December 7, 2021



How to Plan and Manage Money.

What is Personal Finance?

Personal finance is the process of planning and managing personal financial activities such as income generation, spending, saving, investing, and protection. The process of managing one’s personal finances can be summarized in a budget or financial plan. This guide will analyze the most common and important aspects of individual financial management.

Personal finance is very important is in our lives these days and it’s worth adapting into every individuals lives for future betterment of one’s self and family.

Life is a ponzi and we need to take care of it very well, the best time you spend well in your life is the time you eat well and stay happily with your house hold.

Areas of Personal Finance

How ever in this guide, we are going to focus on breaking down the most important areas of personal finance and explore each of them in more detail so you have a comprehensive understanding of the topic, and prepare yourself well to make a good choice of the way to follow in handling your financial matters.

The main areas of personal finance are: income, spending, saving, investing, and protection. Each of these areas will be examined in more detail as shown below.

#1 Income.

Income refers to a source of cash inflow that an individual receives and then uses to support themselves and their family. It is the starting point for our financial planning process.

Common sources of income are:

Hourly wages
These sources of income all generate cash that an individual can use to either spend, save, or invest. In this sense, income can be thought of as the first step in our personal finance roadmap.

#2 Spending.

Spending includes all types of expenses an individual incurs related to buying goods and services or anything that is consumable (i.e., not an investment). All spending falls into two categories: cash (paid for with cash on hand) and credit (paid for by borrowing money). The majority of most people’s income is allocated to spending.
Note, every individuals has to be conscious in all his/her spendings and also be careful with your last card.

Common sources of spending are:

Mortgage payments
Credit card payments

The expenses listed above all reduce the amount of cash an individual has available for saving and investing. If expenses are greater than income, the individual has a deficit. Managing expenses is just as important as generating income, and typically people have more control over their discretionary expenses than their income. Good spending habits are critical for good personal finance management.

#3. Saving.

Saving refers to excess cash that is retained for future investing or spending. If there is a surplus between what a person earns as income and what they spend, the difference can be directed towards savings or investments. Managing savings is a critical area of personal finance.
Any one without savings doesn’t have a future, as if any emergency happens you will end up counting words, so is always important you make savings regarding to your income source.

Common forms of savings include:

Physical cash
Savings bank account
Checking bank account
Money market securities

Most people keep at least some savings to manage their cash flow and the short-term difference between their income and expenses. Having too much savings, however, can actually be viewed as a bad thing since it earns little to no return compared to investments.


#4 Investing.

Investing relates to the purchase of assets that are expected to generate a rate of return, with the hope that over time the individual will receive back more money than they originally invested. Investing carries risk, and not all assets actually end up producing a positive rate of return. This is where we see the relationship between risk and return. And most people always run from investments thinking that the risk involved is more than the gain, but that’s not true, you can make a lot of gain through investments, only invest wisely.

Common forms of investing include:

Mutual funds
Real estate
Private companies

Investing is the most complicated area of personal finance and is one of the areas where people get the most professional advice. There are vast differences in risk and rewards between different investments, and most people seek help with this area of their financial plans.

#5 Protection.

Personal protection refers to a wide range of products that can be used to guard against an unforeseen and adverse event.
and it also goes far and those a lot in making someone’s future look brighter.

Common protection products include:

Life insurance
Health insurance
Estate planning

This is another area of personal finance where people typically seek professional advice and which can become quite completed. There is a whole series of analysis that needs to be done to properly assess an individual’s insurance and estate planning needs.

The Personal Finance Planning Process.

Good financial management comes down to having a solid plan and sticking to it. All of the above areas of personal finance can be wrapped into a budget or a formal financial plan.

These plans are commonly prepared by personal bankers and investment advisors who work with their clients to understand their needs and goals and develop an appropriate course of action.

Generally speaking, the main components of the financial planning process are:

Plan development
Monitoring and reassessment

Personal Finance Budget – Example

PrepariProcess.dget or a financial plan is critical for giving you the best shot at achieving your personal and family goals. Below is an example of a simple monthly budget that could be used to manage your income, expenses, savings, and investments.

As you can see in the example below, there are three potential sources of income (salary, bonus, and other), followed by a list of expenses (rent, food, groceries, restaurants, entertainment, childcare costs, vacations, etc.), and the difference between the two is the person’s monthly surplus or deficit.

If we are able to adapt these procedures in handling our personal finance it will always be a win win as your future will be positively bright and you will live long with your family.

Personal Finance Careers

There is a wide range of careers that relate to personal financial management and advice. If you’re passionate about any of the topics mentioned in this guide, you may want to consider a career in the industry.

Some of the most common careers include:

Personal banker
Wealth manager
Investment advisor
Insurance advisor
Tax advisor
Estate planner
Financial planner
Mortgage broker
To learn more about the different careers in finance, visit Guruspoint interactive Career Map to explore options on the corporate side of the industry. Some of the most common jobs on the corporate side include investment banking, private equity, and corporate development.


Additional Resources

Thank you for reading this Guruspoint guide to personal finance. We hope it has helped you understand what managing personal finance is all about, why it’s important, and how to go about doing it.

Guruspoint mission is to help anyone become a world-class financial analyst and have a meaningful career. To help you in your journey, you’ll find these additional resources helpful:

Corporate Finance
Public Finance
Return on Investment (ROI)
Salary Guides.

Personal finance is one of the most important if not the most important aspect of peoples life, so every individuals need to adapt it positively. And in our present life these days without proper income management people suffers poverty very well, so in order to abstain from poverty we need to follow the procedures of personal finance.


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