What is personal finance

What Will You Learn?

• Personal finance refers to the management of an individual's or household's financial resources to achieve financial stability, security, and goals. It encompasses various aspects of financial planning, including:
• *Key Components:*
• 1. Budgeting: Managing income and expenses.
• 2. Saving: Setting aside funds for short-term and long-term goals.
• 3. Investing: Growing wealth through various investment vehicles.
• 4. Debt Management: Managing and reducing debt.
• 5. Credit Management: Maintaining a healthy credit score.
• 6. Insurance: Protecting against risks (life, health, disability, etc.).
• 7. Retirement Planning: Preparing for financial independence.
• 8. Tax Planning: Minimizing tax liabilities.
• 9. Emergency Fund: Building a safety net for unexpected expenses.
• *Goals:*
• 1. Financial Independence
• 2. Wealth Creation
• 3. Debt Reduction
• 4. Retirement Security
• 5. Financial Stability
• *Principles:*
• 1. 50/30/20 Rule (50% income for necessities, 30% for discretionary spending, 20% for saving and debt repayment)
• 2. Emergency Fund (3-6 months' expenses)
• 3. Diversification (spreading investments to minimize risk)
• 4. Long-term Investing
• 5. Regular Savings and Investing
• Effective personal finance management enables individuals to:
• 1. Make informed financial decisions
• 2. Achieve financial stability and security
• 3. Reach long-term financial goals
• 4. Reduce financial stress
• 5. Improve overall well-being
• Sources:
• - Investopedia
• - The Balance
• - NerdWallet
• - Financial Planning Association (FPA)
• - National Endowment for Financial Education (NEFE)