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Personal finance is the application of the principles of finance
Finance

The field of finance refers to the concepts of time, money and risk and how they are interrelated. Banks are the main facilitators of funding through the provision of credit, although private equity, mutual funds, hedge funds, and other organizations have become important....
 to the monetary decisions of an individual or family unit. It addresses the ways in which individuals or families obtain, budget
Personal budget

A personal budget is a finance plan that allocates future personal income towards expenses, savings and debt repayment. Past spending and personal debt are considered when creating a personal 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 account
Savings account

Savings accounts are accounts maintained by retail financial institutions that pay interest but can not be used directly as money . These accounts let customers set aside a portion of their liquid assets while earning a monetary return....
s, credit card
Credit card

A credit card is part of a system of payments named after the small plastic card issued to users of the system. It is a card entitling its holder to buy goods and services based on the holders promise to pay for these goods and services....
s and consumer loan
Loan

A loan is a type of debt. This article focuses exclusively on monetary loans, although, in practice, any material object might be lent. Like all debt instruments, a loan entails the redistribution of financial assets over time, between the wiktionary:lender and the wiktionary:borrower....
s, investments in the stock market
Stock market

A stock market, or equity market, is a private or public Market system for the trade of Corporation stock and Derivative s of company stock at an agreed price; these are security listed on a stock exchange as well as those only traded privately....
, retirement plans, social security
Social security

Social security primarily refers to a social insurance program providing social protection, or protection against socially recognized conditions, including poverty, old age, disability, unemployment and others....
 benefits, insurance
Insurance

Insurance, in law and economics, is a form of risk management primarily used to Hedge against the risk of a contingent loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for a premium, and can be thought of as a guaranteed small loss to prevent a large, possibly devastating los...
 policies, and income tax
Income tax

An income tax is a tax levied on the financial income of people, corporations, or other legal entities. Various income tax systems exist, with varying degrees of tax incidence....
 management.

y component of personal finance is financial planning, a dynamic process that requires regular monitoring and reevaluation.






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Personal finance is the application of the principles of finance
Finance

The field of finance refers to the concepts of time, money and risk and how they are interrelated. Banks are the main facilitators of funding through the provision of credit, although private equity, mutual funds, hedge funds, and other organizations have become important....
 to the monetary decisions of an individual or family unit. It addresses the ways in which individuals or families obtain, budget
Personal budget

A personal budget is a finance plan that allocates future personal income towards expenses, savings and debt repayment. Past spending and personal debt are considered when creating a personal 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 account
Savings account

Savings accounts are accounts maintained by retail financial institutions that pay interest but can not be used directly as money . These accounts let customers set aside a portion of their liquid assets while earning a monetary return....
s, credit card
Credit card

A credit card is part of a system of payments named after the small plastic card issued to users of the system. It is a card entitling its holder to buy goods and services based on the holders promise to pay for these goods and services....
s and consumer loan
Loan

A loan is a type of debt. This article focuses exclusively on monetary loans, although, in practice, any material object might be lent. Like all debt instruments, a loan entails the redistribution of financial assets over time, between the wiktionary:lender and the wiktionary:borrower....
s, investments in the stock market
Stock market

A stock market, or equity market, is a private or public Market system for the trade of Corporation stock and Derivative s of company stock at an agreed price; these are security listed on a stock exchange as well as those only traded privately....
, retirement plans, social security
Social security

Social security primarily refers to a social insurance program providing social protection, or protection against socially recognized conditions, including poverty, old age, disability, unemployment and others....
 benefits, insurance
Insurance

Insurance, in law and economics, is a form of risk management primarily used to Hedge against the risk of a contingent loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for a premium, and can be thought of as a guaranteed small loss to prevent a large, possibly devastating los...
 policies, and income tax
Income tax

An income tax is a tax levied on the financial income of people, corporations, or other legal entities. Various income tax systems exist, with varying degrees of tax incidence....
 management.

Personal financial planning

A key component of personal finance is financial planning, a dynamic process that requires regular monitoring and reevaluation. In general, it has five steps:
  1. Assessment: One's personal financial situation can be assessed by compiling simplified versions of financial balance sheet
    Balance sheet

    In financial accounting, a balance sheet or statement of financial position is a summary of a person's or organization's balances. Assets, liabilities and ownership equity are listed as of a specific date, such as the end of its financial year....
    s and income statement
    Income statement

    Income statement, also called profit and loss statement , is a company's financial statement that indicates how the revenue is transformed into the net income ....
    s. A personal balance sheet lists the values of personal asset
    Asset

    In business and accounting, assets are everything of value that is owned by a person or company. It is a claim on the property your income of a borrower....
    s (e.g., car, house, clothes, stocks, bank account), along with personal liabilities
    Liability

