Advantages And Disadvantages Of Public Listed Finance Essay - Free Essay Example

Sample details Pages: 3 Words: 998 Downloads: 1 Date added: 2017/06/26 Category Finance Essay Type Argumentative essay Did you like this example? Generally, the capital of a public listed company is raised from the public. Unlike private limited company, public listed companies have the rights to issue shares on the stock exchange. They can issue shares easily in the share market. Don’t waste time! Our writers will create an original "Advantages And Disadvantages Of Public Listed Finance Essay" essay for you Create order In addition, it often requires less time and expenses to issue shares. Therefore, a public listed company can raise large capital in a short period of time without having to spend much. The capital raised can be used to finance business activities for growth, expansion or pay off existing debts. It can also be used to fund research and development, buying assets and acquisitions. Thus, the value of the company will also increase with the growth of the public listed company. ii) Institutional Investment In most of the time, the investment bankers and funds seldom invest in private limited companies. However, they most probably will invest in your company when it is a public listed company. It will eventually increase the companys capital funding alternatives and ability. This is because the investors will gain liquidity and also the fact that public listed companies are more transparent due to the financial report announced publicly. The banks will have more confident towards public companies and less hesitation to lend money to them. As well, public listed companies often receive more favorable lending terms when borrowing from financial institutions. iii) Increase Visibility According to Chris Joseph (2009), being a public listed company means increased visibility and also exposure. The company will gain more awareness from the public through media coverage and publicly filed documents. This can improve the companys profile and eventually increase the value of the company in terms of shares. The increased visibility usually will receive many attractions from the potential customers and investors. This is not something that private company can easily do. Besides, it gives the public listed company a greater level of prestige. Prestige serves as a free source of marketing and helps promote the company as the company gains publicity. iv) Ability to Utilize Stock to Make Acquisitions The stock of a public listed company is as valuable as cash when acquiring other companies or assets. As a public listed company, it creates a type of currency in the form of its stock and the company can use it to make acquisitions. The markets valuation is used by public company when exchanging stock in an acquisition. In another words, public listed company have the ability to utilize stock to make acquisitions. Usually, it is less expensive and easier compared to private companies. v) Greater Employee Attraction and Retention For a public listed company, there will be greater employee attraction. Public listed company mostly does not have difficulty recruiting qualified workers compared to private company (Chris Joseph, n.d.). This is because public listed companies might be more attractive to potential employees since they can pay higher salaries due to the additional capital. These companies also offer enhanced benefits and incentives to motivate employees and improve retention. Besides, the employees also have higher chance to be promoted. Therefore, it creates great employee attraction and retention. Hence, it also increases the companys performance and generates higher profits. Disadvantages i) Profit-sharing Since public listed companies can issue shares, then they have to pay dividends. This means that public listed companies have to share their profits with others, the shareholders. The higher the number of shareholders, the more people the company has to share profits with. Thus, the earnings after paying dividends will be lower. ii) Loss of Overall Control According to Girish Ramachandran (2009), loss of overall control is one of the main disadvantages of being a public listed company. This is because the company has to share ownership with others such as the investors and also the shareholders. As the owners of the company, they have the rights to voice out their opinions and vote for matters that can affect the companys operations. The existing management may have loss of overall control of the company especially when the company is controlled by a group of investors. iii) Loss of Privacy Girish Ramachandran (2009) states that a public listed company will suffer loss of privacy. This is because as a public company, it will attract a lot of media interest as well as has to publish full disclosure about its operations and plans. Additionally, the law also requires the company to publish sensitive information, mostly annually, to prevent insider trading and also to protect the investors. There will be a loss of privacy because the companys financial report that consist of the sales, gross profit, net income, assets and liabilities will be publicly announced. This is a disadvantage as the other competitors can know about the financial position of the company. iv) High Reporting Requirements As a public listed company, there are additional obligations and reporting requirements because they have to fulfill a lot of regulatory requirements and meet accepted standards of corporate governance. Based on Investopedia (2009), public listed companies are regulated by the Securities Exchange Act of 1934 in regard to periodic financial reporting. Comprehensive audited financial statements must be prepared by all the public listed companies and also publish annual reports. Consequently, the company will have to incur high expenses to meet the reporting requirements. In addition, this disclosure provides information to competitors which are a drawback for the public listed companies. v) Pressures to Increase Earnings Although being a public listed company can issue shares, however this also means that there is an increase in accountability to the public shareholders. The shareholders are critical on the performance of the company and constantly look for rising profits. Therefore, public listed companies have to face added pressure of the market to increase earnings. The interest of the shareholders will have to be considered first although it may differ from the companys objectives. Eventually, this may cause them to focus more on short-term results rather than long-term growth (Investopedia, 2009). Hence, to boost earnings, the management even may agree to do somewhat questionable practices.

