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Financial literacy: 5 Major Types of Finances

Here, we'll study the major types of finances and some details about each of them. Further, there'll be two other money categories, i.e. microfinance and trade finance.

Types of Financing: Personal, Corporate, and Public

Finance plays a significant role in everyone's life today. Everyone, from rags to riches, needs to manage and allocate their funds in the most optimum way possible. Yet, unfortunately, most people in the world are financially illiterate and thus, not good with building money. The first step towards getting money knowledge is understanding the kinds of funds, i.e. personal, corporate, or the public.

Note that a financially literate person would eventually have a lot of money as he knows how it works and how to make it work in favor?

Here, we'll study the major types of finances and some details about each of them. Further, there'll be two other money categories, i.e. microfinance and trade finance.

5 Major Types of Finance

Personal Finance: Personal finance is the management of an individual's funds or money to aid them to achieve their long term objective, whether related to savings or wealth building. Further, the strategies related to personal finance vary from person to person and depend majorly on factors like income, objectives, time, requirements, etc.

It prominently includes spending a sum on assets, education, or other wealth-building resources, where assets would consist of real estate, cars, and other resources consist of life insurances, medical insurances, savings, expense management, etc.

It also includes expenses like retirement planning, family wealth transfer, aid from uncertain, unforeseen events, long term purchases, and many more.

Corporate Finance: Corporate finance is the management of a company's capital structure and expenses. It includes all the activities related to sources of money for the organisation and allocation of that money through suitable channels to raise the resources and value of a firm, thus, financial position. It also emphasises on taking calculated risks and creating manageable opportunities.
Corporate finance majorly consists of:
● Issue of shares during a listing on the exchange.
● Risk management
● Determining the sources of funds, which includes debt, funds, creditors, stock issue, etc.
● Investment & Acquisitions
● Tax considerations

Public Finance: As the name suggests, public finance is related to the management of state, nation, municipality, or any other government needed funds. It consists of all kinds of investments concerning public entities, whether short term or long term. It majorly includes economic stability, income distribution, resource allocation in consideration, and more. The primary sources of funds are taxes and money or loans from insurance companies and banks.

Public finance includes:
● Debt issue for government and public projects.
● Sources of earnings.
● Determining the expenditure and spending needed for entities.
● Tax management.
● Activities related to the budget.

Apart from it, finance is also majorly categorized as microfinance and trade finance.

Trade Finance: Trade Finance is related to the management of business and trades working or facilitating internationally. Exporters and importers should continue overseas trades smoothly by mitigating risks, where ways include requirements of overseas traders.

Micro Finance: Microfinance is primarily meant for those individuals, which includes low-income groups and unemployed people, who are currently not financially able and is also known as micro credit.

So, these were the major types of financing. Note that there are other several kinds of finances in the market too, segregated according to different categories.

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