Personal Finance: Definition, Types and Benefits

Personal Finance and Its Definition, Types and Benefits

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Personal Finance is managing your income according to your earning and learning about how you save, invest and spend your hard earned money.

Table of Contents

1. What is Personal Financing

2. Areas of Personal finance

3. Needs of Personal finance

4. Who is a Financial Planner

5. How can one manage their personal finance through investing?

6. Personal Loans

7. Conclusion

What is Personal Financing?

Personal finance is a term that covers managing your money and saving .It also includes investment, retirement , planning , taxes , real estate planning and the industry’s services to individuals. Personal finance  is about meeting personal financial goals, from short-term to long term.


Personal Finance includes five aspects such as income, spending, saving, investing and protection

1. Income: Income refers to the starting point of personal finance; it is the amount of cash inflow . This includes salaries , wages , dividends and other sources of inflow cash .

2. Saving : Saving is the money a person has left over when they subtract their consumer spending from their disposable income over a given time period.

3. Spending:  The process of giving money for goods & services to fulfill your      basic needs.

4. Investment: Investment means investing in assets or items with the goal of generating income or appreciation.


– Need for personal financial planning to look at your complete financial situation including your assets , liabilities , cash flow , financial goals e.t.c

– To plan systematically for your financial goals and objective , including life insurance , health insurance retirement etc

– To make your financial life better and secure for yourself and your family and ensure all financial goals. 

– You should understand and learn about your financial situation and understand the logic behind the recommendations made.

– To regularly review the progress of financial plans and /or to revise the financial plans to accommodate any major change.


A financial planner is a person who is a professional in financial investment and helps others to meet their financial goals. Financial planners also have other jobs to do like tax planning, asset allocation, risk management and retirement planning.

How can one manage their personal finance through investing?

Investment is the backbone of any economy. Investment does not always guarantee higher return but at times we also incur losses , the investment environment is quite uncertain . We are in fact facing a VUCA(volatility , uncertainty , complex , ambiguous ) environment in the context of investment.


In order to meet one’s basic needs like home, education and car people take different types of loans like


It refers to the sum of money borrowed from a financial institution like banks. It involves flexible or fixed interest and payment terms . Property is mortgaged till the payment of loan.  .


Cost of financing education is increasing rapidly. In order to finance education people , take an educational loan like a loan to do MBA from a reputed institution. Educational loans cover accommodation charges , fees and other miscellaneous charges . It can be taken for a full time , part time or vocational course and graduation or post graduation in the field of engineering , management , medical, hotel management etc


To finance the car you need to take a car loan to cover the cost. The vehicle you purchase through the loan you have taken works as a collateral for the banks and in case of not repaying the loan bank has the right to take possession of the vehicle.


In Personal Finance the terms like saving and investment are included. It encompasses budgeting, banking , insurance , mortgage , investment, retirement, term  planning and tax estate planning.

Personal Finance is important for everyone and each person according to their income manages their finances. Budgeting is a very important aspect and knowing about your savings, investment and expenses is very important.

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