ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel

Understanding Basic Finance: Personal Financial Terms

Updated on February 15, 2013

Basic Finance

A basic understanding of Finance is very much essential in everyone’s life. Finance does not always mean to save money or invest it, but a basic understanding helps to lead a financially secure life. Finance is nothing but a way to manage funds. So, if you love to administer things at home or take control of any activity, you have the skills required for management. And when you are ready to administer funds, it becomes finance management.

After understanding the basics of finance management, you can use the available funds systematically to get all the required things properly done. Knowledge of finance is not only required by Financial Managers or working professionals, but is a required and most basic learning for any individual. It does not matter whether you own a business, a working professional, a work-from-home lady or a housewife, knowledge of finance will always help you both in your work as well as in personal life.

Finance
Finance

Understanding Personal Finance

To better understand the personal finance, you must figure out your daily expenses and earnings. First rule of thumb is - “your expenses must always be less than earnings”. If they are not, put down all your daily or monthly expenses and figure which expense can be reduced in order to balance them against earnings.

Download this Excel sheet to easily write down your monthly expenses and balance your financial life.

Administration of funds is the most necessary stuff to ensure a safe financial future for the individuals. Many people misunderstand the term ‘balancing out expenses’ and feels they need to give up all pleasures and should not go for any vacation. It is wise to save money but not at the cost of your pleasures. Best thing is to save a little and spend a little. Follow this important rule while spending money – “Spend on what you need and not on what you want”.

Personal Financial Terms

To understand the basics of personal finance, check out some of the commonly used financial terms and definitions.

Asset: Asset is anything that has some future value or something that can provide appreciation of money. Home or Land is widely considered as a valuable asset.

Budget: Budgeting is a processto determine the expected amount of money required for a specific task. The amount of money allocated is called as ‘Budget’.

Debt / Loan: Debt or Loan is a form of liability; when you borrow some money either from personal contacts or banks. Having different types of Loans are common liabilities among most people.

Depreciation: It is a term used for things whose financial value decreases over time. Cars, Notebooks are some examples of depreciating assets.

Expenditures / Expenses: The amount of money you spend to purchase daily goods and services.

Income: The amount of money you receive from your business or by doing any similar task.

Insurance: An instrument to protect you and your savings in case of unfortunate events.

Investment: Investment is a term which means to grow your money by investing. You can invest in Certificate of Deposits, Mutual Funds or you may invest in some company also. Investment is required to meet the future needs and for retirement.

Liabilities: Liabilities are something that you owe and need to pay back. Liability also comes when you have to pay for something which will not give you any returns in the future. For e.g. Car, Electronic gadgets, Mobile and other such items are kind of liabilities which do not have any appreciation in future.

Liquidity: Liquidity is an important term to understand even in personal finance. It is the money that is available with you at present or the amount of money that you can easily generate given some time, e.g. to withdraw money from bank or from any other source. Having some liquid money is important to meet sudden expenses.

Mortgage: Mortgage is a long-term debt instrument used to purchase the property by which the borrower uses the property itself for collateral.

Payroll / Salary: Generally, a fixed sum of money you get paid to serve a business.

Savings: Amount of money you save from your income/salary after meeting your monthly expenses. Saving money is required for the liquidity of money.

Taxes: The amount of money you may need to pay to government to avail several services and for the betterment of the country’s economy.

These are some of the basic terms used in personal finance which will help you to understand and manage your finances effectively.

Play this quiz on personal finance to find out if you have understood these terms properly.

working

This website uses cookies

As a user in the EEA, your approval is needed on a few things. To provide a better website experience, hubpages.com uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at: https://corp.maven.io/privacy-policy

Show Details
Necessary
HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
LoginThis is necessary to sign in to the HubPages Service.
Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
AkismetThis is used to detect comment spam. (Privacy Policy)
HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the googleapis.com or gstatic.com domains, for performance and efficiency reasons. (Privacy Policy)
Features
Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
MavenThis supports the Maven widget and search functionality. (Privacy Policy)
Marketing
Google AdSenseThis is an ad network. (Privacy Policy)
Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
Index ExchangeThis is an ad network. (Privacy Policy)
SovrnThis is an ad network. (Privacy Policy)
Facebook AdsThis is an ad network. (Privacy Policy)
Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
AppNexusThis is an ad network. (Privacy Policy)
OpenxThis is an ad network. (Privacy Policy)
Rubicon ProjectThis is an ad network. (Privacy Policy)
TripleLiftThis is an ad network. (Privacy Policy)
Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
Statistics
Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)
ClickscoThis is a data management platform studying reader behavior (Privacy Policy)