WEEK 1-2 Flashcards
a term that addresses matters regarding the management, creation, and study of money and investments. It involves the use of credit and debt, securities, and investment to finance current projects using future income flows.
FINANCE
Three Categories of Finance
- Public Finance
- Corporate Finance
- Personal Finance
- Behavioral Finance
a term that covers managing your money as well as saving and investing. It encompasses budgeting, banking, insurance, mortgages, investments, and retirement, tax, and estate planning.
The term often refers to the entire industry that provides financial services to individuals and households and advises them about financial and investment opportunities.
Personal Finance
4 Importance of Personal Finance
securing your financial future.
track your spending.
make smarter choices about your money.
understand the value and importance of money.
5 Main Areas of Personal Finance
Earning Income
Spending
Saving
Investing
Protection
It refers to a source of cash inflow that an individual receives and the uses to support themselves and their family.
Earning Income
It refers to all types of expenses an individual incurs related to buying goods and services or anything that is consumable.
Spending
It refers to excess cash that is retained for future investing or spending.
Saving
It relates to the purchase of assets that are expected to generate a rate of return, with the hope that overtime the individual will receive back more money than they originally invested.
Investing
It refers to a wide range of products that can be used to guard against an unforeseen and adverse event.
Protection
Personal finance enables individuals to build a safety net against unexpected events like medical emergencies, job loss, or other unforeseen circumstances. Having sufficient savings and insurance coverage provides financial security and peace of mind.
Financial Security
Understanding personal finance empowers individuals to create and follow a budget, which helps control spending, avoid debt, and maximize savings.
Budgeting and Money Management
Knowledge of personal finance enables individuals to manage and reduce debt effectively, preventing the burden of high-interest loans and credit card debt.
Debt Management
Effective personal finance helps individuals set and achieve financial goals, whether it’s buying a home, funding education, starting a business, or planning for retirement.
Goal Achievement
Being financially literate allows individuals to make informed investment decisions, potentially growing their wealth over time and building a strong financial foundation.
Investment and Wealth Building
Personal finance knowledge is essential for planning and saving for retirement, ensuring a comfortable and financially secure post-work life.
Retirement Planning
Understanding credit and borrowing practices helps individuals maintain a good credit score, access favorable loan terms, and use credit responsibly.
Credit and Borrowing
With personal finance knowledge, individuals are less likely to fall into financial traps, such as overspending, impulse buying, or falling victim to scams.
Avoiding Financial Mistakes
Having a grasp of personal finance allows individuals to be financially independent, making their financial decisions without relying solely on others.
Financial Independence
Being financially literate enhances one’s understanding of economic trends, inflation, and how these factors can affect personal finances.
Economic Awareness
Through personal finance education, individuals can pass down financial knowledge and strategies to future generations, creating a legacy of wealth-building and financial responsibility.
Building Generational Wealth
11 Lessons to Learn in Personal Finance
Financial Security
Budgeting and Money Management
Debt Management
Goal Achievement
Investment and Wealth Building
Retirement Planning
Credit and Borrowing
Avoiding Financial Mistakes
Financial Independence
Economic Awareness
Building Generational Wealth
These are targets that can help you find effective ways to spend and save money, both at work and in your personal life. It can be short-, medium-, or long-term goals.
Financial Goals
Examples of Financial Goals
Signing Up for a Retirement Plan
Funding a Vacation
Launching a Business
is a strategy to accumulate wealth throughout your career.
It can provide you with substantial savings to fund your lifestyle.
Before you start saving, it’s important to set a retirement goal.
A retirement plan
is an appropriate example of a financial goal that you can set.
Research the travel and accommodation costs and consider the amount of money you may need for food, souvenirs and sightseeing activities. It can also be helpful to assess your financial status before leaving so you have resources for other priorities in your life.
Financing a vacation
Plan and Design your business accordingly. Becoming a business owner can be expensive, as you’re responsible for building and maintaining its operations. You can also consider how much you can compensate the people who work for the business and the rates of the services you can provide to clients.
Launching a Business
