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Personal finance is the application of the principles of financial economics to an individual's (or a family's) financial decisions.
A Question of Time
Personal finance is a detailed analysis of financial flows at various points in time. For example, we may receive employment income today, but have to pay college tuition fees next year. Mortgage payments, interest earned, insurance premiums, and numerous other financial flows are recurring events that repeat at monthly or yearly intervals. Because these involve several time periods, we have to ask "What role does time have in these financial calculations?".
We know that if we deposit money in a bank account we will receive interest. Because of this, we prefer to receive money today rather than in the future. Money we receive today is more valuable to us than money received in the future by the amount of interest we can earn with the money. This is referred to as the time value of money. To adjust for this time value, we use two simple formula. The present value formula is used to discount future money streams, that is, to convert future amounts to their equivalent present day amounts. The future value formula is used to convert today's money into the equivalent amount at some time in the future.
All personal financial planning done by professionals uses these time value formula, as well as several more complicated variants of the formulas. To ignore the role that time plays in financial planning is to ignore one of the most important principles of personal finance.
More on [ Personal finance ]
@freefrombroke Here are a few of my fav personal finance books: http://is.gd/5jQLp
jnickles (Jeff Nickles) Fri, 11 Dec 2009 17:11:20 -0000
@freefrombroke Here are a few of my fav personal finance books: http://is.gd/5jQLp
Weekly Personal Finance Roundup | BudgetPulse Blog | Personal ... http://bit.ly/8eBodd
Jschlinsky (Joshua Schlinsky) Fri, 11 Dec 2009 16:54:36 -0000
Weekly Personal Finance Roundup | BudgetPulse Blog | Personal ... http://bit.ly/8eBodd
Intel Hit By Chip Sector Downgrade Home Business Tech Markets Entrepreneurs Leadership Personal Finance... http://bit.ly/1FiJUP #tech
RealTimeTech (Real Time Tech News) Fri, 11 Dec 2009 16:44:03 -0000
Intel Hit By Chip Sector Downgrade Home Business Tech Markets Entrepreneurs Leadership Personal Finance... http://bit.ly/1FiJUP #tech
A new offer from Kroger Personal Finance gives pet owners some financial assurance if their dog requires cancer treatment, cat needs surgery
gbpetshop (GB's Pet Shop) Fri, 11 Dec 2009 16:40:38 -0000
A new offer from Kroger Personal Finance gives pet owners some financial assurance if their dog requires cancer treatment, cat needs surgery
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911creditpro (Mick Bernard) Fri, 11 Dec 2009 16:38:21 -0000
RT @tweetmeme Weekly Personal Finance Roundup | BudgetPulse Blog | Personal Finance Tips and News http://bit.ly/8Ugoxw
The Suddenly Brighter Employment Picture | Personal Finance Buzz http://url4.eu/ug6h
cvrepublic (CVRepublic) Fri, 11 Dec 2009 16:33:55 -0000
The Suddenly Brighter Employment Picture | Personal Finance Buzz http://url4.eu/ug6h
How to Buy a Home on Good Financial Terms - E-book for home buyers.
Meta Description: [ FREE Home Buying Tips! Plus How To Buy a Home Now, exclusive step by step e-Book featuring 'Insider' affordable, No Mortgage Financing method! ]
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