What does personal finances encompass?
Answer: Personal finances encompass an individual's potential earnings,
assets, debt, investments, and risks. It involves making decisions about
money that affect one's financial well-being, including budgeting, saving,
investing, and managing debt.
Earnings refer to the amount of money an individual makes through
employment or other sources of income. Assets refer to the things an
individual owns, such as property, stocks, or savings accounts. Debt refers to
the amount of money an individual owes, such as credit card balances or
mortgage payments. Investments refer to the money an individual puts into
stocks, bonds, or other assets with the goal of earning a return. Risks refer to
the potential for financial loss, such as from unforeseen events like a job loss
or medical emergency.
Managing personal finances is essential for achieving financial stability and
security. Effective financial planning involves creating a budget, setting
financial goals, saving for emergencies and retirement, and managing debt.
Individuals can seek financial advice from professionals, such as financial
planners or advisors, to help them make informed decisions about their
finances.
References:
- Investopedia. Personal finance. Retrieved from:
https://www.investopedia.com/terms/p/personalfinance.asp
- Federal Trade Commission. Personal finances. Retrieved from:
https://www.consumer.ftc.gov/topics/money-credit