All You Need To Know About Personal Finance

This blog will help you know about personal finance like what is personal finance, types of personal finance, process and strategies for personal financial planning.

What is Personal Finance?

The concept of Personal finance revolves around innovative and effective ways of planning & managing your personal financial activities, for example, budgeting, banking, insurance, risk allocation, mortgages, investments, personal banking, retirement and tax planning, etc. The process of personal finance can be summarized in a budget or financial plan and can be executed for an individual, or a group of people. It requires a certain knowledge of finance expertise such as tax laws and depends on a particular person’s income & expenses, and individual financial goals.

Principles of Personal Finance

Finance has always been an important part of our lives and in the present situation of trade finance and COVID-19, it has become even more necessary.

In this blog, we are going to discuss the most important areas or principles of personal finance with their intricate details. Below are the main areas of personal finance. Let’s have a look:

1. Income - Income refers to the various sources of cash flows from where an individual is getting money to support himself and his family. It is the first step of the financial planning process. The very common sources of income are salary, bonus, wages, pension or dividends, etc. They all generate cash flows for an individual.

2. Spending - It deals with all types of expenses an individual incurs to buy goods and services or anything essential. It can be done in two ways which are in either cash or credit. Common sources of spendings include Rent, Mortgage payments, taxes, food or credit card payments, etc. If expenses are higher than income, it can cause a lack of cash flow.

3. Saving - The principle of saving is the most essential principle of personal finance when it comes to managing money. The more are the savings, the more you can invest. It is the surplus between earnings and spendings that is a critical area of personal finance. The sources are physical cash, bank account, or money market securities.