The Core Areas of Personal Finances

Persoonlijke Financiën is the practice of managing money to meet your financial goals. Your financial goals might include saving enough for a new car or a home, paying down debt, or meeting your retirement income needs.

Money management skills are vital to help you make informed decisions about earning, spending, saving and investing. These skills can also help you reach your financial goals and develop a healthy relationship with money.

The core areas of personal finance are income, spending, savings, investments and protection. Using these principles, you can plan for the short term (such as buying a car or home) and long term (such as retirement or college education).

“The ABCs of Money: An Essential Guide

Income is all the cash that an individual receives. It might be salary, dividends, or income from a business. Spending is the outflow of cash. It includes everything from rent, food, clothing and entertainment to utilities and loan or mortgage payments. If an individual’s expenses are greater than their income, they will run out of cash and may end up in debt.

Savings is the remaining cash after spending. It is important that everyone has some savings to cover emergencies or unexpected costs. The best way to save is by putting money in a savings account or mutual fund. When choosing an investment strategy, consider your risk tolerance. It might be tempting to invest in high-interest funds that promise a quick return, but they can often lead to a loss of capital over time.