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Personal Finance – A Priceless Skill

Personal finance is the art of managing financial activities. An individual can improve his/her financial planning in order to stabilize it.

“Sometimes it does not matter how much you earn rather than how you spend.”

What are you going to explore

  1. What is Personal Finance?
  2. Importance of Personal Finance
  3. What are Spending habits in Personal Finance
  4. Savings vs. Investments
  5. Conclusion
  6. FAQs

What is Personal Finance?

Managing your financial activities and making wise decisions regarding your money is personal finance. it includes income sources, spending habits, savings, and investments.

personal finance

It is a process where people learn how to manage their money and improve their financial health. An individual can make a financial plan or make a budget by using it.

Personal finance helps an individual in revenue generation, controlling spending habits, financial planning, and budgeting. 

It teaches how to cut down expenses and control the overspending.  

Importance of Personal Finance

Money has become one of the most essential elements for mankind. A person who knows how to manage it ease the game of life.

One who doesn’t lead to financial illness and somewhere struggles in life. It is not only a process it is considered as a skill.

One can plan his/her goals by understanding the skill of personal finance. In short It helps to trace the money flow. An individual can avoid the wastage of money by using the skill.

If people start implementing personal finance tricks it will positively affect the economy.

As a result it helps to improve the CIBIL score of an individual. One can easily plan his future goals with the help of financial tricks.

Meanwhile it increases the financial literacy of people which will minimize the poor spending habits and encourage savings habits. It promotes investments.

What are the spending habits in Personal Finance

In personal finance, Saving habits means how an individual spends his money. Spending habits vary from one person to another person. Moreover, expenses made by individuals impact financial conditions. But bad spending habits lead to week poor financial health. Poor spending habits can be fixing by it.

In today’s scenario, people usually overspend on unnecessary commodities.

Following are the examples of bad spending habits:


Buying unnecessary gadgets

Upgrading your phone every year or buying trending gadgets and expensive accessories without its necessity. However it is a sign of poor spending habits.


Taking a loan for a new car

Car or any vehicle has a diminished effect in value over a period of time because its value decreases with time. Therefore purchasing a car on loan can directly impact the financial budget of a person. New Car vs Used Car

By taking a loan you are going to pay interest to the bank in respect of the loan. While the value of the car starts decreases every year.


Excess use of credit card

Credit cards are high-interest rates for financial products. It will increase the purchasing power of a person. But people start spending more than their capacities as a result of inexpensive credit card bills and low CIBIL scores.


Absence of negotiation

People ignore or less negotiates at the time of purchase. By improving negotiation skills a person can get a good deal for a particular commodity or service.

shopping bags

Purchase in sales and discounts

Purchasing unnecessary products because of sales and discounts. However, sales and discounts are meant to attract a customer but that doesn’t mean that we have to purchase it.


Membership clubs

Availing unnecessary memberships of clubs, gyms, spa, and parlors, etc.

Therefore where you are not going consistently. Weekend parties and movies can easily eat up your money for a few hours of entertainment.

Taking unwanted loans and credits

Paying unnecessary interest in respect of unwanted loans and credits provided by the financial institutions.

These unnecessary loans will eat up your money in the form of interests.

Not Maintaining an Emergency fund

Above all it is recommended to hold 3 to 6 months of expenses in your savings account as a contingency reserve for uncertainties.

Let’s talk about some good spending habits:


Emergency fund

Holding an amount in a bank account that contains 3 to 6 months of your expenses and basic utilities. As a result this will help at the time of emergencies ( curfew, war, job change, pay cut, etc).


 Not putting all eggs in one basket

Avoids holding and investing your money in only one place. This will provide better returns and better liquidity.

However putting all your money in one place will increase the risk of major monetary losses. your all money can crash in the worst situation.

Invest in insurance

Buying health insurance, life insurance, insurance for equipment, vehicle; property can save us from major financial burdens. An insurance premium will provide tax deductions during income tax filing.