    In the most general sense, a liability is anything that is a wikt:hindrance, or puts individuals at a disadvantage. It can also be used as a slang term to describe someone that puts a team or group of which they are a member at a disadvantage, and would thus be better off without....
     (e.g., credit card debt, bank loan, mortgage). A personal income statement
    Income statement

    Income statement, also called profit and loss statement , is a company's financial statement that indicates how the revenue is transformed into the net income ....
     lists personal income
    Income

    Income, refers to consumption opportunity gained by an entity within a specified time frame, which is generally expressed in monetary terms. However, for households and individuals, "income is the sum of all the wages, salaries, profits, interests payments, rents and other forms of earnings received......
     and expenses.
  2. Setting goals: Two examples are "retire at age 65 with a personal net worth of $200,000" and "buy a house in 3 years paying a monthly mortgage servicing cost that is no more than 25% of my gross income". It is not uncommon to have several goals, some short term and some long term. Setting financial goals helps direct financial planning.
  3. Creating a plan: The financial plan details how to accomplish your goals. It could include, for example, reducing unnecessary expenses, increasing one's employment income, or investing in the stock market.
  4. Execution: Execution of one's personal financial plan often requires discipline and perseverance. Many people obtain assistance from professionals such as accountants, financial planners, investment advisers, and lawyers.
  5. Monitoring and reassessment: As time passes, one's personal financial plan must be monitored for possible adjustments or reassessments.


Typical goals most adults have are paying off credit card and or student loan debt, retirement, college costs for children, medical expenses, and estate planning.

See also

  • Accounting software
    Accounting software

    Accounting software is application software that records and processes accounting transactions within functional modules such as accounts payable, accounts receivable, payroll, and trial balance....
  • Corporate finance
    Corporate finance

    Corporate finance is an area of finance dealing with the financial decisions corporations make and the tools and analysis used to make these decisions....
  • Credit card debt
    Credit card debt

    Credit card debt is an example of unsecured consumer debt, accessed through ISO 7810 plastic credit cards.Debt results when a client of a credit card company purchases an item or service through the card system....
  • Debt consolidation
    Debt consolidation

    Debt consolidation entails taking out one loan to pay off many others. This is often done to secure a lower interest rate, secure a fixed interest rate or for the convenience of servicing only one loan....
  • Equity investment
    Equity investment

    Equity investment generally refers to the buying and holding of shares of stock on a stock market by individuals and funds in anticipation of income from dividends and capital gain as the value of the stock rises....
  • Family planning
    Family planning

    Family planning is people Planning when to have children, and the use of birth control and other techniques to implement such plans. Other techniques commonly used include sex education, prevention and management of sexually transmitted disease, pre-conception counseling and pregnancy#management , and infertility....
  • Insurance
    Insurance

    Insurance, in law and economics, is a form of risk management primarily used to Hedge against the risk of a contingent loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for a premium, and can be thought of as a guaranteed small loss to prevent a large, possibly devastating los...
  • Investment
    Investment

    Investment or investing is a term with several closely-related meanings in business management, finance and economics, related to Saving or deferring Consumption ....
  • List of personal finance related articles
    List of finance topics

    Topics in finance include:...
  • Mortgage loan
    Mortgage loan

    A mortgage loan is a loan secured by real property through the use of a note which evidences the existence of the loan and the encumbrance of that realty through the granting of a mortgage which security interest the loan....
  • Payday loan
    Payday loan

    A payday loan is a small, short-term loan that is intended to cover a borrower's expenses until his or her next payday. The loans are also sometimes referred to as cash advances, though that term can also refer to cash provided against a prearranged line of credit such as a credit card ....
  • Personal budget
    Personal budget

    A personal budget is a finance plan that allocates future personal income towards expenses, savings and debt repayment. Past spending and personal debt are considered when creating a personal budget....
  • Personal financial management
    Personal financial management

    Personal Financial Management websites enable consumers to track and manage their money in multiple institutions and, oftentimes, to compare notes and information with other users of the service....
  • Settlement (finance)
    Settlement (finance)

    Settlement is the process whereby security or interests in securities are delivered, usually against payment, to fulfill contractual obligations, such as those arising under securities trades....
  • Wealth
    Wealth

    Wealth is an abundance of valuable material possessions or resources. The word is derived from the old English wela, which is from an Indo-European word stem....
  • Wealth management
    Wealth management

    Wealth Management is an advanced investment advisory discipline that incorporates financial planning and specialist financial services. The key objectives are to provide high net worth individuals and families with tailored retail banking services, estate planning, legal resources, taxation advice and investment management, with the goal of s...