Gatsby Idealism And Reality - 2039 Words

For Jay Gatsby idealism and truth play important roles in how he chooses to live his life as well as how others view his life. Every individual holds different ideals and matters of what they believe to be the truth. For people who believe in idealism, existence and truth pertains to only what the person knows and believes in; therefore, how one perceives things to be is how they exist. For Gatsby the only Daisy that exists is perfect and the embodiment of everything he desires while for the narrator, Nick Carraway the way he views Daisy is messy and imperfect so she only exists that way to him. Due to it only being written in first person point of view the story holds a certain biased opinion of Daisy that affects the opinion of Gatsby.†¦show more content†¦Due to Gatsby s perception of the world and what he believes to be the right thing to do he undergoes physical and psychological changes, the people surrounding him also change their opinions on Gatsby due to his endeavo urs. F. Scott Fitzgerald’s intent with the construction of â€Å"The Great Gatsby† is to bring to light the complications viewed in believing and putting forth goals and values over concrete realities. Nick Carraway s observations of Gatsby and his life show this. From Nick’s perspective, Gatsby is ceaselessly chasing a person who only exists in Gatsby’s mind contrasting from the Daisy existing in Nick’s mind. Fitzgerald also outlines how the opinions pertaining to truth and existence vary among people and how depending on one individual’s opinion other opinions can clash and create negative views. The world that exists for Gatsby competes with the world observed by others, such as Nick, Daisy, Tom, and Jordan. Because Gatsby’s world is largely different than other people’s the interpretation of Gatsby becomes a madman with crazy ambitions and unattainable goals, this creates negative opinions on Gatsby even though for Gatsby h e is going after what he loves and does not mind the heartache that comes along with it. Fitzgerald’s novel outlines the judgment held by society and how people tend to try and dictate how another person should live theirShow MoreRelatedIdealism In The Great Gatsby1463 Words   |  6 PagesThe Effect of Truth on Idealism in The Great Gatsby An individual s idealistic world will often be far from the reality of their situation; their own idealistic world in which they wish to live will cloud the truth from their eyes, deceiving them of what their life truly is. In the novel, The Great Gatsby, Jay Gatsby lives his life under an illusion, the illusion that he is living in his own ideal world in which everything will work out for him. 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Gatsby puts his lover, Daisy, on a pedestal and believes she is larger than life. Everything he does to win her over is ideally perfect, but not realistic. The Great Gatsby by F. ScottRead MoreSimilar Themes found in The Great Gatsby and Tender is the Nigh t by F. Scott Fitzgerald1273 Words   |  6 PagesThroughout two of F Scott Fitzgeralds books, ‘The Great Gatsby and ‘Tender is the Night, comparisons can be made between the themes that are dealt with in each book. These themes that are portrayed, include materialism, the corruption of dreams and idealism, which all come under the larger theme of searching for human fulfilment. nbsp;nbsp;nbsp;nbsp;nbsp;Materialism is a theme that is very common through both of the books. In ‘The Great Gatsby we are constantly seeing characters living a hedonistic

Asia Pacific Business

Question: Discuss about the Asia Pacific Business. Answer: Introduction The business system is described as the framework that facilitates a company to formulate the set of movements most likely to accomplish this benefit. The business system charts every step involved to create and deliver products of a company. Managers have the choice of how to conduct a business that starts from development of a commodity to sales and service, at every link in the chain. The word system mostly stresses the importance of supporting at each step with the proposition of value (Zokaei et al. 2013). The essay provides an overview by comparing and contrasting business systems in Korea, China and Japan. It provides an overview about Korean business conglomerate that is termed as chaebol whereas; in Japan Keiretsu formed the largest group of business. According to the present research on varieties of capitalism, a field termed as comparative business systems, owes much of its strength to the influential volume. The economic development of East Asia has been regarded as the most pleasing surprises in the world (Waldenberger 2016). The essay compares the business systems between Japan, China and Korea. It shows that the market performance between China and Japan are far better as compared to their counterparts in the United States and Europe. In order compare and contrast the business system in Korea, China and Japan, it is required to make an understanding about the business system. Discussions According to Palmer (2016), in Japan the largest business group is formed under its business conglomerate known as Keiretsu that is also considered as the major contributors to the economy of Japan. This business group mostly employs