Question

For this discussion post:

• Define the term finance, in your own words.
• Describe areas in which you currently make financial decisions.
• Share an example or two of both good and bad financial decisions you have observed.
• Explain how the study of the principles of finance might improve both your professional and personal financial decisions.

Answer 1

In my words finance refers to the management of money. It relates to decisions regarding areas from which money can be obtained and the various areas where money needs to be spent.

I currently make financial decisions as regards the amount of loan that needs to be taken for the Purchase of my car and my car. I also make financial decisions about the level of expenses in my house.

I have made a good financial decision about making maximum down payment for my house and taking minimum loan. This has allowed my monthly expenses to stay in control. I am also mentally free since I have no interest burden on me. But a bad financial decision that I have made is to buy an extravagant car. This was a huge expenditure with no return and a comparatively high loan burden.

The study of the principles of finance will help me to compare different loans offering different rates of interest and different compounding periods to understand the effective rate that is being charged to me. By this study I will be able to select the loan with the least effective rate.