Finance is a broad subject and one that many people refrain from learning more about. Some throw their hands in the air claiming it is just too complicated for them, while others feel that there is something deeply immoral about the whole things and that a Good Person should simply refrain from dwelling upon it at all.
But regardless of how we feel about finance, it does impact our life and the lives of those we care about. Learning more about both personal finance, corporate finance and public finance can help us make sense of the world and the decisions we make can be more well-informed.
On this site, we aim to answer our reader’s questions about finance in a clear and concise way that is accessible to anyone. If you have anything you want to know more about, please don’t hesitate to send us your question using the email form.
Personal finance involves things such as income, spending, tax management, savings and investments for an individual. For people with a family, this usually means taking the needs of the entire family into account when decisions are made regarding personal finance.
Personal finance involves both short-term and long-term planning and allocation of resources. A household budget should ideally not just deal with short-term issues, but also have budget posts dedicated for long term savings and investments. In most industrialized countries, insurance is an important aspect of personal finance, since it helps individuals and families to manage risk. Insurance can also be a way of saving money for future needs.
Finance related to sovereign states and sub-national entities (such as states, provinces, counties, municipalities, school districts, etc) is known as public finance. Government revenue and government expenditure are two very important aspects of public finance. Political discussions regarding public finance tend to, in essence, revolve around the government’s impact on distribution of income, efficient allocation of resources and macroeconomic stabilization.
Public expenditure is usually financed by taxes and other fees, but public revenue can also come from public investments, publicly owned profitable businesses, donations, the sale of publicly owned resources, etc. If the streams of revenue aren’t large enough to pay for expenditures, bonds can be issued to bring in cash.
Central banks are key players when it comes to public finance, partly because they are lenders of last resort.
Corporate finance is the area of finance that focuses on corporations, e.g. the funding of corporations and the capital structure of corporations. By corporation, we mean corporations in the British English sense of the word, i.e. all incorporated entities – large and small. (In American English, the word corporation is often reserved for large incorporated entities only.)
An important aspect of corporate finance is investment analysis and capital budgeting, where analysts try to determine if potentially value-adding projects carried out by the corporation should be financed by equity or by debt capital.
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