Japanese style of administration and system. Zaibatsu was the predecessor of Keiretsu, which are considered as family run. There are mainly two types of Keiretsu; the first one is the horizontally organized Keiretsu and the second is the vertically organized Keiretsu. As opined by Yanase and Limpaphayom (2015), Fuyo Group is the largest Japanese Keiretsu that is considered as the corporate that descended from Yasuda zaibatsu. It was a key business group in Japan until the Second World War. However, in the year 1948 Yasuda was taken apart with its major monetary arm Yasuda Bank becoming Fuji Bank. Under this form of business conglomerate, both capital and human resources are knitted jointly together. The governing of the companies under this business conglomerate is handed to experts or agents in order to avoid disagreement among group members. The upright prearranged Keiretsu are mostly formed by a large parent company. Each flow and function of the companies follows a top to down procedure in order to control inventories as well as industrialized quality. Almost all the small and medium sized companies follow and utilize this system in Japan. On the other hand, in the year 1979 China started its reform program after the initiation of economic door policy by Deng Xiao Ping. The state government modernizes the major industries of China such as agriculture and technology. The state owned enterprise is also provided with the rights to form the structure of their company according to the requirements of leaner production procedure as well as maximization of market. The usage of profits and loss are also implemented by the state government of China (Yu 2014). With the help of this, a segment of the profits is donated to the state government however; the remaining profits can be kept by the state owned enterprise. The state government of China has also undertaking the downsizing of the state owned enterprise. This includes the development of stock exchange in Shanghai and Shenzhen and also transforms some imperative markets to shareholding industries in order to trade. As a result, it gives rise to the communist market economy i n China whereby commercial way of administrating the economy is reinforced. Japan follows development of its own industries whereas; China follows foreign direct investment policy. Japan has determined to become a part of export-determined economy and as a result, Japanese have been quick to recuperate its economy by competing ferociously in the ever rousingly saturated market. The commodities they are agitating out are of superior dependability and they often demean its competitors by a large margin to win the contract. Japan endowed profoundly on research and development in order to generate high value commodities to make it advantageous to the world. The business systems of Japan have also introduced several methods to enhance efficiency in order to ensure profitability. As opined by Issar and Navon (2016), Toyota generated a system termed as Just-In-Time (JIT) that highlight on the unemployment of keeping live inventory. JIT was first created in the year 1950 that disseminated slowly into diverse industries and plants in Japan. It necessitates close coll aborative association with all its suppliers for all its industries to work. With good performance, it can make sure lean production with little drooping and good flow procedure. This procedure brings about the envy of the manufacturing world particularly in the United States. The companies of Japan also made the use of Total Quality Control (TQC) in production. Professor William Demming who belongs to the city of New York however introduced it; the companies of Japan mostly utilize TQC. The major notion of TQC is to have little or no tolerance at rework. This is mostly because; most of the companies consider reworking of a work as wastage of time (Deshpand et al. 2013). On the other hand, according to Wang (2013), the state government of China views foreign direct investment as a very imperative medium in order to enhance the economy. The state government also generated four Special Economic Zones in Fujian and Guangdong in order to persuade the facilitation of foreign direct investment. The state government comprehends that by generating four zones is not adequate to open up the market. Due to increasing manufacturing cost in the Japanese companies, Japan has started to pour overseas direct investment into China to reduce cost. As a result, the importance of foreign direct investment can be reflected in both the countries. Japan mostly benefits from the low cost of production however; on the other hand, China benefits from the capital inflow as well as technology transfer. The Peoples Republic of China mostly makes the use of the socialist market economy that is based on the governance of State owned enterprises as well as upholding a free market open market. During the early stage of monetary reform in China, socialism can be considered as the basis for the reform and therefore has to implement industrialist techniques in order to survive (Alba, Song and Wang 2013). Japan mostly adopted the system of capitalist market economy that is quite similar to that of its western counterparts. With the help of this system, the business systems of Japan are encouraged to