“Don’t tell me where your priorities are. Show me where you spend your money and I’ll tell you what they are.”
James W. Frick
Finance is the practice of earning, growing and spending money.
You create your future through capital, whether it’s human, cash or something else. This site focuses on personal finance for fathers, partners and kids. However, we also discuss the components of corporate finance and international finance.
They share similar goals, challenges, histories, models, formulas and philosophies. Each requires the critical understanding of assumptions, like risk and return; critical statements, like balance sheets (Assets, Liabilities and Equity); and are often influenced by “the market” which is basically anywhere exchanges happen, though most people just think about the stock market. In essence, however, it’s just the management and planning of money.
Personal Finance
Personal finance is basically the management of income, cash outflow, equity, investments and budgeting. In looking at personal finance for fathers, start with income. This is money coming into our possession and it’s important to track when that transaction takes place and where we are diverting that money (e.g. checking account). It is very important also to look at where that money flows out from our possession (e.g. mortgage or rent).
Another important aspect of personal finance for fathers is equity. This is a great time to talk about the most important accounting equation: Assets = Liabilities + Equity.
We can easily flip this to figure out that Equity = Assets – Liabilities. We often think about this with our line of home equity, but it also applies to researching companies to invest in or even a car loan.
Investments are moneys diverted from our pockets now (at a cost) which is typically placed in a compounding vehicle that allows us funds to accrue until they’re removed for us to improve the lives of our family in the future. This could include investments in your 401k at work, the stock market or into your own business.
Finally, good personal finance for fathers is to budget with intention with a slashing eye on superfluous expenses. Do you need the full DirectTV package? Or would you set your family up for success by downgrading and using your extra income to open a 529 account for your kiddo?
There are many levers in corporate finance and international finance that can be pulled to improve personal finance.
Corporate Finance
Per the good folks at Investopedia: Corporate finance is the division of finance that deals with how corporations deal with funding sources, capital structuring, and investment decisions. Firms of all types use this type of finance to run their business, whether it be a sole proprietorship, LLC or partnership. Now, corporations like those which trade on stock markets – such as the NYSE (think Apple and Home Depot) or NASDAQ (like Airbnb and Tesla) – use corporate finance differently. To put it simply, they adhere to a different set of rules to manage their Assets, Liabilities and Equity, as well as their cash flows (shared in a Statement of Cash Flows). Still, their primary goal is to allocate funds, make investments and grow their business. They also adhere to particular laws that individuals and other firms, like LLCs, do not have to follow. Corporations are run by Directors, Managers and Shareholders who constantly make investment decisions, evaluate risks and returns, use methods like discounted cash flows and tools like excel models, while leveraging marketing insight and information.
International Finance
Taking on the world one dollar/yen/peso/lira/etc. at a time. Doing business across borders requires much more consideration of international factors that can affect Assets, Liabilities, Equity, cash flows, capital and operational expenses – to name a few. International finance actually affects almost every market, business and product whether they do business with other countries or not. A lot of considerations in international finance include foreign exchange markets, valuation of companies and risk – including political and informational. Each country essentially plays by a different set of rules (think about nationalization of oil in Venezuela vs. privatization in the USA). They all mostly use different accounting methods, too. There is some involvement from the International Monetary Fund (IMF) which tries to help out countries, business and citizens around the world.
Definitions of Finance
Finance (noun) fi·nance | \ fə-ˈnan(t)s , ˈfī-ˌnan(t)s, fī-ˈnan(t)s
- Money or other liquid resources of a government, business, group, or individual
- The system that includes the circulation of money, the granting of credit, the making of investments, and the provision of banking facilities
- The science or study of the management of funds
- The obtaining of funds or capital
Finance (verb) fi·nance | \ fə-ˈnan(t)s , ˈfī-ˌnan(t)s, fī-ˈnan(t)s
- To raise or provide funds or capital
- To furnish with necessary funds
- To sell something to on credit
