5 types of finances and tips for good management

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5 types of finances and tips for good management

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Financial education is essential to contain unnecessary expenses, avoid losses and debts – as well as requesting expensive loans – to your assets. And that goes for both the personal and the corporate aspect. Even so, there are several types of finance.

Although the concept of finance applies to all of them in a similar way, the relationship of people with income and the comparison with periodic expenses, mean that we have to deal in a strategic and individualized way.

To understand a little more about this, we have prepared this post to explain the main types of finance:

  • Personal finances;
  • Behavioral finance;
  • Experimental finance;
  • Public finances;
  • Corporate (or corporate) finance.

In addition, we will explore the differences between them and even offer some tips for you to learn everything about finance management.

Good reading!

What is finance?

Finance is a term that has consolidated itself as a proposal to define money that circulates around the world. Historically, the concept of finance (from the French term finance) has been linked to state assets and possessions.

But over the years, that view has changed and the money no longer necessarily has to come from the state. It can also be seen from the monetary movement between companies and individuals.

But, as we advanced in the introduction of this post, this segmented idea raised questions that embark on the individuality of each issue. For example: your home economics actions are not the same as necessary for the CEO of a company to keep its financial area up to date.

Then came the types of finance that we will talk about in the next topic!

What are the main types of finance?

If finance, on the one hand, is a broad term, we can branch out the concept based on its specificities. Understand the differences between each of the types of finance:

1. Personal finance

All types of property, income and financial commitments of an individual are translated into personal finances. Not only that, but your financial organization over time to deal with the relationship between expenses and the budget in a more qualitative way.

Therefore, it is important to deal with personal finance management in a planned manner. Without discipline, we lose the monthly battle against the bills (fixed and variable), which implies an increase in debts and also the level of financial stress you deal with.

Personal Finance Management Tips

Here are some tips for you to plan your personal finances and have a much safer and protected routine:

  • map your income and expenses;
  • calculate ways to balance the accounts so that you have some income left over at the end of the month;
  • have a personal financial planning that consists of the first two tips above and also the composition of financial goals and objectives. In other words: short, medium and long term achievements that help to save more and improve the economic situation of your family;
  • cut superfluous and unnecessary costs. Assess where your monthly income is being directed and start disciplining yourself about those expenses that only negatively impact the budget;
  • create an emergency reserve. Through it, you protect yourself against unforeseen events (such as urgent medical expenses) and do not affect everyday expenses;
  • if you have overdue accounts, seek creditors to renegotiate debts. Calculate a means of payment that will ease the burden of accrued interest and fines and allow you to reach the end of the month without further defaults;
  • still in this sense, avoid the use of credit cards and overdraft. The first can create a false sense of extra income, while the second has one of the highest interest rates in the world;
  • if possible, dedicate a little (as little as possible) of your income to some type of investment. Through this habit, you build an equity that you will continuously monetize.

It may seem like a lot, but realize that these are situations already inserted in your routine. The challenge is to change habits in order to make your relationship with money much more profitable and less conflicting.

2. Behavioral finance

Among the types of finance, behavioral finance is the one that defines the strategic orientations and visions of investors and economic agents in general. For example: decisions made that help to leverage certain types of investments to the detriment of others.

In addition, it explores the entire financial market better. This helps to assess the sector's problems and solutions. A financial crisis can be quickly diagnosed (who knows, prevented) and resolved when people are constantly evaluating the numbers.

Speaking of the sector that moves a large part of the global economy, we have another very complete post that talks about everything you ever wanted to know about the financial market: ‘What is the financial market: how does it work and how do you participate?'. Take the opportunity to leave this reading ready as soon as you finish this article!

3. Experimental finance

The experimental finance segment theoretically assesses market conditions and the entire scenario that directly and indirectly influences finance. The academic sector is one of the most concerned with the issues of these types of finance.

Through this work, researchers simulate situations and establish projections to check the results of these actions. As a consequence, it is easier to predict the impacts of all types of economic situations (micro and macro).

4. Public finances

This is one of the types of finance that most interest the population, since it translates into the financial management of the State.

It is through this work that budgets are established, money is distributed and all types of government action are converted into measures of general development for the nation. This also includes the application and adjustment and adjustment of taxes.

5. Corporate (or corporate) finance

Going into corporate day-to-day business, corporate finance is a reflection of all kinds of economic actions that an organization does.

With this, you can improve profits, reduce (and eradicate) losses, compose the institution's financial planning, organize the budget, invest in other areas and products, deal with cash flow, pay taxes and fees etc. .

In other words: all kinds of financial obligations that arise in the daily lives of professionals in the sector. It is not by chance that there are specialists of all kinds within this segment of activity to ensure that companies anticipate problems and obtain continuously better financial results.

Business finance tips

For those who think that this, among all types of finance, is one of those that have more to do with your current needs, take the opportunity to take a look at the tips that we have separated to improve your organization's relationship with finance:

  • maintain full control of the company's financial health through reports, financial management, budgets (and full control of them);
  • monitoring the inflows and outflows and the entire cash flow of the organization;
  • separation of your personal and corporate accounts;
  • set up an emergency fund. As with personal finances, the emergency fund is essential for many organizations to avoid precipitated bankruptcy in the face of any crisis that appears on the horizon;
  • have a business financial planning. With it, everyone in the company knows about the limitations, ambitions and also the step by step to achieve each of its goals;
  • control spending and keep payments on time. Something fundamental (although it seems obvious) to avoid the accumulation of debts and, with this, serious aggravations in the financial health of your business.

Nowadays, there is no lack of digital solutions that help automate many processes and favor financial control through agile and monitored reports in real time (and integrated with other areas).

So, regardless of what types of finances we are talking about, your company can boast of having full control of how your economic day-to-day is.

It is worth mentioning that corporate finance is an elementary part of your business. Whether for companies in any sector of activity and regardless of their size. Value this work and give it the importance it requires to maintain and improve the financial health of your enterprise.

Help employees not to get into debt and work better

Now that you know the main types of finance that most circulate in our society today, you can implement new efforts to optimize your company's financial area.

In addition to business results, your team of employees can improve their relationship with money through a simple and efficient solution: salary on demand.

Get to know the HR Consultant UKy tool and learn how the system that implements payment on demand works, that is, employees of a company can anticipate part of their salaries when they need it.

This tool is changing the way employees deal with their wages and generating more job satisfaction and motivation.

HR Consultant UKy can be one of the most valued benefits for those who work at your company. Talk to an expert and find out more!

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