PERSONAL FINANCE- An Introduction

In the mad bustling world of commerce, money is King. And those who must reign in this world must be close to it. Must befriend it. It is why amongst the over Six billion inhabitants of our world, there has been a jostling; desperate attempts to clutch and embrace money, to have it in abundance.

And so far, in this struggle, the victorious have been those who have mastered the “art” of money management. Those who have successfully asked and have answered the questions of what to do to generate income, how to spend it, how to save it how to invest it, and how to protect it.

In this article, one would learn the basic and elemental aspects of individual financial management. the primordial bedrock from which the larger parts sprouts from, or perhaps still, the fundamentals of personal finance.

 ASPECTS OF PERSONAL FINANCE

As implied above, the tethers of our individual finance  is tugged and nailed up to these basic aspects :

1.Income

2.Spending

3.Savings

4.Investing

5.Protection.

Income:  “In-come”  as a single word, quite humorously, reflects on its own, an inflow of something. It insinuates an incoming of the specified material. And From this perspective, “money” is our specified material. So income talks about cash flow,  about the money an individual receives and spends for self-support and for family. It is the pacesetting point for an individual’s financial planning process.

 COMMON SOURCES OF INCOME :

1. Hourly wages.
2. Bonuses

iii.           Salaries

1. Pensions
2. Dividends.

The above are specialized generators of income sources. They supply the money an individual can use to either spend, save or invest. From this viewpoint, an income can be thought of as the first point of call that leads to the long line of our personal finance roadmap.

2.SPENDING: This refers to the act of releasing money, in exchange for choices goods and services. It involves mostly things paid for with the sole aim of consumption.  All spending falls into two categories; Cash spending( paid for with physical paper currency) and credit spending(paid for by borrowing cash). Majorly all incomes are allocated to spending.

      COMMON AREAS SPENT MONEY GOES TO;

1. Rent
2. Mortgage

iii.           Taxes

1. Food
2. Entertainment
3. Travel

vii.          Credit card payments.

               The above-listed expenses, all reduce the amount of cash an individual has available. The process of expenditure management is just as paramount as income generation. And usually, people have more control over their discretionary expenses, than their income. Tactical and good spending habits are critical for satisfactory maintenance of personal finance.

3. SAVINGS:
   It refers to “storing up”. To retain excess cash, deigned for future investing or spending. If there is a surplus between what a person earns as income and what they spend, the difference can be pushed towards savings or investments. Managing savings is a critical and important area of personal finance.

COMMON FORMS OF SAVINGS INCLUDE;

1. Physical cash.
2. Savings bank account.

iii.           Checking bank account.

1. Money market securities.

   Most savings serve as a short term difference between income and expenses, hence a lot of people keep their savings only to manage their cash flow. Too many savings can be viewed as a bad thing, since it earns little to no return, compared to investments.

4 INVESTING:

When your money works for you, it is called an investment. It relates to assets purchased, and from which are expected to bring a certain rate of return. However, investing has its own risks. And not all assets actually end up producing a positive rate of return. This is where the relationship between risks and return is seen.

 COMMON FORMS OF INVESTING INCLUDES;

1. Stocks.
2. Bonds.

iii.           Mutual funds.

1. Real estate.
2. Private companies.
3. Commodities

vii.          Art.

The most complex aspects of personal finance is the investment aspect. It is where people get the most professional advice.

5. PROTECTION: Money is delicate and important, hence it is only right to understand and grasp how best to protect it. Personal protection refers to a wide range of products that can be used to guard against an unforeseen and adverse event.

COMMON PROTECTION PRODUCTS INCLUDES;

1. Life insurance.
2. Health insurance.

iii.           Estate insurance.

This is also another area of personal finance where people also seek advice from professionals typically, because of its complexity. There is a catalogue of analyses, that need to be done properly to access an individual’s insurance and estate planning needs.

THE PLANNING PROCESS IN PERSONAL FINANCE

Efficiency in personal financial management boils down to knowing what works and holding firmly to it. All over-listed areas of personal finance can be wrapped into a budget or a specially designed Financial plan.

 These plans are prepared commonly by financial personnel like bankers and investment advisors, who work with their respective clients to understand their needs and goals. And as well develop an appropriate course of action.

On the whole, the main components of the financial planning process are;

1. Assessment.
2. Goals.

iii.           Plan Development.

1. Execution
2. Monitoring and reassessment.

BUDGETING, IN PERSONAL FINANCE

Planning Out a budget or a financial plan or map is critical and necessary for giving a more defined and precise shot at achieving your personal and family goals.

PERSONAL FINANCE CAREERS

There are a number of careers that relate to personal financial management and advice. Anyone who is passionate about any of the topics mentioned in the article may want to consider a career in the industry.

   Some of the more common ones include;

1. Personal Banker.
2. Wealth manager.

III.          Investment advisor.

1. Insurance advisor.
2. Tax advisor.
3. Estate planner

VII.         Financial planner

VIII.        Mortgage broker.

     Some of the most common jobs on the corporate side include;

1. Investment banking.
2. Private equity.

III.          Corporate development.

 In summary, we have learnt and have been able to deduce, that personal finance education is indispensable, especially to the youthful ones, who need to grasp the investments “ know-how” and basic credit management systems. However, understanding the basic concepts in theory alone is not an assured path to fiscal mastery. One must always practice.

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