6
Section 1.1
Personal Finance Basics
Objectives
After studying this section, you will be able to:
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Terms
financial planning
financial security
financial literacy
management
goods
services
needs
wants
values
value system
ethics
goal
priority
standard
resources
Financial Competence
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matter how much you earn, you may not meet your financial needs if you fail
to manage your money competently.
Financial planning is an ongoing process that can take you from where
you are to where you wish to be financially. It can help you reach important
goals and achieve a sense of financial security over your lifetime. Financial
security is the ability to meet your essential needs without taking on more
debt than you can repay. It is largely a matter of balancing money coming in
and money going out over time. Financial security enables you to afford the
goods and services you need and want with some cushion for emergencies,
savings to reach important goals, insurance to cover financial losses, and
investments to make your money grow.
To manage money successfully, it is necessary to be financially literate.
This means you need to be educated about money matters. Financial literacy
is the possession of a body of financial knowledge, a set of basic skills, and
the ability to apply your knowledge and skills to making informed and
responsible financial choices. These financial choices should serve both
your interests and the larger community, and respond to the ever-changing
economic environment.
You are the manager of your life. The way you live will depend on how
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more of what you want to do. By managing your financial resources, you
can control the dollars that pass through your hands and direct them to your
important goals.