Ayumi P.

Fajardo
BSBA III - FM
PRELIM - Assignment No. 1
Instruction: In three sensible sentences, answer the following questions.

1. Define Personal Finance.

Personal Finance is managing money as an individual or family which helps in
understanding where the money is allotted. Personal Finance is used in budgeting, saving, and
spending money on different types of investments that will secure a person’s future. It is also
used to determine a person’s capability to reach their financial goals and come up with plans that
could help in reaching it as well as improve their finances and their way of approaching money.
2. Why do we need to study personal finance?
As a business administration student, it is important to study personal finance due to the
fact that it is an important part in the day-to-day operation of a business, as well as for the future
finances of the business. It is also a big help in training myself to be more responsible with the
money and use it for things that will help me in the future such as investments or insurances.
Personal finance serves as a guide in making financial decisions to prevent unnecessary
problems and put everything in order; knowing where it goes, how, and why the money is used.
3. List down the principles of personal finance.
There are many principles when it comes to personal finance but the key principles are
prioritization, assessment, and restraint. Prioritization is focusing on what keeps the money flow
while Assessment is the key skill that evaluates potential costs and benefits that may occur.
Restraint is the final skill in which it is the ability to hold back from spending on something that
is irrelevant, increasing the net worth.
4. Enumerate the main areas of personal finance.
There are five areas of personal finance and the first one is income; where everything
begins as it is the cash inflow that will be later on allocated to the other four areas. The second
area is spending which is the cash outflow that fulfills the basic needs of the person, making the
third area savings; the income left after spending as it is usually used for emergencies or
investments. The fourth area is investments where people purchase assets in order to increase the
individual’s money beyond what they invested and the last area is protection where it is also
known as insurance or plans that secure the individual from uncertainties.