Personal Finance Economics

3 Key excerpts on "Personal Finance Economics"

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  eBook - ePub

  De Gruyter Handbook of Personal Finance

  • John E. Grable, Swarn Chatterjee, John E. Grable, Swarn Chatterjee(Authors)
  • 2022(Publication Date)
  • De Gruyter

    (Publisher)

  Journal of Financial Counseling and Planning presents an interesting example of this situation. This journal is published by the Association for Financial Counseling and Planning Education (AFCPE). AFCPE was established in the early 1990s by researchers who were primarily interested in personal finance research and practice. Although the journal has been published for more than 30 years, it was only recently that the journal was indexed. Because of the relative obscurity of the journal, few outside of the AFCPE membership actively monitor what has been, and is being, published. This lack of review means that what are sometimes considered gaps in the literature may be more akin to holes that remain to be filled.

  Personal Finance in the 21st Century

  This historical sketch leads to today. Before defining personal finance, it is useful to first place personal finance in the context of the modern academy. The goal of those who conduct personal finance research (and of those who provide personal financial services to consumers) is to better understand how individuals and families (and other households) acquire, develop, and allocate financial resources to meet current and future financial needs. According to Schuchardt et al. (2007) , personal finance encompasses the study and use of tools such as financial statements, checking and savings accounts, investment products and strategies, and daily financial management products and services (e.g., management of debt, homeownership, bankruptcy, risk-management techniques, tax planning, retirement planning, special needs planning, and estate planning). The goal of applying personal finance models, tools, and techniques is to improve the financial capabilities, financial literacy, and financial security of individuals and households. In this regard, personal finance differs from household finance, economics, and traditional finance in that these fields of study generally focus on gaining a better understanding of the global macroeconomic and microeconomic environment, market systems, policy, and corporate outcomes. Rather than focus exclusively on consumption patterns, personal finance researchers typically attempt to better understand the determinants of financial well-being at the individual, household, or family unit level.

  Where does this leave personal finance in the 21st century? We believe, in concordance with Schuchardt et al. (2007) , that personal finance is an interdisciplinary field of study, and that the delivery of personal financial services to consumers represents a professional activity. As evidence of this assertion, consider the following definitions: a discipline “has a body of knowledge and seeks to discover new knowledge from within its somewhat rigid borders” (Darling, 1995 , pp. 371–372). Merriam-Webster (n.d.) describes a discipline as a field of study based on one’s education and/or body of knowledge. Although closely related, a profession has a defined body of knowledge that is used to serve people. According to Darling (1995) , “a profession assimilates and utilizes information from both internal and external sources in order to pursue explanations of socially relevant questions that may or may not be capable of solution” (p. 372). A profession can also be viewed as a vocation or calling. Professionals are governed by codes of ethics and strive to provide services with integrity and in a competent manner (Cruess et al., 2004 ). Based on these conceptualizations, and as exemplified historically, personal finance can be viewed as an interdisciplinary field of study and profession (Schuchardt et al., 2007 ), where the body of knowledge in personal finance has been, and continues to be, informed by other disciplines. As illustrated in Figure 1.1

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  eBook - ePub

  A Compassionate Vision for Elementary Social Studies

  A Holistic View

  • Thomas A. Lucey(Author)
  • 2021(Publication Date)
  • Routledge

    (Publisher)

  Economics plays an important role in all aspects of our daily lives – from “macro” systems (such as government policy, supply, demand, and pricing of goods and services) that affect us in big ways, to “micro” economics that deals with individual actions. Personal finance and financial literacy intersect with economics. No matter if we are considering macro- or micro economics, a decision rooted in compassion realizes the importance of the self-identities affected by the decision.

  Our perspectives of economics depend on our worldviews and priorities. The extent to which your life prioritizes love for others (versus greed for yourself) guides your allocation of resources determines your perspective of economic relationships.

  1. Introduction

  Economics also helps us understand some very serious issues in society, especially with respect to economically marginalized or needy children in our schools. Consider, for example, the following facts about needy children, single parents, and homelessness.

  • On a single night in January 2019, 567,715 people were experiencing homelessness – meaning they were sleeping outside or in an emergency shelter or transitional housing program. The highest rates of homelessness are in California, Hawaii, New York, and Oregon (www.endhomelessness.org ).
  • 15 million children received free breakfasts through the National School Breakfast Program in the 2019 to 200 school year, in more than 89,832 schools. This represents an increase from 12.2 million in 2016 to 2017, from 10.5 million in 2011 to 2012 and from 8.0 million in 2006 to 2007 (http://frac.org/wp-content/uploads/school-breakfast-scorecard-2021.pdf ).
  • Of the 11 million families in which children are living in single parent, 77.2% are headed by women and 22.8% by men (US Census Bureau, 2016).

  Keep these statistics in mind as we explore the discipline of economics. Much of what we will learn here applies to your life and everyday wellness.

  2. The Discipline’s Perspective

  Economics is the study of how society produces and distributes goods and services. Economists investigate how individuals, families, businesses, and governments decide how to use their limited resources to meet everyday needs. They also investigate how to make systems of production and distribution work better.

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  eBook - ePub

  Financial Economics

  Empowering Wealth, a Journey Into Financial Economics

  • Fouad Sabry(Author)
  • 2023(Publication Date)
  • One Billion Knowledgeable

    (Publisher)

  Chapter 1: Financial economics

  Financial economics is the subfield of economics characterized by a "focus on monetary activities" in which "money of one form or another is likely to appear on both sides of a trade." It focuses on the interrelationships of financial variables, such as share prices, interest rates, and exchange rates, as opposed to real economy variables. It focuses on asset pricing and corporate finance; the first from the perspective of capital providers, i.e. investors, and the second from the perspective of capital users. Thus, it provides the theoretical foundation for the majority of finance.

  The topic focuses on "the allocation and deployment of economic resources across space and time in an uncertain environment." It focuses on decision-making under uncertainty in the context of financial markets, the resulting economic and financial models and principles, and the derivation of testable or policy-relevant implications from acceptable assumptions. Thus, it also encompasses a formal investigation of the financial markets themselves, including market microstructure and market regulation. Microeconomics and decision theory serve as its foundations.

  Financial econometrics is the subfield of financial economics that uses econometric methods to parameterize the identified relationships. Mathematical finance is related to financial economics in that it derives and expands the mathematical or numerical models proposed by financial economics. In contrast to the microeconomic focus of financial economics, monetary economics is primarily macroeconomic in nature.

  The study of how rational investors would apply decision theory to investment management is the focus of financial economics. Thus, the subject is based on the fundamentals of microeconomics and derives several important conclusions for the application of decision making under uncertainty to financial markets. The fundamental theorem of asset pricing, which provides the conditions for arbitrage-free asset pricing, is derived from the underlying economic logic. The auxiliary formulae yield directly.

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