Personal Finance JSS3 Business Studies Lesson Note

FINANCE: means decisions on how money is spent or invested i.e. it is the study of how money is managed, invested, or spent on any project.

Personal finance – is the process of controlling your money and making decisions to keep finances in check and out of debt. It helps to make the monetary decisions for individuals’ families/households.

SOURCES OF FINANCE

–          Personal savings

–          Borrowing from friends and family

–          Credit cards

–          Retained profits

–          Loan and overdraft from the bank

CONSUMPTION AND CHOICE

A consumer is an individual who buys products or services for personal use. The demand for goods and services available depends on the price of goods and the consumer’s willingness and ability to pay these prices.

Money is limited or scarce, consumers cannot afford to pay for all goods and services. So there is a need to make a choice. Choice is the ability to choose the pressing want first among many things.

Consumer choice and scale of preference are related to each other. It shows the order in which they want to satisfy our wants in order of priority that is pressing wants come first and the least pressing wants come last.

MODESTY: Modesty means simplicity and humbleness. It is a state of not being expensive to be moderate in spending or buying.

ATTRIBUTES OF MODESTY

(i)      Moderate living within one’s income

(ii)    Contentment – we must be contented with what we have from time to time

(iii)    Honesty – be honest with yourself, do not spend more than what you have

(iv)      Simplicity – live a simple life

EFFECTS OF LIVING MODESTY

–          Self – control

–          Prudence

–          Peace of mind

–          High self–esteem

–          Refusal to indulge in corrupt practices

Link Between Modesty and Extravagance

The only link is that they are opposite. A modest person is simply honest, and humble and lives within his/her means while an extravagant person is involved in uncontrolled spending, spending above his/her earnings.

PERSONAL FINANCE

Preparation of an individual budget. A personal budget is the most basic tool individuals use to manage money. It is a financial planning. A personal budget is a short-term individual financial plan on his/her expenditure within a given period usually a year. It is designed by an individual to monitor and control spending so that long-term objectives can be achieved.

Things to be considered while preparing a personal budget:

1.         Identify a goal and set a time before the budget.
2.         List all the expenses.
3.    List all sources of income.
4.    Ensure that expenses do not exceed 60% of the income 40% should be for investment for the future.
5. Subtract total expenses from total income if negative, revise expenses, and reduce them.
6.  If the income is more than expenses put the excess into savings.

Example of individual budget:

 Uses of personal budget.

1.   It teaches members of the family the worth of money.
2. It is a tool for planning and thinking ahead.
3.   It identifies areas where one can spend or take necessary steps to curtail expenditure.
4. It alerts you against cash flow problems in the future.
5.   It gives ideas of how much credit are in a position to take on without landing in serious debt.
6.   It helps to support long-term goals.

Questions :

1.           What is personal finance?
2.           What is an investment

Explain modesty