What is Finance and How to Plan Them?

Finance is a set of economic relations arising in the process of creating and using funds (centralized or decentralized) used for the needs of the state and providing conditions for the expansion of production. The emergence of finance is associated with the presence of such conditions as regular commodity-money exchange and the need of the state to attract additional resources.

There is no one correct definition stated in regulatory documents, however, there are several definitions of the concept of “finance”, joined in one: finance is connected with the formation, distribution and use of monetary funds and the purpose of their existence is to fulfill the functions and tasks of the state.financing planning

Finance planning

At present, the drafting of a business plan is a gradually entire and primary practice of businessmen but very few people make a financial plan for their personal expenses. Some financial specialists, independent financial advisers and personal finance consultants, cite the experience of American millionaires as an example of rational use of money.

A study of wealthy US businessmen showed that their personal spending planning is thrift – they spend far less than their incomes allow, they are engaged in annual planning, long-term investment of 20% of all revenues, as well as planning future contributions and implementing tasks.

Specialists note that the main mistake that some businessmen make is investing 100% in business. The experience of American millionaires proves that planning should be balanced, for example, 20% is invested in securities and real estate, 30% – in pension funds, 10% in other affairs and only 20% – in business.

In addition, it is necessary to separate personal money from business – this ensures sufficient security. The independent consultant also notes that the rational planning of personal finances includes a mandatory financial plan, insurance, and a bank account sufficient to provide the family for 6 months.

Category: General Issues

Tags: Business, financial