carry a free trade in the market. China adopted the market economy in the year 1980 that was coupled with the alleged reform and opening up policy, blocks of the market entry to the key Asian countries have in due course been erased. However, even though the market economy of China has been developing with large inflows of overseas investment as well as export, the political standing of China, which is one party controlled government, is dissimilar from that of US and other key western countries (Li, Cui and Lu 2014). According to Murillo and Sung (2013), the business conglomerate of Korea is known as chaebol that is famous for its exclusive organizational structure as well as administration pattern. Every chaebol is composed of several companies thus being engaged in diverse types of economic activities. However, they are all combined jointly by a vertically federal command structure controlled by the proprietor and his family members. Hyundai is considered as the major chaebol that is considered as the corporate that was initiated by Chung Ju Yung who visited Seoul as a teenager in the year 1930. After the Second World War, he developed trade relation with the US military and won construction contracts from them. Hyundai was provided the contract to build the 260 mile highway between second largest city of South Korea, Pusan as well as the capital Seoul. Hyundai was involved in the construction of overseas projects. The managerial authority of the owners is allegedly derived from his share of capitals. The major owner characteristically occupies the position of the group leadership, thus acting like a established patriarchy and authorizing control with the help of personal staff in the management of the overall chaebol group. However, the chaebol proprietor does not restrict the size of the business organization to the one that he can individually administer. Rather, he builds up a large officious structure that he dominates by making the use of his share of capital. The progression to the leadership of a chaebol is in accordance to patrimonial objectives. Chaebol mostly operates with a complicated officious decision making procedure that engages functionally dedicated offices as well as definite tasks (Choi et al. 2014). The initial organizational structures and operation of the chaebol bear a resemblance to those of the states in Korea, with which it shares a close relation. Every chaebol function as a articulate group, in severe competition with other chaebol. However, the corporate recognition of the chaebol is much weaker as compared to the business organization in Japan. According to Yanase and Limpaphayom (2015), the business groups of Japan that is mostly referred to as keiretus, is mostly identical to that of the Korean chaebol both in terms of size as well as in terms of the importance to the economy of Japan. However, both chaebol and keiretus operates on the principles quite diverse from those of their Korean counterpart. Most of the scholars distinguish keiretsu from chaebol based on their types. There are mainly two types of chaebol; the first is deals with the intermarket group while the second deals with independent groups. The intermarket group mostly deals with the engagement of diverse industrial sectors. The correlation of the member firms under this type of keiretsu is more collegial rather than hierarchical. Under such keiretsu, control and coordination is accomplished with the help of dispersed networks of presidential clubs, mutual share holdings as well as interlocking directorships (Glattfelder 2013). On the other hand, independent groups are liable to be identical to member firms of the intermarket keiretsu. Each of the intermarket keiretsu consists of a large as well as highly successful parent company as well as vertically aligned subsidiary companies. Despite some connection with Korean chaebol, the Japanese keiretsu is distinguishing for the strong networks it promotes as well as networks that work to restrain the blunt and inept appliance of authority. The ability pattern in China also diverges from that of proprietors of Korean Chaebol. In Korea, there are large hierarchically arranged sets of firms however; in China, there are mostly family firms where each firm consists of a small segment of the production chain. In Korea, the firms are directly controlled by the central holding company that is possessed by an individual or a family unit. On the other hand, the business groups in China are often conglomerates of disparate trades that are usually owned by an individual family. The intellectual layer of the Korean trade system illustrates a comparatively higher level of resemblance with that of China. The institutionalized trust in Korea is much more strongly enhanced as compared to that of China (Hasegawa and Noronha 2014). As far as management of firm is concerned, the structures of the firms in China are centralized and interdependence between managers and workers are mostly weak. As far as networks are concerned, Korean chaebol are of self-sufficient size and they also demonstrate low dependence on suppliers and distributors. Either the organizational system of the companies in Korea is characterized as disciplined or hierarchical that in turn reflects the widespread social pattern. Korea is