Do you ever find yourself evaluating your financial situation and anticipating your financial future?
Or perhaps, reaching out to finance advisors to help you with wealth management and acquisition of necessary economic skills?
This kind of financial literacy is what Personal Economics is all about. It allows you to bring financial stability and capability to your life.
Furthermore, it helps you to envision the ups and downs you will encounter while handling your personal finances.
Different Elements of Personal Economics
While finance is a major part of Personal Economics, there is so much more to it. Personal economics further encompasses various elements that together help individuals gain knowledge and skills to assist them in solving their financial problems and averting future difficulties.
1. Money and Finance
This section of Personal Economics includes components like managing your money, borrowing, spending, saving, personal life cycle, and making diverse monetary decisions. It basically teaches you how there are different stages within your personal lifecycle, and the ways in which each stage will bring about changes in your expenditure, debt, savings and income. Additionally, they teach you how your needs and wants can possibly influence your cycle, and the stages within.
It is extremely important to understand the fact that your income is a scarce resource which needs to be allocated to your needs and wants efficiently. In doing so, you are required to make a choice and consider the opportunity costs of making that particular decision.
Furthermore, this section helps recognize the significance of budgeting, financial planning, and debt management. These three factors are heavily influenced by changes in personal life cycle. This is because once you begin to understand the link between the three factors, you start making efficient spending, borrowing and saving decisions.
2. The world of work
In this section, you are expected to understand how the working systems function, and why some people work and some don’t. Working is a vital part of the economic activities that take place all around the world where goods and services are produced to satisfy individual wants and needs.
Ultimately, those who work are rewarded accordingly. The reward is usually in monetary terms where a person is paid with money and is also given several other non-monetary benefits.
Those who work also go through the process of specialization in which every worker discovers his area of specialty or expertise, which has its fair share of advantages and disadvantages.
3. National and Global Economy
This area of personal economics deals with economic concepts at the macro level including international trade, exchange rates, and the ways in which the global economy influences the working system.
International trade has to do with main types of imports and exports, and how global trade leads to certain advantages like reduced prices and increased choices of goods for people. On the other hand, exchange rates refer to changes in the values of currencies which, in turn, affects the import and export of goods and services.
Lastly, it shows how globalization affects the labor market, i.e. how it may create employment opportunities in some regions but increases unemployment rates in others.
While personal economics may not seem as personal as the name suggests, it is actually an integrated process where the systems of the world truly affect an individual’s personal decisions!