What Is Finance?

This term may relate to the money management of governments, businesses or individuals.
Laura McMullen
By Laura McMullen 
Edited by Courtney Neidel

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Here’s the simple meaning of finance, according to Webster's New World College Dictionary:

As a noun, finances are “the money resources, income, etc. of a nation, organization, or person.” Or finances may refer to “the managing or science of managing money matters, credit, etc.” That’s a broad topic and short definition — let’s unpack it.

Finance relates to the money of “a nation, organization, or person.” Those terms align with three nuanced types of finance: public or government finance, corporate finance and personal finance.

Types of finance

Here’s a bit more about each type of finance, according to Corporate Finance Institute, which provides online financial analyst certification programs.

Public finance “is the management of a country’s revenue, expenditures, and debt load through various government and quasi-government institutions,” per the CFI website. Components of public finance include tax collection, the government budget and expenditures (like those on social programs and infrastructure).

Corporate finance deals with — you guessed it — corporations, rather than governments. Specifically, corporate finance has to do with how businesses fund themselves and increase their value, according to the CFI website.

Personal finance describes how individuals manage their own money. Personal finance is the process of making money and saving it, as well as building wealth and protecting assets. (Learn about what are considered assets.)

Personal finance helps people control their lives. Take saving money, for example. With money set aside, individuals are in better shape to pay for emergency expenses and take career risks.

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Make the most of your money

Now that you know the simple meaning of finance, consider your own money and how you can make the most of it. If that task sounds overwhelming, start with a baseline. Track your expenses so you understand how much you spend on what. Or consider trying a free budget app. This kind of tool typically connects with your financial accounts to track incoming and outgoing money and provide insights.

Once you get comfortable examining your cash flow, start setting money goals. These could include creating a budget, building an emergency fund, saving for retirement and paying off debt.

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