a society that witness respect for authority and their job status is an established norm. Under the management business system in Korea, workers are expected to illustrate a high degree of loyalty towards their employer. Similarly, workers are professed to be a highly valued asset that is reflected by the professed importance of job training. On the other hand, managers are unenthusiastic to delegate to individuals who are not personally trusted that limits the complexity that is undertaken and implemented by a f irm. Management of private firms in China mostly involves direct managerial control by the family proprietors (Lu et al. 2014). As far as network is concerned, the dominant bargaining power related to chaebol dominates trade partners that mostly are small medium enterprises, which have adjusted its trade activities to individual corporate customers. On the other hand, the foreign Chinese business networks are structured hierarchically that is followed by the hierarchy of the family firm. There is mostly lack of business network in China due to limited requirement. According to Folk and Jomo (2013),intellectual protection of property is weak and as a result, the firms in China takes advantage of that to copy what they crave. Korea on the other hand, reflects corporate competition for a leading position that acts as the fundamental motivation behind many of the new investments. The adverse correlation and competition between chaebol can be exemplified by the relationship between Lucky Goldstar (LG) and Samsung as well as their ambition to dominate the electronics market in Korea. There has been low degree of al liance-based modes of incorporation in the post-war Korean business system. An increase of technological partnership between companies is mostly noticed under the Korean business system. Personal trust is critical for most of the Korean firms while building coalition with firms outside the business group. Conclusion It has been concluded that the bank of Zaibatsu merged with Taiyo Kobe bank after the year 1990 and then in the year 2002, it became associated with Sumitomo bank thus creating one of the largest financial groups in Japan. With the economic stagnation of the year 1990, a more crucial horizontal keiretsu has been formed. After 1990, zaibatsu dissolution became the major importance to the establishment of the so-called Japanese-style mixed economy. After 1990, both the chaebol Samsung and LG started flourishing among the top ten 10 companies in South Korea. The economic crisis in Japan in the late 1990s forced the companies of Japan to compete for price as well as quality by making the use of market-based systems. It can also be concluded that in South Korea, chaebol is comprised of multiple companies with robust internal transaction that are controlled by an individual enterprise. Zaibatsu is largely influences chaebol as both zaibatsu and chaebol are considered as family-owned multin ational companies. Most of the chaebol trace their origin back to the period of the occupation of Japan of South Korea. Cooperation in trade requires patient building of inter-personal trust mostly between the proprietors. However, under the management business system in Korea, workers are expected to illustrate a high degree of loyalty towards their employer. References Alba, J.D., Song, P.X. and Wang, P., 2013. Is There A Positive Association Between Merger And Acquisition And Non-Merger And Acquisition Fdi? Firm-Level Evidence From Japanese Foreign Direct Investment Into United States.The Singapore Economic Review,58(04), p.1350028. Choi, Y.R., Yoshikawa, T., Zahra, S.A. and Han, B.H., 2014. Market-oriented institutional change and RD investments: Do business groups enhance advantage?.Journal of World Business,49(4), pp.466-475. Deshpand, R., Grinstein, A., Kim, S.H. and Ofek, E., 2013. Achievement motivation, strategic orientations and business performance in entrepreneurial firms: How different are Japanese and American founders?.International Marketing Review,30(3), pp.231-252. Folk, B.C. and Jomo, K.S., 2013.Ethnic Business: Chinese Capitalism in Southeast Asia. Routledge. Glattfelder, J.B., 2013. Backbone of complex networks of corporations: The flow of control. InDecoding Complexity(pp. 67-93). Springer Berlin Heidelberg. Hasegawa, H. and Noronha, C. eds., 2014.Asian business and management: Theory, practice and perspectives. Palgrave Macmillan. Issar, G. and Navon, L.R., 2016. Just in Time (JIT). InOperational Excellence(pp. 65-67). Springer International Publishing. Li, M.H., Cui, L. and Lu, J., 2014. Varieties in state capitalism: Outward FDI strategies of central and local state-owned enterprises from emerging economy countries.Journal of International Business Studies,45(8), pp.980-1004. Lu, J., Liu, X., Filatotchev, I. and Wright, M., 2014. The impact of domestic diversification and top management teams on the international diversification of Chinese firms.International Business Review,23(2), pp.455-467. Murillo, D. and Sung, Y.D., 2013. Understanding Korean capitalism: Chaebols and their corporate governance.ESADEgeo Center for Global Economy and Geopolitics Position Paper,33. Palmer, D., 2016. Foreign Forced Labor at Mitsubishis Nagasaki and Hiroshima Shipyards: Big Business, Militarized Government, and the