Personal Finance
Personal finance is when principles of finance are applied to monetary discussion of an individual or a family. This addresses how an individual or family spends, saves and gets monetary resources over time with the account of many financial risks and future life events. To name some components of personal financing are checking accounts, saving accounts, credit cards, consumer loans, stock market investments, retirement plans, social security benefits, insurance policies and income tax management.
A vital key to personal finance or personal financing is financial planning which is a process that would require constant monitoring, evaluation and re-evaluation of all assets. Financial planning is summed up into five parts which are:
- *Assessment - where an individual compiles a simple version of balance sheets and income statements that list all personal assets and liabilities. It also contains personal income and expenses.
- *Setting goals – is where an individual will set a goal to help direct financial planning.
- *Creating a plan – this shows the detail of how an individual is to accomplish their goals.
- *Execution – is when an individual places their plan into motion which requires a lot of discipline.
- *Monitoring and Reassessment – is when an individual will monitor and reassess their financial plan so that they may find possible adjustments.
Loans, which entails the redistribution of financial assets overtime between the lender, which is usually a bank, and the borrower is very common these days. To site some of examples of loans, we have credit cards, home or mortgage loans, student loans and car loans. There are also two types of loans that should be taken into consideration which are secured loans and unsecured loans.
Secured loans is when a borrower pledges some assets as a collateral for their loan. The most common type of secured loan is mortgage loans and car loans.
Unsecured loans are monetary loans that are not based against the borrowers assets. These are provided by financial institutions in the form of credit cards, student loans and personal loans.
Many individual and families hire professionals such as accountants, financial planners, investment advisors and lawyers to assist with their finances since they are very busy managing their jobs and other personal or family related business.
Typical goals that individuals or families mostly set are paying off credit cards, student loans and debts, retirement, college costs for their offspring, medical expenses, transportation expenses, food consumption expenses and estate planning. These are needs that have been taken into accommodation since they are the most essential and vital.