Definition of personal finance
Personal finance is the field that mainly deals with family finance or the financial calculations that people are doing on their own. It is required to estimate the cost and how the money will be spent in different expenditure sections in private life. Maintenance of profit and loss is also necessary for personal life. Self-budgeting is a vital tool for personal finance. Furthermore, it is noteworthy that personal financial planning and assessment allows one to identify the economic risk factors.
Various topics of personal finance
Various topics come under the head of personal finance. These topics are equally essential to take into consideration as these covers up a vast area. Those are enlisted below:
- Principles of Personal finance
- Statement of Personal income
- Health, Life and disability insurance
- Financial life management
- Separately managed account
- Money management
- Monitoring and reassessment
- Equity investment
- The process of personal financial planning
- Depreciating assets
Steps of personal financial planning personal finance
Personal finance can be planned by following several steps. It is noteworthy that personal financial planning is such a dynamic sector that cannot be progressed without a proper plan. The steps are stated below:
- Assessment: Assessment is the initial stage required for making a detailed assessment of the financial statements with the profit and loss statements.
- Goal setting: In the next step, it is essential to set goals. Moreover, the goal-setting process can be segmented into two separate heads, namely,
- Long-term goals
- Short term goals
- Creating a plan: After the goal is set, it is essential to develop a plan as per the requirement. Moreover, the program must be systematic so that the goals and objectives can be achieved positively.
- Execution: The personal finance section is all about execution after making the plan because if there is no execution, then the planning and goal setting will become futile.
- Monitoring and reassessment: In personal finance, there is a need for monitoring the execution process so that the current issues can be found through making the reassessments. Adults can make an idea regarding the cost estimation and make their further financial planning effectively.
Six critical areas of personal finance
There six different key areas that are of the personal-finance section. Those are as follows:
- Investment and accumulation of goals
- Adequate protection
- Estate planning
- Tax planning
- Financial position
- Retirement planning