 Retirement plan

Preparing a retirement plan is always a wise choice. Investing money in PPF and other govt services for the future is a good thing.

These funds not only grow your money but also help in tax savings. Therefore this will reduce the dependency on financial requirements in old age. Investing in Mutual funds can be a goods option.

Healthy lifestyle

 Avoid regular junk food and other unhealthy habits that will lead to strong health. Therefore spending on healthy food and healthy activities will reduce the risk of major diseases. This will cause low medical bills.

Savings vs. Investments

saving vs investment infographic image

Personal finance promotes investments and saving habits. However, people usually have the misconception that saving and investments are the same but actually they both are different from each other.

Let’s see what the difference between savings and investments is:



Saving can be done by holding cash in saving accounts, recurring deposits, and piggy banks.


Investments can be done by purchasing financial products and appreciating assets.  



Saving can be a good option for a short term basis.
Savings can be used as emergency funds which contain 3 to 6 months of expenses of a person.  


However, investments can be a good option for a long term basis.
Investments can be used for future goals and financial requirements like buying a house, retirement plan, marriage, etc.  



Period of saving depends upon the financial goal and income sources of a person. Saving starts when a person starts holding and adding money separately.  


Investments can be started with small money.
The period of investments depends upon the purchased financial product or asset and the financial goal of a person.

At last on the average investment required 1 to 3 years to show results.

This image is about funding saving investing



Liquidity factors are very high for saving options. Savings can be withdrawal easily with less or no formalities and less time.  


The liquidity factor is medium to low as compared to savings. But investments take more formalities and time to withdrawal when compared to saving options.  



Returns are low when compared to investments. Because of inflation value of money decreases with the time. Savings work on low-risk low returns model.  


Meanwhile, Returns are medium to high when compared to savings. Impact of inflation on investments. Investments work on medium to high risk with medium to high returns.



Saving is less reliable when compared to investment because holding money can be theft by anybody.

Due to inflation value of money decreases. In the long term, it is difficult to hold a huge amount in saving options.


Investments are more reliable when compared to saving. Loss of theft or loss of fire cannot affect investments.

Investments can devalue by market situations and have less impact on inflation. Huge money can be easily held and grow as an investment.  


This image is about wallet and money emoticon

In this blog we have discussed a financial skill called personal finance. In this skill we learn how to manage our finances and make the best use of it.

We have discussed some bad spending habits as well as good spending habits people have.

We have also discussed savings and investments how they are different from each other. When we should save and when we should invest.

At last, I would say it is a must-have skill which everyone should learn once in their life.

Learn more about Personal Finance

Also read NBFC crisis


What personal finance meaning?

It is an art of managing your finance wisely.

Can personal finance build credit?

Yes, indirectly it builds credit.

How can personal finance decisions affect the economy?

If citizens start taking financial decisions seriously than a liquidity crisis.
Bad loans problems can be resolved that will make a positive impact on the economy.

How can personal finance help you?

It helps people to make wise financial decisions and managing their money.

How can personal financial crisis be avoided?

By increasing financial literacy this crisis can be solved.

Can quick books do personal finance?

Yes, quick books can teach personal finance tricks

Why personal finance education is important?

It can lead to financial literacy which improves the poor spending habits of people.

Why personal financial planning is required?

To improve financial health of individual and his family.

Who personal financial advisors?

He will advise and help in planning financial activities

What is a personal finance worksheet?

It shows the income, expenses, savings and overall financial overview of a person.

What is a personal finance class in high school?

To increase the financial literacy of a person

Where to learn this skill?

Best option is internet

Is personal finance important?

Yes it is very important for financial health and financial goals.

What are the financial goals?

Debt free life, good credit score, less financial stress, financial stability.

What are the saving financial ratios?

50% of income on needs, 30% of income on wants, 20% income on savings.

How to learn this skill?

One can learn by internet, books,  etc.

How to plan personal finance?

A person can plan his finance by tracing his/her expense and income.


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