PERSONAL FINANCE

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.