FINANCE: An Introduction

Have you ever looked at your bank account at the end of the month and asked yourself, ” Where did all my money go ? ” Or watched a colleagues of your age driving a luxury car, taking vacations, or purchasing their dream home—and thinking, “How are they affording it while I’m just getting by?”

 

You’re not alone, millions of people are trapped in a cycle of making and spending without even actually getting ahead. Not because they’re a overspending person. Not because they don’t make enough. But because they don’t know to manage, grow, and protect money.

 

The harsh reality? Most of us never learned the fundamentals or basics of budgeting, saving, and investing. We learn how to earn money—but not how to earn more money with the money we have.

 

Suppose this:
Rather than keeping your savings stagnant ( not developing ) in a bank account, what if you began investing as little as ₹500 per month in a mutual fund? In 10–15 years, that not very large sum may become lakhs. Investing ₹500 per month for 15 years can potentially grow to approximately ₹50-55 lakh after 15 years, assuming an annual return of around 12-14% which is an average historical return for some mutual fund categories .

 

That’s how individuals can cover out-of-pocket expenses for homes, pay for their children’s education, or even purchase that dream luxury automobile you’ve always wanted.

 

Financial is not about amounts—it’s about freedom. Freedom from stress. Freedom from living paycheck-to-paycheck. And the freedom to live life on your own terms.

 

Here in this blog, we’ll study the most common issues individuals are facing because of financial illiteracy—and how even minor steps towards financial literacy can bring enormous changes to your future.

 

If you’re annoyed with struggling, bored with daydreaming without a plan, and ready to take control of your future—continue reading.

 

Degrees and diplomas are at times promoted as the be-all-and-end-all of success these days. But picture it like this: your financial literacy—your skill at handling, saving, making money grow—might be the actual game-changer. It’s something that not many schools and colleges teach, yet it’s the key to financial freedom and stability.

 

Whatever your goals—buying your dream home, starting up your own business, having a secure retirement—something is for certain: banks, businesses, even life itself won’t be impressed by your educational credentials unless you learn to figure out how to work with money.

 

In this Finance Category Series, we’ll lay out the basics that you need to learn: from budgeting boldly through to saving intelligently, borrowing sensibly, and forecasting your future financial needs. It’s time to look beyond mere earn-and-spend—let’s discuss how you can build wealth, reduce financial stress, and live the life of your dreams. Ready to take matters into your own financial hands? Let’s start.

 

what is finance ?

Finance, in simple words, is all about managing money — how people, businesses, and governments get money, spend it, save it, invest it, and plan for the future. Controlling personal finance is essential for reducing stress and achieving life goals. So we will emphasizes discipline in money management and self awareness.

 

Make Personal finance goals by assessing your current situation and determining steps to reach those goals. May be you will be like are you kidding we aren’t here to think about it . Hold on you have to do it because everyone has different amount of income. You have to know about your expenses and saving which are making now. So its necessary to make goals for present or for future according to it.

 

Finance can be generally categorized into three types :-

All types aim at considering the use of money in varying aspects of life and business.

 

Personal Finance

It is the management of personal resources. It includes budgeting, saving, investing, borrowing, and planning for future expenditures like buying a house, education, or old age. Its true aim is efficient management of your earnings, avoiding excessive borrowing, and generating wealth so that you may live a financially secure life.

 

Corporate Finance 

Corporate finance is business money management. It is involved in business project funding, investing, managing, controlling, and maximizing business profits. Its objective is to expand business value for business proprietors or company shareholders while ensuring company growth and business stability in the long run.

 

Public Finance 

Public finance refers to administration of finance of a government. It consists of taxation, spending of the government, budget, and administration of public debts. It regulates proper use of resources in infrastructure, health, education, defense, and other services aiding the economy and citizens of a nation.

 

What is Financial Literacy?

Financial literacy refers to knowledge and skills to handle money wisely. It means knowing how money operates—how to earn, save, invest, borrow, and safeguard it. It means being financially literate to have intelligent choices regarding budgeting, staying out of useless debt, planning for tomorrow, and accumulating wealth.

 

For instance, an economically informed individual would understand wants versus needs, would be aware of how interest rates work through loans, would understand how inflation works on savings, and would understand why savings for long-term objectives would be required.

 

In short, financial literacy helps you control your finances, not allow your finances to control you. It leads to less stress, less financial errors, and an independent and stable future.

 

Merits OR Benefits of Finance literacy

 Topics about which we will discuss in upcoming posts :–

• • Investing – how to grow your wealth
  • Borrowing and Lending – using credit wisely
  • Budgeting – planning your expenses smartly
  • Saving – building a financial safety net
  • Forecasting – preparing for future financial needs

Key point :- Self awareness in financial management is crucial for achieving goals.

Imagine setting a goal to buy your dream home. You need to asses where you stand financially by evaluating your current income, expenses and debt. You notice may be or there must be some sort of things which are unnecessary but, it is draining your budget. So the awareness allow to redirect that funds into saving for your necessary needs. As you develop better habits like Sticking to budget, tracking your expenses. By doing this you will find that you are now able do not much but little for your future dream or for your financial stability. For here you are coming closer to homeownership, illustrating how self awareness in managing money can transform your aspiration into reality.

 

Write down Monthly income and expenses :

In order to get control of your money, start by recording everything you bring in and everything you spend on a notebook or computer spreadsheet. List every possible source of income—salary, freelance, or small sideline jobs—and then every expense, beginning with fixed payments like rent, utility bills, and car or student-loan payments, then moving on to variable payments like groceries, buses or taxis, eating out, and entertainment. Putting it all in writing will give you a very clear picture of the difference between what’s coming in and what’s going out. It’s not only good at pointing up wastage, but it will enable you to spot places you can cut back and channel the saving into targets of yours.

