What is Finance and how does it benefit you? 

By Irel Wong 9/25/2020

What is Finance?

To answer this question in easy and simple terms, finance has to do with everything concerning money and how it’s managed. Well, you probably already know that answer and you are here because you want to learn more about the complexities of finance and how you can use it to your benefit in some way or another. So, to get a little more in depth, finance involves taking an evaluation of all assets, debts, investments, insurance, borrowing potential, goals and plans and then using this assessment to devise strategies for a better outcome. This could be for your personal finances, it could be for a business or it could be for running the government, which leads to the three main areas of finance – Personal, Corporate and Government. Even though they are all intertwined and form a cohesive flow, each area has its level of complexities and challenges depending on how much money is transacting. Because of this, there are many specialized courses and studies dedicated to gaining a deeper understanding about the different aspects of finance. Many people make a career in their study so they can provide expertise and knowledgeable insights to those who need it. 

Financial Services

Services in the financial sector is a broad and wide landscape that involves products and services that you use every day. These services help communities, states and countries access funds, capital, and make transactions beneficial to each other. One example is that a bank may provide a business owner with a loan to help launch the business so that it can be more profitable. In return the business owner pays back the loan with interest that benefits the bank. Government entities sell bonds as a way of raising money to fund different operations and programs. In return, investors who purchase these bonds make money from the interest rate that accompanies them. These are only a few examples of financial services but it’s how individuals, business, government and countries interact with each other and with products and services surrounding money. 

Here is a list of some other products and services that fall under the Finance sector:

• Banks

• Mortgage Lenders

• Insurance companies

• Brokerage Firms

• Investors

• Investment and fund management

There are also many organizations, associations and publishing companies that offer advice, subscriptions and sell financial products. These have grown very popular as people are becoming more involved and knowledgeable about their finances.

Financial Oversight

With the wide field of financial services and products and its potential for wealth accumulation, many have fallen to the lures and traps of so-called investment firms that offer get rich quick schemes. These shady investment firms disguise themselves as reputable, prestigious and qualified operations to get people’s money. The government is aware of this and has set up various organizations and boards to provide oversight and regulation with the intent to protect investors and maintain the integrity of the financial systems. One of these agencies is the SEC (Securities and Exchange Commission) which was founded in 1934. One of the ways in which the SEC governs the industry is to require public companies to disclose meaningful financial and other information to the public. The SEC also oversees participants in the securities world – securities exchanges, brokers and dealers, investment advisors, and mutual funds. If individuals or firms are found to be in violation of securities laws such as fraud, insider trading, and providing false or misleading information about securities, the SEC will bring civil or administrative actions against these offenders. These normally include one or more of these results: heavy monetary penalties, fines, imprisonment, cease and desist orders, suspension and/or revocation. 

Here are some other agencies with financial oversight: 

• FRB (Federal Reserve Board) – The central banking system of the United States of America that has central control of the monetary system.

• FDIC (Federal Deposit Insurance Corporation) – Agency that provides deposit insurance to depositors in U.S. depository institutions.

• CFTC (Commodity Futures Trading Commission) – Agency of the US government that regulates the U.S. derivatives markets.

• CFPB (Consumer Financial Protection Bureau) – Agency of the US government responsible for consumer protection in the financial sector

• OCC (Office of the Comptroller of the Currency) – Established by the National Currency Act of 1863 and serves to charter, regulate, and supervise all national banks and thrift institutions.

• FINRA (Financial Industry Regulatory Authority) – A government-authorized not-for-profit organization that oversees U.S. broker-dealers.

Even though the intent of these agencies is to protect investors, there have been complaints that the US has too many of them compared to other nations. Many financial advisors and fund managers also must meet credentials, designations and provide reporting on a regular basis. Besides this they are required to take continuing education to maintain their licenses and remain in good standing. However, despite these agencies and requirements, individuals and firms still find ways to deceive the public and defraud people out of their hard-earned money. It is always wise to do your own research, background check, and ask for references before committing to any financial transaction with any financial company.

The benefits of finance

Having a broad knowledge of the financial world is key to acquiring and growing wealth. Many people who searched for and acquired insights in this area have used the information to their advantage. Knowing about the right products, services, tools, software programs, strategies, and implementing them strategically can put you in a position to grow your finances over time. 

Many people pay large amounts of money to pay for financial services so that they can acquire wealth. Some do their own research, while others create their own strategies. Financial strategies are unique to individuals, businesses or government entities based on their financial state of being. 

In order to really realize the benefits of finance, consider how you or someone you know have been inconvenienced or disadvantaged because of a lack of financial awareness. Many opportunities have been passed upon and many instances that required financial sense weren’t acted on because of ignorance. Also, failure to invest in your own personal growth or in professional services that surrounds finance can cause you to be at a standstill.

Having a well-rounded understanding of financial concepts, services, insights and knowledge is vital and key to becoming wealthy.

You also benefit from the existing services that financial professionals offer. When you open a checking and savings account at your bank you are benefiting from a financial service. When you get approved for a mortgage loan, when you purchase life insurance, invest in a retirement plan, access your HELOC (Home Equity Line Of Credit), get a credit card, use the service of a Financial Advisor………these are all benefits of finance.

To grow your knowledge in the area of Finance and Investing, check out my top recommendation here!

 I hope you now have a better understanding of what finance is and begin your journey to becoming more financially savvy!