits for the purchase of real estate; credit cards… At that time, personal finances begin to improve as savings become a positive and important patrimony until the end of your life. This is due to the decrease in consumer spending and to the fact that their children can grow up and leave the family roof and resort less to credit. During the down period, personal finances start to deteriorate as their income falls and they want to maintain the same standard of living. They reduce their savings to meet increased consumption, and income declines. To maintain their previous level of consumption they resort to their savings; sometimes he tends to dispose of his estate.

This shows us the importance of managing finances during our youth, because it is the best time of our lives because during this period we have the opportunity to influence our personal finances through the income from our activities. How does it positively influence our assets, our savings and our brief finances?