Personal Finance

Basic principles of effective personal money management concepts How to live within one’s income Income is received from work and is limited Budget is a tool to plan the spending and saving of income Reasons and benefits of saving Uses and costs of credit

Income Your income provides you with money to spend on whatever you choose.

What is saving? Putting money away for later use Can be as simple as putting money in a piggy bank or a savings account in the bank that draws interest

Benefits of Saving Provides money for future purchases Can be used to earn income Increases a person’s financial security

Budget One way to help live within your income is to use a budget. A budget is a spending and savings plan. You look at your income and then decide how you are going to spend your money.

Financial Investment Investing money refers to putting money aside now in order to receive a greater benefit in the future. Unlike saving which doesn’t involve much risk there is a risk of losing money when investing. If a person makes a bad investment they may actually lose money.

Financial Investment You may invest in bank accounts stocks and bonds real estate collectibles businesses

Credit Sometimes you may need to use credit to purchase items. You can borrow money to buy something now and pay for it later. When you pay back the loan you have to pay the original amount you borrowed plus a fee to use someone else's money. This fee is called interest.

Some Reasons for Borrowing Major purchases like a house or an automobile Emergencies School loans Business loans

Types of Credit Buying with a credit card Paying on installment (monthly or weekly payments) Payday loans

Credit Good credit vs. bad credit Things that give you good credit worthiness A long time at one job Paying your bills on time A good education Things that make you a bad credit risk Being unemployed or moving from job to job frequently Not paying your bills on time Not having a good education

Debt Spending more than you have and going in debt is risky, but sometimes it can be necessary. Individuals, businesses, and even governments sometime need to borrow money in order to invest in the future.