This article is about educating you about Personal Finance; What is it? why it is important to our lives? How to improve money management skills in your life, and more .
It is not an easy subject to handle but we will tell you everything you need to know – right here.
So, what is the personal finance as a term ?
It is “the “art” of taking the most-suitable financial ( money-related ) decisions for a person or family ; that includes incomes, budgeting, ways to spend the allocated amounts you have, investments, retirement plans and such ( Source ).
But there are some definitions that we need to explain before talking personal finance, let’s broaden our scope first and learn things like … What is finance ? What is the difference between finance and economics ? Do finance and business mean the same ?
Let’s start digging in depth .
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Well, Economics is a social science with a lot of theories and processes in to study, and aspects to review .
It studies the production, consumption and distribution of services or goods and all regulations and processes in between , and their effect on other aspects of people’s lives and manner.
The science of economics tries the general economy works, and how do different economies interact in the world.
The analysis of “The Science of Economics” is applied in various fields, like finance, businesses environments, universe of education, laws and regulations, Gov. institutions and bodies… and all life’s aspects.
That is good to know, now what about Finance as a science ? Well, Finance “in short” concentrates of aspects of : Saving money & lending money” … That is called Fund management science. Consider this – for example – The financial studies are interested, and coordinate the interests of the lenders and borrowers that are doing business in a certain market ( big or small) , while the study of economics is more about the study of the goods & services – which are circulating in the same market.
In short , finance is the science of studying the financial markets , and it is part of that.
Got the main idea now ? Let’s proceed to more categories.
Dividing – Economics VS Finance
* Economics , in general , is divided in two main parts :
- Micro Economics
- Macro Economics
Micro-Economics : Small-scale market & interactions studies .. It studies interactions between individual markets, and focuses on specialization and supply & demand relations – between small entities and markets.
Macro-Economics : Large-scale market & interactions studies .. It is not focusing on single or small or individual markets or entities , but on large and bigger variables – national , regional or world-wide levels. Terms include such as: National income and output, GDP, Price inflation and unemployment rate in a country, region or the whole world .
Finance, generally, is divided between two parts;
– Public finance &
– Personal finance / Private Finance
Example showing public sector’s bodies & segmentation
OK, let’s get into more details .. The term “business finance” is about goods and products and the business environment related. What concerns us here is the difference between public finance & private ( personal finance ).
To clear things more – and to keep your interest ; I expanded the subject further in this article