Oswald Browne Associates
Oswald Browne Associates

Finance is a broad term that describes two related activities or the study of how money is managed and the actual process of acquiring needed funds. Now because individuals, businesses and government entities all need funding to operate, the field is often separated into three sub-categories: personal finance, corporate finance and public finance.

All three categories are concerned with activities such as pursuing sound investments, obtaining low-cost credit, allocating funds for liabilities and banking. Yet each has its own specific considerations. For example, individuals need to provision for retirement expenses, which means investing enough money during their working years and ensuring that their asset allocation fits their long-term plans. A company, on the other hand, may have to decide whether to raise additional funds through a bond issue or stock offering. Investment banks may advise the firm on such considerations and help them market the securities.

As for public finance, in addition to managing money for its day-to-day operations, a government body also has larger social responsibilities. Its goals include attaining an equitable distribution of income for its citizens and enacting policies that lead to a stable economy.

What is Finance

Finance describes the management, creation and study of money, banking, credit, investments, assets and liabilities that make up financial systems, as well as the study of those financial instruments. Some people prefer to divide finance into three distinct categories: public finance, corporate finance and personal finance. Additionally, the study of behavioural finance aims to learn about the more “human” side of a science considered by most to be highly mathematical.

Breaking Down Finance

Public finance includes tax systems, government expenditures, budget procedures, stabilization instruments, debt issues and other government concerns. Corporate finance involves managing assets and debt for a business. Personal finance includes proper management of an individual’s income and expenses so enough money is left over for savings.

Oswald Browne Associates

Oswald Browne Associates

Public Finance

The government helps prevent market failure by overseeing allocation of resources, distribution of income and stabilisation of the economy. Regular funding for these programs is secured mostly through taxation. Borrowing from banks, insurance companies and governments; receiving grants and aid; and earning dividends from its companies also help finance the government. In addition, user charges from ports, airport services and other facilities; fines resulting from breaking laws; revenues from licenses and fees, such as for driving; and sales of government securities are also sources of public finance.

Corporate Finance

Businesses bring in financing through equity investments and credit arrangements, and by purchasing securities. Startups may receive investments from angel investors or venture capitalists, and established companies may sell stocks or bonds. Businesses may purchase dividend-paying stocks, bonds or interest-bearing bank deposits. Acquiring and managing debt properly can help a company expand and become more profitable.

Personal Finance

Earning more money and spending less money is the basis of personal finance. Individuals may earn more money by starting a business, taking on additional jobs or investing. Spending less money can be done by deciding whether what is being purchased is truly worth the price being paid. For example, instead of purchasing coffee every day from a cafe, a person can buy bags of coffee at a grocery store and make the coffee at home for much less money.

Paying off debt and establishing an emergency fund are also important parts of personal finance. Having at least six months’ income set aside in case of a job loss, medical issue, car accident or other large expense helps a person pay cash for expenses rather than charging them and gaining more debt.

Saving for retirement is also important. People need enough money set aside to live on when they decide to stop working and enjoy the freedom of choosing to do what makes them happy.

At the end of the day, it’s all down to you…

Oswald Browne Associates