Personal finance is a term used to denote several different yet closely related aspects of monetary decisions made by either an individual or a family whose members live together. These closely related aspects include the rate of income, budgeting said income, inevitable costs (e.g. taxes, electric bill, gas, mortgage, etc.), and even frivolous spending. It refers to anything and everything having to do with one’s money and its allotted uses. One of the most important aspects of personal finance, though, is financial planning; this is the cornerstone concept on which the term and all its denotations are founded because it is the most common meaning to which the aforementioned term is ascribed.
One must carefully analyze bank statements to determine a net profit and net loss. A net profit is essentially the total amount of earnings accumulated once all expenses have already been subtracted, and a net loss is the total amount of expense paid over the course of the same amount of time. If one’s net profit is lower than one’s net loss, then that means he or she is living beyond his or her means and will eventually run out of money. After evaluating things like this, factoring in all income and expenses, one can begin to set goals to further his or her financial stability, and this, too, is very much apart of personal finance. These goals could be practically anything since they are dependent on what one deems necessary. For instance, one may be ambitious enough to decide that he or she wants to go to school and further his or her education. Furthering one’s education can be rather expensive, and setting this goal from a financial perspective means knowing how much it will cost (cost per semester or year, including books and materials), how much time will be allocated toward it, and whether or not that cost is less than the margin of net profit at one’s disposal. This is merely an example of a goal, but as stated earlier, financial goals can be anything; it could just as easily have been a goal to simply accumulate a certain amount of money in savings.
Personal finance also refers to banking, assets, investments, and insurance. With regard to banking, it is inclusive of how many accounts one has, what types of accounts they are (checking, savings, etc.), how many (if any) credit or debit cards one owns, or how many (if any) loans one has as well as the type of loan(s) in use (business, consumer, etc.). As for assets, this refers to important things that one owns like a house/mortgage, car, clothing, or stocks, and even bank accounts themselves can be considered assets. Part of personal finance is also life insurance, health insurance, house insurance, car insurance, or disability insurance if applicable. Additionally, it deals with any investments one may have made dealing with anything from stock to mutual funds.
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