The types of finance are then the subdivisions of the science that analyzes the way in which economic agents make their spending, saving and investment decisions.
In finance four areas can be distinguished, which we will explain below.
Table of Contents
Corporate finance is dedicated to studying the way in which companies obtain and manage their resources. Thus, they cover several thematic areas such as the following:
- Project evaluation.
- Decide between reinvesting the earnings or distributing them as dividends.
- Compare financing alternatives, based on the term of the credit, the interest rate and other conditions,
- Define the level of financing with own resources and with third-party resources.
Personal finance studies how individuals or families obtain income and/or financing and manage these resources. Some of the topics it covers are:
- The choice of professional career, depending on the expected profitability.
- Income management, deciding how much can be used for savings.
- Loan decisions, such as obtaining mortgage or vehicle loans.
- Investment decisions, for example, in mutual funds, stock indices, company shares, or starting a business.
Public finance studies how the State captures resources and how it spends or invests them. Among his areas of interest we can highlight:
- Tax collection.
- Evaluation of projects or public works.
- Preparation of the public budget, determining the level of fiscal surplus or deficit. In the latter case, a financing mechanism such as the issuance of bonds would have to be sought.
International finance studies the financial operations that take place at a global level. They are dedicated to the study of the following topics:
- Financing abroad (when a company or the Government seeks credit in another country).
- The effects of the exchange rate variation on the performance of financial instruments.
- Movements of capital from one country to another.
- Risks of investing in a certain country, for example, depending on the political situation or its macroeconomic indicators.
Use Of Credits
This is another of the basics of personal finance. They are a good economic tool to solve liquidity, but you have to know how to handle them. For example, the interest rate on a payroll loan is not the same as that on a mortgage loan or a credit card. You have to inform yourself before using them!
Did you think that salary is the only source of money? The truth is that there are several types of income. Most are governed by the different types of currency (pesos, dollars, euros, etc.), but exchanges of species are also included. To distribute them correctly, the ideal is that you start putting together your own budgets and understand what assets make up your income.
As with income, there are several types of expenses in this financial classification. The most feared are micro-expenses, also known as “ant expenses”. They are the small consumptions that you make in a period of time and when you add them up they can affect your finances.
An excellent way to combat them is to keep a daily record, either manually with a monthly expense calculator or with one of the best personal finance apps.