If you think that’s a dumb question, you’re partly right. Partly wrong too, because I see a lot of people who do not understand that all too well.
Whenever I tell acquaintances that I have a website on personal finance, the first and last question I get is, “Now, you can tell me where to INVEST”
By the time I finish saying that personal finance is not just investing and there are things like setting financial goals, budgeting,….., I get a feeling that I have lost them. They move on to another topic like the Rakhi Sawant’s latest reality show or something similarly interesting!
But, what is Personal Finance? As always, Wikipedia has a page on personal finance which says,
Personal finance is the application of the principles of finance to the monetary decisions of an individual or family unit. It addresses the ways in which individuals or families obtain, budget, save, and spend monetary resources over time, taking into account various financial risks and future life events. Components of personal finance might include checking and savings accounts, credit cards and consumer loans, investments in the stock market, retirement plans, social security benefits, insurance policies, and income tax management.
Sounds pretty tough! Okay, I’ll make it simpler.
Personal Finance can be represented with a simple equation:
Income(t) – Expenses(t) = Savings(t) + Investments(t)
where time t signifies moving money, or purchasing power, backward and forward in time.
So personal finance is not just about Investing but also about maximizing your income, optimizing your expenses and your savings.
You might have a question on the difference between savings and investments. My take is that Investments are for the long term while Savings include your emergency funds, funds to buy some expensive toys & gadgets and funds for the down payment for your car/home.
Having said that personal finance is not so simple, I also want to say that it’s not rocket science but plain common sense (infact like breathing). Infact all of us are managing our money in our own way and we think that’s the right way. My intentions on this blog is to make you aware how you are managing your money.Whether it’s right/wrong way, you decide.
To help you decide, first take a look at the contents of my proposed workshop.