Personal finance is one of the types of finance we have.
Table of Contents
- Four basic areas.
Let us dive into the full content.
What is Personal Finance And Its Importance
Personal finance: is a financial term that is used to describe the activities of an individual or family that involve creating wealth and the management or utilization of this wealth. Some of these activities involve budgeting, retirement plans, insurance plans, savings, investments, etc.
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Personal finance explains all the financial activities of individuals or families.
According to Wikipedia ” Personal finance is the financial management which an individual or a family unit performs to budget, save, and spend monetary resources over time, taking into account various financial risks and future life events.
When planning finance, the individual would consider the suitability to his or her needs of a range of banking products checking, savings accounts, credit, and consumer loans) or investment in private equity, (companies’ shares, bonds, mutual funds) and insurance (life insurance, health insurance, disability insurance) products or participation and monitoring of and- or employer-sponsored retirement plans, social security benefits, and income tax management.”
Failure to understand finance has put a lot of people in debt, and some of these debts take a lifetime to pay back.
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Why is finance Important?
- finance talks about managing the revenue or incomes of individuals or families so that they can achieve their financial goals.
- Another vital importance is that it helps individuals or families cut down on excessive spending
- It helps individuals or families achieve their annual savings goals.
- It also helps individuals or families avoid getting into debt.
Four Basic Areas of Personal Finance?
There are four basic areas of personal finance that all individuals and families must never ignore if they truly want to get financial freedom.