 

List your Assets and debts :

Another enlightening or to inform you lets take a step towards discovering your level of financial health is the preparation of a list of assets and debts. Make a list of everything you possess of value—like money, savings, investments, land, gold, or even a car—these form your assets. Make another list of everything you owe, whether credit cards, personal loans, car loans, home loans, or any other outstanding payments—these form your debts or your liabilities. Subtract the debts from assets , and you get your net worth (Assets – Debts). It’s a simple exercise which informs you of where you actually stand financially and enables you to make better choices relating to saving, borrowing, and planning for future objectives.

 

Before talking much about finance , one must know about terms which are widely used :-

 

Asset – It means something a person or business own. There should ne no loan or debt on it , also it should have value benefits and provide future.
For Example – For Person – Your Bike , Car , House , Jewelry etc.
For Business – Building , Machinery, Inventory , Accounts receivable etc.
So relating to example if you have a Van it is an ‘asset’ because it helps to generate income and can be sold if needed.

 

Liability – It means something a person or business owes though loan , debt, or simply he have to pay money in future for it.               
For Example – For Person – Home Loan . Mortgage , Credit card debt etc.

For Business – Bank loan , Unpaid bills , Salaries , Payables etc.

So relating to example if a person take a $50,000 loan from the bank then the loan is ‘Liability’ because he must have to pay it back.

 

Equity – It is something a person or business claims on the assets after all the liabilities are paid.
To understand this there’s a formula Equity= Assets-Liability

For Example – Home equity (value of home after home loan is paid ).
For Business – Shareholder’s equity .

 

Liquidity – It is something “How Quickly and Easily” an assets can be converted into cash without loosing value. So if a company needs cash urgently. It can “Sell its Stock” quickly ( High Liquidity ) but if a person want to sell his company it would take much longer time ( Less Liquidity ).

 

Cash Flow – The movement of money into the business and out of a business or a personal account over time.

Positive Cash Flow – More money coming in business than going out.
Negative Cash Flow – More money going out than coming in .

 

Profit – It is the money left after all cost and expenses are substracted from revenue .

Formula of Profit = Revenue – expenses

 

Income – Income means funds taken or earned at regular periods in exchange for labor, services, or investments. The income can be from any of these sources such as salary, businesses, profit, rent, dividends, or savings, interest. The income finances your day to day spending, savings, and future finance planning. The regular payment made in one’s employment or rent paid from property. For example, is considered income.

 

Investment – Investing means putting your money in assets, opportunities, etc., in order to earn an income or gain in the long term. Instead of keeping money inactive, you engage it. Stock, mutual funds, bonds, property, or gold are some of the most popular investments people engage their money in. Investing involves some risk, but it’s unavoidable to build long-term wealth, beat inflation, and achieve financial goals. For example, retirement, college, or buying a home.

 

Inflation – Inflation means there is an increase in the aggregate prices of goods and services over time, and this reduces purchasing power in monetary terms. In short, as inflation rates grow, more goods than before can be purchased for the same number of dollars or rupees or can be with any currency.

 

Example of Inflation:

Assume you spend one loaf of bread today to cost ₹30. If inflation in this country persists at 6% per annum, it would cost an approximate ₹31.80 to purchase this bread after one year. After 5 years, it can cost even ₹40 or even more. This would mean this ₹100 today would buy less in years to come if one’s earnings or one’s investments do not keep pace with inflation.

 

That’s why keeping money languishing ( to lose strength or energy and not make any progress in something ) in cash or an ultra-low-paying savings account can hurt you—because inflation slowly eats away at its spending power. That’s also why investors invest in assets like mutual funds, shares, or property, as these assets appreciate in value at a faster clip than inflation.

 

Loan/Debt – Loan or debt refers to borrowing money, to be paid at some future date, often with an extra cost in the form of interest. Companies and individuals borrow loans to pay bills, purchase property, or fund a chance. 

 

Though, in some cases, debt seems to be bad, all debts do not have to be good ones – it can also contribute to financial growth. This demands an introduction of good and bad debts. 

 

 

1. Good debt – It refers to funding to support your vice, pay bills, or fund speculative investments, i.e., bonds or stock. 

Examples: Borrowing an education loan to acquire an education degree, which increases future earnings.

A house loan through which you can afford to own an asset whose value increases over time.

A business loan to enable you to grow your business and earn increased profits.

 

2. Bad Debt – It means lending without value creation and tends to exhaust your finances. It often funds products losing value soon or not needed at all.

 

Examples: Charging luxury clothing or electronics you do not afford on a credit card.

Borrowing to finance vacations or lifestyle expenses without short-run or long-run payoffs.

Purchase an automobile on a high-interest loan if it’s out of one’s budget (as automobiles lose value).  

 

Stay updated for next article on – Importance of Saving and Budgeting , understanding inflation and its Impact.

 

If you really want to be ahead , Of the WORLD and You don’t understand the things then “Learn, Read or Ask”.

 

Catch you later guys….. Keep learning.

 

 

Disclaimer –

This website’s materials are for educational and informational purposes only and are not intended for use as investment, financial, or lawful advisory services of any sort. All situations will be different and plans or illustrations here will not be applicable in your own situations. You are strongly advised to consult these materials and any questions you might have with a professional advisor who is competent and familiar with your personal and business needs, objectives, and financial conditions. We cannot promise accuracy, completeness, or use of information provided through this website. By using this website, you agree the author(s) and publisher(s) of this website will not be liable for losses, damages, or liabilities resulting from your own economic decisions.