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Continuing with my post on “What is personal finance?” Part 2, people ask as to why it is called “personal” finance. Let me share my thoughts on this question.
Ostensibly, finance is such a vast subject with elements of business finance ( capital structure, financial management of a business, working capital management, etc), government finance (budgets, monetary and fiscal finance, etc) and the economics of money included. Perhaps, personal finance is a way to differentiate from money management for a business and at the country & global level of money management.
Moreover, as each person has his/her own belief systems and nobody is a clone of anyone else ( 6 billion people have 6 billion thumb impressions!), money management for everyone is a personal decision.
Let me elaborate with two examples from two current themes: India Elections and India Cricket.
Rahul Dravid and Virender Sehwag are two batting greats. Each in his own inimitable style. Can Sehwag bat like Dravid? Or vice versa! When Sehwag bats, we all are on the edge of our seats. Not with Dravid. One of the reasons for the recent success of the Indian team is that each player is allowed to play their natural games.
But both need to be aware of the cricketing basics. We can’t become like Sachin/Sehwag/Dravid by just watching them!
It’s important to become aware of your own style and talent (read risk profile) and plan out your innings accordingly.
Similarly in the present India elections, the two PM candidates are contrasting personality types. One can’t become like the other even if they tried. Nor they should!! Since I belong to the SAP (Stay Away Party), I don’t know who would be better. But that’s besides the point.
Again the differences can (and should) be there. But both need to be aware of how to run a country.
Our own money management is both personal and very dynamic. While we need to be aware of our belief systems, we also need to continuously strive to improve our performance. And all of need to know the basics of money management.
That’s what makes writing a blog on personal finance so very exciting. It’s a mix of psychology, technology, economics, HR(?) and of course finance.
When I’ll talk about a “Personal Spending Plan” (Point no. 8 in the Personal Finance Workshop), I’ll talk about understanding our own risk profile and making the right asset allocation decision.
What do you think?
I edit Personal Finance Online Resources, deliver Financial Awareness Workshops and have built a desktop RupeeManager.
Invite me for a talk. Email me on ranjan@ranjanvarma.com or Call me on +919867755615
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