Personal finance means the careful management of one’s money and financial resources. It involves how an individual earns, spends, saves, invests, and plans for future financial needs.

In simple terms, it is the way a person controls income and expenses to achieve financial security and meet personal goals.

It helps you to make wise financial decisions, avoid waste, and prepare for emergencies or future needs.

1. It helps you to control spending and avoid waste.


2. It helps you to save money for future needs.


3. It helps you to plan and achieve financial goals.


4. It helps you to avoid unnecessary debt.


5. It helps you to prepare for emergencies such as sickness or loss of job.


6. It helps you to make informed financial decisions.


7. It helps you to live within your income.


8. It helps you to achieve financial independence and stability.

Personal income is the money an individual receives from various sources.

Main sources include:

1. Wages and salaries – payment from employment or work done.


2. Profits – earnings from business activities.


3. Interest – income from savings or lending money.


4. Rent – money received from renting property or land.


5. Dividends – payments received from owning shares in companies.


6. Gifts and donations – money given freely by others.


7. Pensions – money received after retirement.


8. Allowances – money given by parents, guardians, or employers.

After receiving income, individuals use it for different purposes.

Uses include:

1. Feeding and clothing.


2. Shelter (rent or building a house).


3. Education.


4. Transportation.


5. Health care and medication.


6. Savings and investment.


7. Entertainment and leisure.


8. Payment of bills and taxes.

A budget is a financial plan that shows how expected income will be spent over a period of time (usually monthly or yearly).

It helps you to ensure that your expenses do not exceed your income.

Formula:

Income − Expenditure = Savings or Deficit

If income is more than expenditure, there is savings.
If expenditure is more than income, there is a deficit.

1. List all sources of income.


2. List all expected expenses (needs and wants).


3. Group expenses into essential (needs) and non-essential (wants).


4. Compare total income with total expenses.


5. Adjust spending to ensure income covers all expenses.


6. Save the balance for future use or emergencies.

1. It helps you to plan and control spending.


2. It helps you to avoid waste and overspending.


3. It helps you to identify priorities and needs.


4. It helps you to promote saving and investment.


5. It helps you to track income and expenses.


6. It helps you to avoid debt and financial stress.

Meaning of Saving

Saving means keeping part of one’s income that is not spent for future use. It is the act of setting aside money to meet future needs or emergencies.

Ways to save money include:

1. Keeping money in a bank or microfinance institution.


2. Joining a cooperative society or thrift group.


3. Using a piggy bank (kolo) at home.


4. Buying shares or bonds.

1. It helps you to meet future needs.


2. It helps you to provide for emergencies.


3. It helps you to start or expand a business.


4. It helps you to earn interest on your money.


5. It helps you to achieve financial independence.


6. It helps you to avoid borrowing unnecessarily.

Investment means using money to buy assets or items that will generate income or increase in value over time. It is a way of making money work for you.

Examples of investment:

1. Buying shares in companies.


2. Buying land or buildings.


3. Starting a business.


4. Purchasing bonds or treasury bills.

Saving	Investment
Saving means keeping money for future use.	Investment means using money to acquire assets that will bring more money.
It involves low risk.	It involves higher risk.
The money is usually kept in a bank or thrift box.	The money is used to buy shares, land, or start a business.
The return is usually small (interest).	The return is usually higher (profit or dividends).

1. Low income or unemployment.


2. High cost of living.


3. Lack of financial discipline.


4. Ignorance about saving and investment.


5. Fear of loss or fraud.


6. Too many responsibilities or debts.

Personal financial planning means creating a long-term plan for how to earn, spend, save, and invest money wisely.

It helps you to:

1. Achieve financial goals like buying a car or house.


2. Prepare for retirement.


3. Avoid unnecessary debt.


4. Build financial security and peace of mind.


5. Live a comfortable and responsible life.

Consumption means the use of goods and services to satisfy needs and wants. For example, eating food, wearing clothes, or using a phone are all forms of consumption.

Choice means the act of selecting one need or want from several alternatives because of limited resources (especially money). Since human wants are many but resources are few, individuals must make wise choices.

Example:
If you have ₦1,000 and you can only buy either a pen or a notebook, you must choose one — that is choice in action.

Scale of Preference

A scale of preference is a list of a person’s needs and wants arranged in order of their importance or priority.

It helps you to decide which needs to satisfy first when your income is limited.

Example:

Items	Priority
Food	1st
School fees	2nd
Transport	3rd
Clothing	4th
Entertainment	5th

By arranging needs this way, you can spend your money on the most important items first.

Modesty means being simple, moderate, and not wasteful in appearance, behaviour, and spending. It shows contentment with what one has and avoiding pride, extravagance, or show-off.

In personal finance, modesty means spending wisely and living within your income.

Attributes of modesty are qualities that show a person is simple and disciplined in life.

Examples include:

1. Simplicity – not being proud or boastful.


2. Contentment – being satisfied with what you have.


3. Self-control – avoiding unnecessary spending.


4. Humility – respecting others and not showing off wealth.


5. Discipline – following a budget and avoiding waste.


6. Patience – waiting for the right time to buy things.

Living modestly has many positive effects, such as:

1. It helps you to avoid debt and waste.


2. It helps you to save money for important needs.


3. It helps you to gain self-respect and good reputation.


4. It helps you to develop good financial habits.


5. It helps you to live peacefully without envy or competition.


6. It helps you to achieve financial stability.

Modesty and extravagance are opposite habits.

Modesty	Extravagance
Modesty means being simple and avoiding waste.	Extravagance means spending carelessly and showing off.
A modest person lives within his or her income.	An extravagant person spends more than he or she earns.
Modesty leads to saving and financial growth.	Extravagance leads to debt and financial problems.
Modest people are respected and trusted.	Extravagant people are often careless and irresponsible.

Therefore, modesty helps individuals to manage personal finance wisely, while extravagance destroys good financial planning.

---

Summary

Personal finance involves the proper management of income, spending, saving, and investment. It helps you to live within your means, avoid debt, and prepare for the future. Every individual must plan how to use money wisely through budgeting, saving, and investing, to achieve financial security and independence.