FINANCE: means decisions on how money is spent or invested i.e. it is the study of how money is managed, invested or spent on any project.
Personal finance – is the process of controlling your money and making decisions to keep finances in check and out of debt. It helps to make monetary decision for individuals family/household.
SOURCES OF FINANCE
- Personal savings
- Borrowing from friends and family
- Credit cards
- Retained profits
- Loan and overdraft from bank
CONSUMPTION AND CHOICE
A consumer is an individual who buys products or services for personal use. The demand for goods and services available depends on the price of goods and the consumer’s willingness and ability to pay these prices.
Money is limited or scarce, consumers cannot afford to pay for all goods and services. So there is need to make choice. Choice is the ability to choose the pressing want first among many things.
Consumer’s choice and scale of preference is related to each other. It is showing the order in which they want to satisfy our wants in order of priority that is pressing wants come first and the least pressing wants come last.
MODESTY: Modesty means simplicity, humbleness. It is a state of not being expensive to be moderate in spending or buying.
ATTRIBUTES OF MODESTY
- Moderate living within one’s income
- Contentment – we must be contented with what we have from time to time
- Honesty – be honest with yourself, do not spend more than what you have
- Simplicity – live a simple life
EFFECTS OF LIVING MODESTY
- Self – control
- Prudence
- Peace of mind
- High self – esteem
- Refusal to indulge in corrupt practices
Link Between Modesty and Extravagance
Only link is that they are totally opposite in nature. A modest person is simply honest, humble and lives within his/her means while extravagant person involves in uncontrolled spending, spending above his/her earning.
PERSONAL FINANCE
Preparation of an individual budget. A personal budget is the most basic tool individuals use to manage money. It is a financial planning. A personal budget is a short term individual financial plan on his/her expenditure within a given period usually a year. It is designed by an individual to monitor and control expenditure so that long term objective can be achieved.
Thing to be considered while preparing a personal budget:
- Identify a goal and set time before budget.
- List all the expenses.
- List all source of income.
- Ensure that expenses do not exceed 60% of the income 40% should be for investment for the future.
- Subtract total expenses form total income if negative ,revist expenses and reduce it.
- If the income is more than expenses put the excess into savings.
Example of individual budget:
| Categories | Budget amount |
| Income: | |
| Wages and bonuses | |
| Investment income | |
| Income taxes : | |
| Income tax | |
| Spendable income | |
| Expenses : | |
| Home | |
| Mortgage or rent | |
| Home repairs/maintenance | |
| Utilities : | |
| Electricity | |
| Water | |
| Natural gas or oil | |
| Telephone | |
| Food : | |
| Caro cerise | |
| Eating out | |
| Family obligations : | |
| Child support | |
| Day care, baby sitting | |
| Health and medical : | |
| Insurance | |
| Out pocket medical expenses | |
| Transportation : | |
| Clothing | |
| Investment/savings | |
| Miscellaneous : | |
| Toiletries | |
| Gift | |
| Total investment and expenses | |
| Surplus/shortage {spendable income minus expenses and investment} |
Uses of personal budget.
- It teaches member of family the worth of money.
- It is a tool for planning and thinking ahead.
- It identifies areas in which one can spend or take necessary steps to curtail expenditure.
- It alerts you against cash flow problem in the future.
- It gives ideas of how much credit are in a position to take on without landing in serious debt.
- It helps to support long term goals.
Questions
- What is personal finance?
- What is investment
- Explain modesty.
See also
DUTIES OF A RECEPTIONIST
RECEPTION OFFICE
DOUBLE ENTRY BOOK KEEPING