Absence of Shipbuilding Workers Rights in World War ii Japan.On Coerced Labor: Work and Compulsion after Chattel Slavery, p.159. Waldenberger, F., 2016. Horizontal keiretsu Defining characteristics.Routledge Handbook of Japanese Business and Management, p.35. Wang, J., 2013. The economic impact of special economic zones: Evidence from Chinese municipalities.Journal of development economics,101, pp.133-147. Yanase, N. and Limpaphayom, P., 2015. Organization Structure and Corporate Demand for Reinsurance: The Case of the Japanese Keiretsu.Journal of Risk and Insurance. Yanase, N. and Limpaphayom, P., 2015. Organization Structure and Corporate Demand for Reinsurance: The Case of the Japanese Keiretsu.Journal of Risk and Insurance. Yu, F.L.T., 2014. China's Economic Change in Entrepreneurial Perspective: Mao Zedong (Transformative Entrepreneurship) versus Deng Xiaoping (Adaptive Entrepreneurship)+.International Journal of China Studies,5(3), p.599. Zokaei, K., Lovins, H., Wood, A. and Hines, P., 2013.Creating a lean and green business system: techniques for improving profits and sustainability. CRC Press.

Managing Personal Finance Essay Example

Managing Personal Finance Essay Due to the current economy and credit card-oriented lifestyle, it is vital to understand the importance regarding management of personal finances. Having a budget, ensuring debt is being paid off, readying an emergency fund, preparing for the college education of children, and saving for retirement are all essential portions in managing personal finances.Because of the mass amount of people in debt there are a decreasing number of individuals who are prepared for retirement. Managing finances is simply being a good steward of personal income. Having a budget is an extremely important foundation to managing personal finances. Through a budget, an individual can track past purchases and costs incurred, manage how much he can spend today, and take control of his future inflows and outflows. A good budget allows spending to be kept to a minimum and helps maintain control of inflows and outflows which frequently opens up excess cash to be used elsewhere (Vohlwinkle, n. . ). Budgeting is n ot as difficult as some make it out to be. It is also advantageous because, although spending cuts may have to be made, there will be more savings and less debt to worry about. Vohlwinkle discusses the fear people have in attempting the birth of a budget: The biggest fear that most people have when creating a budget is that they will need to suddenly cut back on all of the fun spending things like the occasional coffee or dinner out, movie night, or even the trip to grandma’s for the holidays.While you may find that you do need to cut some spending after putting together a budget, without actually sitting down and creating one, it is impossible to know what expenses need to be cut, if any. (Vohlwinkle, n. d. ) Although budgeting finances can be a painful and tedious process, it is a process that should be done in order to ensure cash inflows are greater than cash outflows. The first step in creating a budget is computing total income. This includes the salary of a spouse as well as income from shares and dividends or interest on investments.Once the income is calculated, it is necessary to subtract the total expenses. The first money that should be deducted from a salary every week is the money that belongs to God. â€Å"Honor the Lord with your wealth and with the first fruits of all your produce. † (Proverbs 3:9, ESV). The Lord gives the strength that is necessary to work; therefore, it is only fitting that He should get a small percentage of the paid wages in order to further his work. After the tithe is paid, it is best to move on to the major expenses, such as mortgages and car payments, and take away the minor expenses last.Expenses must include bills, food, gasoline, and any other expenses that are incurred on a monthly basis. Since expenses such as food, gasoline, and even some bills can change on a monthly basis, taking an average of these over a few months will help monitor the expenses more closely. Once the expenses are subtracted, t he computed number will be either positive or negative. A negative number suggests trouble and requires an individual to start cutting back. Negative numbers require a person to take action and control of his finances.Once the number is seen, it will be evident as to how much will need to be cut back. If the number is much larger than expected, take action immediately as opposed to worrying and becoming discouraged. By making a few small adjustments, one can easily turn a negative number positive. If minor changes are not enough to gain control of debt, it may be necessary to make a lifestyle change. Too many people live above their means; an individual who lives an extravagant lifestyle with a frugal paycheck will regret his or her unwise choices.A positive number does not mean that budgeting is being done perfectly, but it does represent income is greater than expenses. There is almost always room for improvement in any budget. When an individual determines his inflows and outflow s, he can decide how much he must spend each month and how much he should save. Because the majority of people have debt, it is necessary to discuss how much money