Why Personal Finance Is Important In Your Life?
Let’s consider “Why Personal Finance Is Important” for you to live a better life.
Consider yourself in the middle of a desert.
It‘s dry, hot, and survival hinges on a single thing: water.
Now imagine you get paid each time you work in the form of—not money—but water. It‘s easy to say, but it‘s the ideal way to explain why personal finance matters.
Money is represented by water in this analogy. Additionally, in order to ensure long-term survival, money needs to be preserved, stored, and used prudently, much like water.
The First Challenge: How to Store Your Water
You just got paid in water. Do you have it in your hands? Not possible. It eludes your grasp.
Solution? Use a glass.
This is the same as storing your funds in a simple bank account. Although it’s vulnerable, it’s better than nothing. Water (money) gradually evaporates due to the sun (inflation). This illustrates idle cash’s weakness.
The Second Problem: Preventing Evaporation
You now use a canteen with a cap to protect your water. Everything is changed by this minor update.
The canteen represents assets that appreciate or maintain value—such as oil, gold, silver, or other inflation-protected instruments. These tools preserve your money’s value against the effects of time.
This is a sign of one’s capability to manage their personal finances. You have shifted from basic storage to strategic preservation.
The Third Problem: Planning for the Long Term
Till now, everything has been going in the right direction. You have used multiple canteens to stock water, and you’ve got a clear picture of the future.
By doing this, you are not only saving money but also creating spare money that you will be able to use in the days when you choose to take a break. It can be looked at as our retirement savings, emergency funds, and long-term investments.
But here’s the catch. Eventually, even your stored canteens will run out. This brings us to the next, more critical level.
The Last Challenge: What Happens When You Can’t Work Anymore?
In the desert, when you can’t work anymore, your only option is to use what you’ve stored.
This is retirement—when your income generating ability ends and your savings are your lifeline. Your life expectancy in the desert now depends on how many canteens you filled during your working years.
Some people may have enough to get through their golden years comfortably. Others may run dry too soon.
So, what’s the ideal solution?
The Ultimate Goal: Build a Water Well
A water well in the desert represents cash flowing assets—investments that generate income without active work.
This could be rental income, business profits or royalties. These assets produce money while you sleep, while you rest and even while you’re retired.
This is the real meaning of understanding cash flow basics. It’s not about how much you earn but how well your money works for you.
Interpretation of the Analogy:
- Water = Money (Cash)
- Water in a Glass = Cash in a Bank
- Water in a Canteen = Appreciating Assets (e.g., gold, silver, oil)
- Accumulated Water = Savings in Assets
- Losing Strength = Retirement
- Water Well = Cash-Flowing Assets
Key Takeaways from the Analogy:
- Money is just a tool—a means of exchange that holds value temporarily.
- Idle money loses value over time due to inflation (evaporation).
- Assets like gold or properties protect your savings from economic instability.
- Saving isn’t enough; you’ll eventually need to withdraw from those savings.
- The best way to manage personal finance is to own assets that generate passive income.
Getting Started: Small Steps Matter
You don’t need to start a business or buy property tomorrow. Start small:
- Track your expenses to understand where are you spending your money.
- Save regularly, even if it’s just a little. Don’t worry about how much collected.
- Learn how different assets behave so that you understand how you can get benefit.
- Prioritise passive income streams to keep generating money.
Recommended Reading for Beginners
If you’re new to personal finance, these books will shift how you view and handle money:
- “Rich Dad Poor Dad” by Robert Kiyosaki – This iconic book flips everything you thought you knew about money. Through powerful storytelling, Kiyosaki compares his two “dads” and their opposing financial philosophies. He teaches you the crucial difference between assets and liabilities, and why traditional education often fails to prepare us for real wealth. If you’re ready to start thinking like the rich, this is your blueprint.
[Click here to unlock your financial mindset with Rich Dad Poor Dad] - “The Psychology of Money” by Morgan Housel – This isn’t your typical finance book. Housel dives deep into how emotions, behavior, and mindset shape our financial decisions more than math ever could. With relatable stories and surprising insights, you’ll learn why being wealthy is more about discipline than intelligence. A must-read for anyone who wants to make smarter, calmer choices with money.
[Click here to master the emotional side of money with The Psychology of Money] - “Think and Grow Rich” by Napoleon Hill – Written after studying over 500 successful people, this timeless classic unveils the mental strategies behind wealth. Hill reveals that success begins in the mind—with belief, persistence, and clarity of purpose. If you’re seeking motivation and a proven success formula, this book is your roadmap to achieving your biggest goals—financial or otherwise.
[Click here to awaken your potential with Think and Grow Rich] - “The Power of Your Subconscious Mind” by Joseph Murphy – Your thoughts shape your reality—and this book proves it. Murphy explains how to reprogram your subconscious mind to overcome fear, attract success, and improve health and relationships. By mastering your inner dialogue, you can literally transform your outer world. Perfect for those ready to tap into their full mental and emotional power.
[Click here to unlock mental mastery with The Power of Your Subconscious Mind] - “I Will Teach You to Be Rich” by Ramit Sethi – Smart, sassy, and insanely actionable—Ramit Sethi’s book is a no-BS guide for young adults looking to build real wealth. From credit card hacks to investing and automation, this is financial advice that actually fits into real life. Perfect for those who want a solid plan and still enjoy guilt-free lattes.
[Click here to take control of your money with I Will Teach You to Be Rich]
These books are not just about making more—they’re about using what you already have in smarter, safer ways.
Final Thoughts: Why Personal Finance Is Important
By understanding this desert analogy, you’ve taken the first step toward better personal finance.
It’s not about becoming wealthy overnight. It’s about making sure your work translates into real, lasting value. Protecting the effort you’ve already put in. And planning for a time when you might not be able to work at all.
This is the importance of personal finance.
Don’t let your hard-earned water evaporate.
Start now. Store it wisely. Grow it. And when you need it most, make sure it’s there for you.
Be in control of your money and #NeverGiveUp.
