What is Personal Finance?

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In personal  finance , an individual or a family manages its assets effectively to achieve the desired goals. The basic aim of personal  finance  to generate income and certain amount of this income is allotted to meet the expenses. In personal  finance , some action is also taken to create the cash reserves and other assets for the future. Many resources are used to help in the process of personal  finance . The basic aim of personal  finance  is to keep the flow of money in the household. Usually, the income is from a salary or wages from a job. Other forms for generating income can also be used.

All the income that comes from interest earned from the investment, child support or alimony and other forms of compensation qualify as income.

If you want to understand how to handle your own economy, along with income, you should also understand the different kinds of expenses associated with the household. There are two kinds of expenses that you have to do, fixed expenses and variable expenses.

In fixed expenses, car payments, mortgage payments, rent and any outstanding loans can be included. The expenses on monthly utility bills, food and bank service charges are included in the variable expenses.

After identifying the income and the expenses, now you should make a budget. By determining that how much money would come and how much would be spent to meet the obligations you have already to some extent accomplished the process. However, apart from these things, you should also save some money to meet some unexpected expenses. These unexpected expenses may be auto repairs etc.

Now, you should determine that how much money is remaining, you should allocate some part of this money for the entertainment purposes. The remaining money should be saved in some bank account for the future obligations.

Personal  finance  is the management of assets and liabilities in an efficient and effective way.

Source by Steve L Peterson

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