Finance is a very broad topic with so many subcategories that majorly consist of the flow of money. More accurately, it includes activities such as borrowing, forecasting, saving, lending, and other banking-related processes. Also, finance can be said to be the process of acquiring funds through either of those activities. This article gives a general overview of finance and then focuses on the different types of finance that exist.
What are financial activities?
In an exemplary manner, we could say finance activities involves transactions between two parties in a bid to achieve their individual goals. Also, these activities always involve the flow of money across the two directions. Some prominent examples of financial activities are:
- Buying and selling products
- Investing your money in stock, bonds or other market instruments
- Initiating loans
- Borrowing money from investors through issuing bonds
Also, governments are involved in financial activities as it is not exclusive to private individuals alone.
What are the types of finance?
Although finance is very broad, we can break it down into three main subcategories:
Personal finance focuses on analyzing your immediate financial condition and then forming a befitting strategy to navigate possible constraints. In addition, the personal finance strategy could vary depending on the particular situation at hand. Also, it takes into account important factors like income, goals, and expectation and living requirements.
Essentially, whatever you do to get through a financial constraint is called personal finance. For example, everyone wants a comfortable retirement, and the only way to do this is by investing or saving enough before then. Also, banking activities that involve operating your account are also under personal finance.
corporate finance takes a step further, broadening the scope to cater for the finance of a corporation at large. Most times, they break the finances of the corporation down into several portions according to departments. Also, a good example of corporate finance situation is a company trying to raise money. This act could include receiving capital from angel investors, issuing shares on a stock exchange market through IPO or issuing a bond or stock. Furthermore, financial experts mostly guide corporate finance activities.
Public or government finance:
Public or government finance involves policies that affect how a government provides finances for social and economic services. Some examples of these include tax, debt issuance, budgeting, and spending. Also, other responsibilities of the federal government include economic stability, resource allocation, and income distribution, which is secured by different means. Essentially, all these can be summed up in public finance, including the daily operations of different government bodies to create an environment for people to save, enhancing personal finance.
Understanding the different types of finance would help you see things in a new light. All the different aspects work in correlation with one another. In essence, the government’s ability to provide a stable economy determines how easily a corporate organization can raise funds, and consequentially how well you can save or invest your personal money.