Finance 101 – Down to Basics

 

To some, the topic of finance may be super boring or completely terrifying, but to AJ it’s entirely fascinating. Your money has feelings, and it should be treated with care because it’s extremely sensitive, but when you treat it right, it’ll treat you right. So, let’s get down to basics.

  1. Finance, just another word right?

Wrong. Finance is more than just another word. It’s one of those cool words that is both a noun and a verb. Some would call it a science, which AJ completely agrees with. We can narrow the broadness of the word ‘Finance’ to two general statements. The first being that it’s the process of acquiring funds for whatever activity your heart desires on a personal scale, and on a big scale it involves businesses, governments, etc. The second being the actual management of those funds needed for whatever activity your heart desires, did you think budgeting? No? Well you should of! Now you will.

  1. What areas of finance are there?

Let’s categorize. The three sub-categories would be 1. Personal Finance, 2. Corporate Finance, and 3. Public Finance. I reckon if you’re reading this, you’d be trying to get a better grasp on your financial situation so you’d fall into the personal finance category.

  1. So, what do sub-categories do?

Each sub-category takes into account the two general statements about finance. Moreover, the categories are wanting to achieve the best investment opportunities, lowest cost credit possible, generating assets (those things you like, your car, home, boat, etc), allocating funds for those pesky liabilities that take your money (bills, bills, bills… etc), and of course banking.

  1. I think Personal Finance is what I’m concerned about.

Alright, that’s good. Everyone should be considering their personal finances and most importantly, budgeting. (Did you subscribe for a free budgeting template? You should!) Personal finance would encompass forecasting expenses for retirement and a level of financial income during retirement that would be comfortable, as a basic example. This means you need to be investing adequate money during your boring 9-5 working years, so after your 9-5 you can travel and to ensure your assets fit your long-term plans.

  1. Corporate finance sounds really cool.

Corporate finance was one of my favourite courses during uni! Large companies often need to raise additional funding for whatever reason, for example research and development for a company trying to cure cancer! How do they do it? The company would do this through issuing bonds or stock offerings (we call these securities – and don’t worry, we’ll cover these topics in the near future for you). Have you ever heard the news talk about Investment Banks? Well, in this example of a company raising funds for R&D  (research and development) to cure cancer, an investment bank may have advised the company on the issuing and offerings as well as helping market the securities.

  1. Okay, does public finance mean money for everyone?

I wish. That would be awesome, public finance day would be like a public holiday of money showers. Back to reality now. This is in regards to government bodies and the management of money to keep the government bodies operating. Aside from just the every-day operating, government bodies have a greater social responsibility. A quick example, raising funding towards the medical industry to assure citizens have adequate health care. Most importantly, public finance would be those pesky taxes and policies that help keep our economy stable.

If you want to learn further about these categories head over to http://www.investopedia.com !

Until next time,
Julia

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