Basics and Fundamentals of Personal Finance

Personal finance is the science of handling money. it involves all financial decisions and activities of an individual or household – the practices of earning, saving, investing and spending.


matters of personal finance include the purchasing of financial products, like credit cards, life and home insurance, mortgages and of course various investments and investment vehicles. banking is also considered a part of personal finance, including checking and savings accounts and 21st century online or mobile payment services like paypal and venmo.
Basics and Fundamentals of Personal Finance

all individual financial activities fall under the purview of personal finance; personal financial planning generally involves analyzing your current financial position, predicting short-term and long-term needs and executing a plan to fulfill those need within individual financial constraints. it depends on one's expenses, income, living requirements and individual goals and desires.

among the most important aspects of personal finance are: assessing expected cash flow, buying insurance, calculating and filing taxes, savings and investment, and retirement planning.

as a specialized field, personal finance is a fairly recent development, though colleges and schools have taught aspects of it as "home economics" or "consumer economics" since the early 1900s. the field was initially disregarded by male economists, as "home economics" appeared to be the purview of home-making women. however, more recently economists have repeatedly stressed widespread education in matters of personal finance as integral to microeconomics and the overall economy.


market theory and practice are largely guided by assuming the presence of the invisible hand: the idea that all consumers in a market economy will act rationally, or in their own self-interest. in theory, this makes market fluctuations predictable and provides assurance that their movements have been in the interest of the consumer.

however, scholars and behavioral economists in the late 20th and 21st centuries began to question that assumption, arguing that consumers actually act irrationally as a result of under-education in a more complicated and less comprehensible economy.

many consumers simply do not have the information to make the most rational financial decisions for themselves, or they are manipulated by circumstance or misinformation to perceive a decision as being more rational than it actually is.

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