3/17/2023 0 Comments Finance definition![]() ![]() Where you invest depends on whether you are risk-averse or risk-seeking. You could purchase some assets such as stocks (shares) and hope that you will eventually get a better return than you would elsewhere. If you are not happy with the returns that your savings bank account gives you, you should consider investing. If people don’t spend, businesses suffer. Japan’s economy suffered from extremely weak growth for nearly two decades because consumers were not spending enough – they were saving too much. If too many people save too much, the national economy can suffer. You might also make payments into a pension account. Most people have a savings bank account, which is referred to as a deposit account in some parts of the world. There is an the old saying: “He keeps his money under the mattress.” If you don’t like or trust banks and other financial institutions, you could keep the money as cash. Economists sometimes refer to savings as deferred consumption. ![]() If your income is greater than your spending, you have a surplus. Savings Image created by Market Business News. ![]() It is just as crucial, and maybe even more so, than generating income. At that time, there were 240 pennies in one pound)ĭo not underestimate the importance of managing spending. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.” ( six means six pennies. “Annual income twenty pounds, annual expenditure nineteen and six, result happiness. When you spend more than you earn, you might eventually find yourself in financial difficulties.įamous author Charles Dickens (1812-1870) wrote the following in his book David Copperfield: Spending represents a major portion of most people’s income. We either spend with money we have or money we borrow, i.e., credit. Our credit card and tax payments also come under the term spending. Examples include paying bills, rent, mortgage, paying for a round of drinks with friends, shopping, filling our cars, buying presents, and making donations to charity. When it comes from work it is referred to as either a wage or a salary.” Spending “Income refers to money – cash or cash-equivalents – coming in either for work done, interest or profit from capital invested, or rent from a property or land that is let. In one of our previous articles, we defined income as follows: Salaries, hourly wages, commissions, pensions, gifts, dividends, government payouts, and bonuses are examples of some sources of income. Our income is money that we receive and then use to buy things, support our loved ones, pay bills, save, and invest. Let’s look at the five main areas of personal finance: 1. It encompasses budgeting, banking, insurance, mortgages, investments, retirement planning, and tax and estate planning.” Personal finance – five main areas “Personal finance is a term that covers managing your money as well as saving and investing. has the following definition of the term: ![]() Personal finance may refer to the whole area from the individual’s point of view or that of the sector that provides individuals and families with financial services. It is the financial management each person performs to spend, budget, save, and plan for retirement and other the future events. The term personal finance is all about how we, as individuals or families and not companies or organizations, manage our money, save, and invest. ![]()
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