Finance is the act of channeling funds from investors and savers to organizations that need it most. When put to good use, investors and savers have excess money available that can make profits or interest. This money is known as liquid finance. Usually, it is invested in low risk liquid instruments such as bonds, common stocks, mutual funds and mortgage backed securities.
In recent years, personal finance has become an increasingly important part of individual and corporate financial management. The expansion of global markets, new technologies, improved accounting practices, the internet, and new tax rules have made it necessary for individuals to know their personal finance portfolio since international trading has become more intricate. Personal financial management also encompasses aspects related to retirement accounts, estate planning, education, investing, and the management of assets, liabilities, and financial assets such as hedge funds and derivatives.
Another major area of personal finance is managed insurance companies. Insurance companies undertake risk management activities, such as making asset quality and risk assessments, and providing financial products like annuities and life policies. Because insurance companies are not classified as banks, the proper prudence required in managing money through insurance companies is more difficult than managing money through banks. A wide range of insurance products, including life, health, annuities, and worker’s compensation, are provided by insurance companies.
The third major area of personal finance management is in non-traditional financial services. Many people are comfortable with traditional bank financing but less comfortable with credit unions and other non-bank lenders. These services are typically more expensive, require a higher minimum deposit, and take longer to receive approvals and credit lines. Non-traditional lenders are often focused on developing new clients, offering lower interest rates and fees, and requiring larger down payments. Most credit unions are members of professional organizations such as the National Foundation for Credit Unions (NFU) or the National Association of Personal Bankruptcy Alternatives (NAPFA).
One of the most common topics of finance management concerns cash flow. Cash flow describes the ability of a business to pay its bills on a timely basis. It is expressed as a ratio that evaluates the amount of current assets – currently held or expected to be invested – with their current liabilities – i.e., the total amount of the debt outstanding). Finance experts recommend that anyone seeking finance positions focus on both long and short term cash flow. Long-term concerns include expansion plans, growth forecasts, business plans, and financing issues, while short-term concerns relate to bills and billing.
Personal finance is a large and diverse area of the financial industry. Anyone seeking a position in this field must be skilled in analysis, budgeting, risk management, investment, banking, insurance, payroll, and cash flow. Although finance careers require a great deal of math and statistics, they also require a great deal of English, as many finance related tasks require persuasive writing and communications skills. Finance professionals who are serious about a career in finance should consider earning a bachelor’s degree in finance before pursuing graduate or professional degrees.