Personal Finance

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Financial status is generally viewed with four basic quadrants.

Income
Expense (Spending)
Assets
Liabilities

One have to manage these four quadrants in a way that he/she can survive today and also in future (ie after retirement) The way one manages these four quadrants

[edit] Generating Income

Employment

Self-employment

Self-employment/Business structures

Self-employment/Franchise

Self-employment/Multilevel Marketing

Passive Income

Assets

[edit] Taxes

[edit] Spending

This module reviews spending in your life. It covers way to control spending and the ways to best enjoy what you do spend.

[edit] Insurance

[edit] Liabilities

This module reviews liabilites in your life. Liabilites by defination generates an expense (or spending). As you might see from the following list these are cause of the out flow of money.

Loans

Credit Cards

[edit] Saving

Saving in view of personal finance is more of the discipline. Small amount of money saved regularly can build bigger kitty. In general savings can be classified by the purpose for which it is done.

First purpose of saving is for saving rainy day. Based on the individual he/she needs to identify the amount which will be needed on short notice in case of emergency. This saving amount must be available in a bank account in such a way that you can withdraw at your will. Once you are saving beyond this amount it must become part of your investment.

Tax Advantaged Savings

Automatic Savings

Paying Debt

[edit] Investing

See also: Investing

Investing involves using your money (or borrowed money that you control) to earn more money. Investments are classified based on the risk and return matrix. Following are the possible categories :

High Risk + High Return

Low Risk + Low Return

In general one should be able to put all their investment in above two class.

Ratio in which one's investment should be distributed between the two categories is based on the person's risk appetite. One's risk apatite can be a function of age and total assets. If a person is younger, he/she can invest more in riskier avenues since he/she can recover from the loss. If the person already has very high assets he can increase his/her exposure to the riskier investments to gain more returns.