Personal Finance

Personal finance refers to the management of an individual’s or household’s financial resources in order to achieve short-term and long-term goals. It involves planning, organizing, and controlling income, expenditures, savings, and investments.

Key Components Income Management Tracking earnings from salary, business, or other sources. Ensuring optimal utilization of available funds. Expenditure Control Budgeting to manage daily, monthly, and yearly expenses. Prioritizing essential needs over discretionary spending. Savings Setting aside funds for emergencies, retirement, or specific goals. Choosing suitable savings instruments (bank deposits, recurring deposits, etc.). Investments Allocating resources to stocks, mutual funds, real estate, or other financial instruments to grow wealth. Balancing risk and return according to individual risk appetite. Risk Management Using insurance, diversification, and contingency planning to protect against financial losses. Importance Ensures financial stability and security for present and future needs. Enables goal achievement, such as buying a home, funding education, or retirement planning. Mitigates financial stress during emergencies or unexpected events. Encourages informed decision-making regarding spending, saving, and investing.

Example: A person earns ₹80,000 per month: Budgeting ₹50,000 for expenses Saving ₹15,000 in a fixed deposit Investing ₹15,000 in mutual funds for long-term wealth creation