Personal finance refers to any and all decisions that relate to the budget of an individual or family. This can include monthly income and their monthly expenses. Loans, credit cards, investment accounts and retirement plans are also a part of personal finance.
Financial planning is a huge part of personal finance. This is generally divided into five different steps. Assessment is the first step and refers to compiling data related to income and expenses. Setting goals involves looking into what financial goals that the individual would like to achieve and in what time frame the goals should be achieved.
Once personal finances are assessed and goals are set, the focus shifts to creating a plan. This can include reducing expenses, paying off credit card balances, paying off mortgages or increasing income. Debt management plans are also a part of this process.
Long term planning can also include investments, such as putting money in the stock market or purchasing investment properties. After the plan is in place, the process moves to the next phase, execution. This involves putting the plan in place and actually executing the steps outlined. Finally, personal finance involves monitoring personal finance and reassessing the budget as circumstances change.