What is Personal Finance?

Becoming wealthy is not a matter of how much you earn, who your parents are, or what you do. it is a matter of managing your money properly.

~ Noel Whittaker

Money might not be everything but it’s definitely something very important. Finance governs our lives and being wealthy and self-sufficient continues to be one of the dreams that many of us crave.
According to Investopedia, finance represents money management and the process of acquiring needed funds.
Oxford Dictionary defines finance as the management of large amounts of money, especially by governments or large companies.
From the above two definitions, one thing is for sure finance has something to do with money or funds(you don’t say!). If you are wondering why an engineer by profession is talking about Personal Finance and why in the first place should you be reading this, you should get an answer by the end of this post. Finance is, without doubt, a very extensive field and that makes it perfectly logical why we have so many professionals studying and analyzing the field. We have many people that manage economies/ finances of big cities and countries, many of them with advanced degrees in finance. Let me ask you this, how many of them are themselves wealthy personally. I am not saying none of them are, but it is interesting to note that an individual that manages the finances of a city/country is not able to do it for himself. There are of course exceptions to this, Warren Buffet has an MS in Economics from Columbia Business School and he is one of the most successful investors the world has ever seen.
This is why Personal Finance is so different, and this is what makes Personal Finance challenging. When it comes to Personal Finance, No one shoe fits everyone and you don’t need any advanced degrees in Finance or Economics to manage your own money.
What you would need is :
1) Patience(discipline ?)
2) Savings(duh !)
3) Willingness to learn (this is where this blog comes in)
Firstly to prove to you that it indeed can be done by anyone, allow me to recite a story that I first read in Morgan Housel’s Psychology of Money. It’s about a gentleman named Ronald Read, he is popularly known as the millionaire janitor. No prizes for guessing why he is still so popular. From a gas station attendant to a janitor and then a multi-millionaire by the time he died. Did he have any specialized education? No. Did he have a huge salary? No. What did he have? I have already answered this question before. It is Patience, Reasonable Savings, and a willingness to learn what you don’t know.
On a related note, let us talk about individuals who win money on game shows or win it through lottery tickets. How many of them maintain that wealth or grow that wealth? Very few if any. Don’t they have enough money, what is the problem here? What they lack however are Patience and knowledge. One such example is of Sushil Kumar who won 5 Crore(50 Million) Rupees on the Indian quiz game show Kaun Banega Crorepati (Who wants to be a millionaire). He lost all the money and his life turned to the worse after he won the money. You can get the details of his unfortunate story in this Indian Express article.
That’s the beauty of Personal Finance, for the most part, it’s a level playing field. None of us, are taught this in school, it is just about when you start your journey towards Financial Independence(FI) and if you want to Retire Early(RE). The earlier you start, the better. Good Financial “hygiene” is all that matters when it comes to money.
Some of the aspects of Personal Finance.
1) Saving Money.
2) Investing(Make your money grow). Read my blog post on the importance of investing for details.
3) Retirement. (Unless you plan to work till you die. Start Planning! )
4) Taxes (If you don’t do it right, prepare to pay a lot more than you have to.)
Each of these and much more will be discussed as we proceed. Stay Tuned.

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