WHAT IS PERSONAL FINANCE
Personal finance is a process of arranging and managing the personal financial tasks. These generally include income, saving, spending, investment and protection. Through a financial plan or budget, a summary of managing the personal finance can be made.
WHAT ARE THE AREAS OF PERSONAL FINANCE
Significantly, the main areas of personal finance include income, saving, spending, investing and protection.
INCOME Income is a source of cash flow towards a person and then make use of it to support his/her family. Not to mention, income is the beginning point for the financial planning. Some of the sources of income:
- Hourly wage
These sources of income, being the starting point for financial planning, produce cash that is used by people for their various needs.
Generally, saving refers to the process of retaining excess cash for future needs. If there is a difference between what a person earns and spends, then that can be used as savings or investment for the future. Savings management is a crucial part of personal finance. Some forms of the savings:
- Savings bank accounts
- Physical cash
- Money market accounts
It is good to keep savings for future needs. However, having more savings is not a good things as it provides little return compared to investments.
Spending involves all kinds of expenses a person faces related to any consumable goods. Specifically, there are two types of spending: paid with cash and paid with credit/borrowing. The majority part of everyone’s income falls in spending. Some sources of spending:
Spending can reduce the amount you will have for savings or investments. If you spend more than you earn, you will have debt at your hands. Good spending practice is essential for a better personal financing.
Particularly, investment refers to the process of buying assets that expect to provide a return as more money than originally invested. Investing is a risky process and not every assets provide a positive return. Some forms of investment:
- Mutual funds
- Real estate
- Private companies
It is important to realize that investing is the most complicated section of personal financing. This is also the part where people get more professional advice.
Protection generally refers to the various products that can help people in any unexpected or unpleasant events. Some forms of protection:
- Life insurance
- Health insurance
This is also a quite complicated area where people seek professional advice.
WHAT ARE THE PLANNING PROCESSES IN PERSONAL FINANCE
For any good financial management, we need a stable plan to follow. A formal financial plan or a budget covers all the areas of personal finance. Usually, advisers or personal bankers who work for their clients make these financial plans to identify the solutions for needs and requirements. Normally, the major components of financial planning:
- Development of plan
- Execution of plan
- Monitoring and reassessment
WHAT ARE THE CAREERS RELATED TO PERSONAL FINANCE
There are a number of careers related to personal finance management. Some of the related careers:
- Investment advisor
- Insurance advisor
- Tax advisor
- Personal banker
- Financial planner
- Financial broker
There are many more available careers related to financial management.