Personal finance

Personal finance

Personal finance is the application of the principles of finance to the monetary decisions of an individual or family unit. It addresses the ways in which individuals or families obtain, budget, save, and spend monetary resources over time, taking into account various financial risks and future life events. Components of personal finance might include checking and savings accounts, credit cards and consumer loans, investments in the stock market, retirement plans, social security benefits, insurance policies, and income tax management.

Personal financial planning

A key component of personal finance is financial planning, a dynamic process that requires regular monitoring and reevaluation. In general, it has five steps:
# Assessment: One's personal financial situation can be assessed by compiling simplified versions of financial balance sheets and income statements. A personal balance sheet lists the values of personal assets (e.g., car, house, clothes, stocks, bank account), along with personal liabilities (e.g., credit card debt, bank loan, mortgage). A personal income statement lists personal income and expenses.
# Setting goals: Two examples are "retire at age 65 with a personal net worth of $200,000" and "buy a house in 3 years paying a monthly mortgage servicing cost that is no more than 25% of my gross income". It is not uncommon to have several goals, some short term and some long term. Setting financial goals helps direct financial planning.
# Creating a plan: The financial plan details how to accomplish your goals. It could include, for example, reducing unnecessary expenses, increasing one's employment income, or investing in the stock market.
# Execution: Execution of one's personal financial plan often requires discipline and perseverance. Many people obtain assistance from professionals such as accountants, financial planners, investment advisers, and lawyers.
# Monitoring and reassessment: As time passes, one's personal financial plan must be monitored for possible adjustments or reassessments.

Typical goals most adults have are paying off credit card and or student loan debt, retirement, college costs for children, medical expenses, and estate planning.

Popular Tools

* GnuCash (Free Software)
* Microsoft Money
* Quicken
* You Need a Budget (YNAB)
* KMyMoney
* Mint.com
* Yodlee

ee also

* Accounting software
* Credit card debt
* Corporate finance
* Debt consolidation
* Equity investment
* Insurance
* Investment
* List of personal finance related articles
* Mortgage loan
* Payday loan
* Personal budget
* Public finance
* Settlement (finance)
* Wealth

References

* Kwok, H., Milevsky, M., and Robinson, C. (1994) Asset Allocation, Life Expectancy, and Shortfall, "Financial Services Review", 1994, vol 3(2), pg. 109-126.


Wikimedia Foundation. 2010.

Игры ⚽ Поможем написать курсовую

Look at other dictionaries:

  • personal finance — ➔ finance1 * * * personal finance UK US noun FINANCE ► [U] the activity of managing your own money: »This weekend we ve launched a new online guide to personal finance. »Because personal finance is not taught in schools, young people do not know… …   Financial and business terms

  • Personal Finance — All financial decisions and activities of an individual, this could include budgeting, insurance, savings, investing, debt servicing, mortgages and more. Financial planning generally involves analyzing your current financial position and… …   Investment dictionary

  • Personal Finance Manager — Personal Finance Manager,   Finanzmanager …   Universal-Lexikon

  • Personal Finance Education Group — The Personal Finance Education Group (PFEG) is a UK educational charity focused on equipping young people with confidence, skills and knowledge in financial matters, particularly personal finance. It was founded in 2000 and receives support from… …   Wikipedia

  • Personal finance society — The Personal Finance Society is a British professional organisation of individual financial advisors and those in related roles. The Society was formed in January 2005, from the merger of the Life Insurance Association with The Society of… …   Wikipedia

  • Kiplinger's Personal Finance — Changing Times redirects here. For the French film, see Changing Times (film). Kiplinger s Personal Finance Editor Knight Kiplinger Frequency Monthly First issue 1947 (1947 month) Company Kiplinger …   Wikipedia

  • Tesco Personal Finance — Infobox Company name = Tesco Personal Finance Ltd type = Private Joint Venture genre = foundation = 1997 founder = location city = Edinburgh location country = Scotland, United Kingdom location = locations = area served = key people = industry =… …   Wikipedia

  • BNP Personal Finance — Saltar a navegación, búsqueda Grupo empresarial de origen francés, filial de BNP Paribas, que agrupa las empresas cuyo objeto de negocio se centra en cubrir las diferentes necesidades de financiación qué puedan surgir al potencial cliente… …   Wikipedia Español

  • International Personal Finance — Infobox Company company name = International Personal Finance company logo = company type = Public (lse|IPF) foundation = 1997 location = Leeds, United Kingdom key people = Christopher Rodrigues Executive Chairman industry = Finance products =… …   Wikipedia

  • personal finance company — noun : a company primarily or solely engaged in making loans of 300 dollars or less to private individuals …   Useful english dictionary

Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”