should be put towards paying off that debt. Paying off debt is a difficult and tiresome process.Most times, this is because of people who are in debt as a result of not having money; they now find it nearly impossible to pay off debt because they still have the same income and increasing debt. Minimum payments are all many people can afford to pay. It often seems as if there is never enough money to pay bills let alone pay off debt, but saving dollars here and there can surprise an individual as to how much is accumulated when just a little money is cut in every area possible (Vohlwinkle, n. d. ). Taking little steps, one at a time, towards debt can have a massive impact over a long period of time.It is not necessary to have thousands of dollars in order to reduce debt; by cutting out a few insignificant expenses every mo nth, it is possible to save thousands of dollars in a few short years due to the severe amount of interest credit card companies and loaning companies charge (Vohlwinkle, n. d. ). Debt should be paid off as soon as possible in order to avoid high interest payments. Some people have so much debt that all they can pay is the interest, which makes it difficult for them to have a savings or retirement fund.It is important to be responsible with money; God will bless if He is shown faithfulness with which he has given. â€Å"If then you have not been faithful in the unrighteous wealth, who will entrust to you the true riches? † (Luke 16:11). Saving money is an extremely important part of managing personal finances. Saving money gives an individual the ability to be financially stable in case of an emergency, to prepare for the future of his children, and to plan for his own future retirement.Having an emergency fund can be the difference between maintaining or losing a home and an entire lifestyle. The unexpected should be expected to happen at some point; experts agree that an emergency fund should carry enough money to be able to cover living expenses for three to six months. (Vohlwinkle, n. d. ). Vohlwinkle specifies the reasoning as to why three to six months is ideal: The reason you want to have three to six months of expenses saved up is that the most common reason for the need of an emergency fund is due to a sudden loss of income.If you or your spouse loses a job you still have bills to pay and it may take a few months to find suitable new employment. It is best to plan for a worst-cast scenario so that the smaller emergencies such as replacing the hot water heater that just went out will be easily covered. (Vohlwinkle, n. d. ) The unemployment rate is exceptionally high; because jobs are increasingly uncertain, it is undoubtedly necessary to have an emergency fund. Losing a job results in a massive reduction in income, and there are still monthly bi lls, mortgages, and other expenses that must be paid.Without an emergency fund, most of these bills would not get paid forcing an individual to go into debt until he found another job. The key to starting an emergency fund is simply taking the initiative to start it; everyone has to start somewhere. It will be a tedious process to save enough money for six months of living expenses, but the time will arrive when some of that money is needed. By making small payments frequently, the emergency fund total will add up. Opening up a new savings account at a bank is a great way to start saving for the emergency fund (Vohlwinkle, n. . ). It is necessary to regularly make deposits into this savings account; choose to deposit per week or month and keep committed to do so (Vohlwinkle, n. d. ). After enough money is saved up, the money that was being deposited every week or month will seem as extra cash. If children are a plan for the future, investing in the future of their lives is an excell ent way to use the excess money. Preparing for children is an exciting yet difficult process. An even more challenging process is preparing for their college education.Because children live with their parents for approximately eighteen years, their expenses are added up over an eighteen year period. However, college only lasts four years, and depending on which college they attend, it can be incredibly expensive. In order to prepare for a newborn baby, a budget process can be used. Simply approximate the child’s expenses and subtract the expenses, along with all the other expenses, from the total income of the household. If a positive number is computed, the baby is affordable; a negative number implies some cutbacks are necessary.Saving for a child’s college education is a rewarding process. To ensure a child gets a proper education, some parents offer to pay for their child’s entire education, while others propose to pay for a portion. Either way, the followin g example is extremely valuable in showing parents that they should start saving as early as possible. The following is an extremely useful example given by Vohlwinkle: Begin investing $5,000 each year when your child is 10 in an account that earns 11% annually. This would result in a total savings of over $65,000 by the time they are 18. Total money invested: $40,000.Begin investing $2,000 each year when your child is 8 in an account that earns 11% annually. This would result in a total savings of over $37,000 by the time they are 