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Finance

An Overview of the Different Aspects of Finance

Finance is a broad term encompassing many things about the financial management, development, and assessment of funds and investments. In particular, it deals specifically with the issues of why and how an individual, firm or governmental entity obtains the funds required for their activities, called capital within the business context. Finance can be taught and learned, but most people tend to take it upon themselves to either acquire a college degree in finance, master a trade or get an internship and spend years learning the ropes through reading books and taking courses. The latter is a great option, especially if you have the time and/or resources. However, for most people the traditional, classroom-based way of learning about finance isn’t enough.

Fortunately, today there are numerous options through which an individual or small business can learn about and practice fiscal responsibility. Some popular and readily available online finance courses focus on investing and managing money; others teach the more practical aspects of keeping finances healthy. Still others provide a basic understanding of how markets operate, and how managing money affects those markets. While these programs offer excellent preparation materials, they typically lack in depth or in-depth analysis of specific topics such as government debt, business financing, investment banking, venture capital, mortgage-backed securities, derivatives, and personal investments (such as 401(k) s and mutual funds). For most individuals and small businesses, this is not enough.

There are also many excellent sources for learning more about government debt and corporate finance. Government debt refers to obligations of the federal government toward major projects such as bridges, highways, buildings, and utilities. Examples include the Medicare, Medicaid, and Social Security programs. Corporations, like those found in the private sector, are required by law to meet certain minimum standards related to investing, lending, and insuring their own accounts. Most corporate finance programs also deal with a variety of other financial institutions, including bank loans, credit facilities, corporate bonds, investment securities, real estate and partnerships.

One type of financial service that is more directly related to finance is financial planning. Financial planning can be used to establish long-term goals and to create preventative measures. Financial planning can also be used to implement changes in a company’s budget to increase profitability. There are many different types of financial management that fall under the broader field of finance, including financial statement preparation, investment management, and financial analysis. While these are all important, all of them deal with one component of the overall financial services industry.

Finally, there are a number of different types of financial institutions, each of which has its own distinct focus and methodology. Private financial institutions make loans, investments, and advances to other people or corporations. Public financial institutions handle money from the government for different purposes, including deficits and investments in education and infrastructure. Governmental financial institutions are generally considered to be more stable and reputable than private institutions when it comes to dealing with complicated financial issues, such as investments and financing.

The field of behavioral finance is beginning to look more closely at the processes behind financial decisions instead of the results. Behavioral finance aims to understand the behavior of people based on past financial decisions, in order to better understand how certain financial decisions might affect future decisions. By doing so, the discipline helps individuals to take control of their own finances. For example, by examining customer choices regarding interest rates, consumers can gain a greater understanding of how to effectively negotiate the best interest rate possible for their loans, mortgages, credit cards, etc.

Author

Peter Conley

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