Finance is defined as the management of money and includes activities such as investing, borrowing, lending, budgeting, saving, and forecasting. Finance is inclusive of three things in total, money, time, and risk; while management tails with the end goal of securing your assets and working upon liabilities to have a profitable lifestyle.
Whether you are a student, corporate personnel or someone who has nothing to do with finance, it is still important to have profound knowledge of finance and its branches. But the field of finance is so huge that it could have hundreds of sub-categories. Financial experts and scholars consider the areas of finance as per their requirements. However, the major branches considered and agreed by the institutions around the globe are:
- Personal Finance
- Corporate Finance
- Public Finance
Briefing the branches of Finance:
Personal Finance: The first and the foremost important that affects everyone individually. All activities that have you and your money involved is a part of personal finance. This branch deals with personal expenses, including investments, savings, and debt. There are 5 salient aspects to financial planning, which will give a brief overview of major influence on your money.
- Financial Position: The current inflow and outflow of your money decide your budget and lifestyle. The financial position does not always depend on your income, it also depends on the returns from your investments.
- Investment Planning: Maintaining your capital, learning where to invest, how to invest is a part of Investment Planning. The risk involved in investments remains silent, but one should play safe and sound to fulfil your needs.
- Tax Planning: Taxation is crucially affecting your overall money every year. Essentials and expenditures should remain in contact with financial parameters. This elevates your tax management, which allows you to have the best use of tax exemptions, deductions and benefits.
- Asset Protection: Securing your profitable assets is the only way to assure financial stability which indirectly holds financial freedom. You can invest in Hedge funds which protect the downside risk of your capital.
- Retirement: Working for the most percentage of your life and expecting a sustainable retirement is the least we can expect. Having a retirement plan will help you and your family lead a secured future.
To conquer all these aspects, one has to manage their personal financial plan well, which will help one gain the ultimate financial freedom.
Money that revolves in business is considered as corporate finance. Businesses usually aim to have a profitable margin. Corporate finance management is basically handling business money wisely. This involves risk, and to ensure growth one has to make decisions that will analyze the primary needs to start any kind of business.
Financial growth in your business involves key aspects which will directly affect your fund management. Primary ones include:
- Fund Management: Initial state of any corporate finance includes fund management skills. To ensure a balanced flow of capital, management should be disciplined.
- Risk Management: Crucial factor of corporate financing, as it affects your invested capital, and employees directly. The growth of business also majorly depends on the risks that you are willing to take. Hence, knowledge about risk management is important as will decide if the business would grow or not.
- Profit Management: To any business, profit and loss is a part of the success journey. Profit management is how to get a good inflow, and how to manage it as well. Making sustainable profits that create a profile, which indirectly keeps the company at a good rate of success, is important.
- Economic Trends: Experts of business consider this as the most important aspect of having a successful business. The economic trends in the industry determine the value of your corporation. One should always remain up-to-date with them.
- Stocks: Who doesn’t dream of high stock values for their company? Obviously, no one. There are multiple factors that can affect the stock of your company, but the clear and dear one is profit.
All the money that is related to government, public sectors, public schools, government buildings, etc., are covered by public finance. Large volume investments, which are handled by the government, banking, insurances are also a part of public financing. The funds are the taxes paid by the citizens, so it’s very important to know where the money goes and how is it involved in the national interest.
Key aspects of public finance:
- Government Projects
- Funding for events
- Investment Banking
- NGOs and NPOs
- Government Agencies
- Government Businesses
The art of managing finance, the love for making money, is the key to financial freedom. Knowing your finances is a day-to-day activity, knowledge of these areas and practising them more accurately can start your journey towards financial freedom.