18. Total money invested: $20,000. Begin investing $3,000 each year when your child is born in an account that earns 11% annually. This would result in a total savings of over $148,000 by the time they are 18. Total money invested: $51,000. As you can see, if you begin investing as soon as possible you could save less money annually and only $11,000 more in total than if you waited 10 years and end up with $83,000 more! Vohlwinkle, n. d. ) Parents are wis e to start saving even if they do not have any children yet. If they plan to have or adopt children at any time in the future, parents would be able to save more money the earlier they start. This would ensure a child receives the education that he or she requires to go into a desired field. Planning for retirement is essential in order to ensure the necessary funds are available at the appropriate time. Retirement age varies by career. Men who work construction may not be able to work as long as an accountant due to the necessities of the job.Regardless of what age retirement is desired, saving for retirement must be done consistently and carefully. Vohlwinkle writes: If retirement seems like it is a lifetime away, planning for how you’ll spend that time can be difficult. But one thing is certain—you’ll need to have money in retirement. If you don’t plan on working in retirement, where will this money come from? Most people have three sources of income t hat work together to fund retirement: Social Security, pensions, and personal savings. (Vohlwinkle, n. d. Social Security is completely unstable and it is unknown if it will even exist in thirty years, and pension plans are rare and the benefit still only satisfies approximately twenty-five percent of pre-retirement income (Vohlwinkle, n. d. ). That leaves the responsibility to save to the retiree. 401(k) plans are a wonderful way to save money for retirement. A 401(k) plan is usually an employer sponsored plan in which the user contributes a specific amount of money each week. The employer will match that contribution and the total amount will be added to the 401(k).The money is invested and gains interest. The holder of the 401(k) chooses where he wishes to invest his money. It is irrational to put the investment all into one company as a single company, no matter how successful, still has potential to collapse. The old proverb says it all—do not put all your eggs in one ba sket; by following this guideline, it is easy to avoid a devastating loss of investments (Vohlwinkle, n. d. ). Separating investments does not allow the collapse of a single company to devastate an entire retirement fund; increasing the number of companies and asset investments made will increase eturn and decrease risk (Vohlwinkle, n. d. ). All interest accumulated in a 401(k) plan is added onto the principal amount which is ever increasing due to the holder’s contribution, the employer’s contribution, and the accrued interest. Since the principal is constantly growing, the interest is as well. In order to successfully utilize the 401(k) plan, money must be invested as early as possible. â€Å"The median household headed by a person aged 60 to 62 with a 401(k) account has less than one-quarter of what is needed in that account to maintain its standard of living in retirement† (Browning, 2011).Those who start saving late will not be able to save near as much as opposed to those who start early. The 401(k) works essentially the same as the example regarding college funds mentioned above. Even if the amount is smaller, money that is contributed earlier on in life will grow much more quickly than money contributed later. The old proverb says it all—do not put all your eggs in one basket; by following this guideline, it is easy to avoid a devastating loss of investments (Vohlwinkle, n. d. ).Separating investments does not allow the collapse of a single company to devastate an entire retirement fund; increasing the number of companies and asset investments made will increase return and decrease risk (Vohlwinkle, n. d. ). Managing Personal Finances can be a frightening thought, especially if there is a great amount of debt piled up. Like anything, controlling finances must be done a small step at a time. Whether an individual earns a six digit figure every year or fifteen thousand dollars, there is always room for improvement.Creating a b udget, paying off debt, arranging an emergency fund, organizing funds for the college education of children, and planning for retirement will all help ensure an individual lives a life managing his or her personal finances.References Vohlwinkle, J. (n. d. ). Budgeting Basics. Retrieved February 20, 2012, from Financial Planning: A Comprehensive Guide to Personal Finance Web site: http://financialplan. about. com/od/budgetingyourmoney/a/BudgetBasics. htm. Vohlwinkle, J. (n. d. ). Find Money To Pay Down Credit Card Debt.Retrieved February 20, 2012, from Financial Planning: A Comprehensive Guide to Personal Finance Web site: from http://financialplan. about. com/od/creditdebtmanagement/qt/FindMoney. htm. Vohlwinkle, J. (n. d. ). Why You Need an Emergency Fund. Retrieved February 21, 2012, from Financial Planning: A Comprehensive Guide to Personal Finance Web site: http://financialplan. about. com/od/savingmoney/a/emergencyfund. htm.