What is personal finance?

Personal finance is a term used to cover the management of your money, including saving and investing. It also entails budgeting, banking, insurance, mortgages, investments, taxes, retirement planning, and estate planning. Overall, it encompasses how you develop a plan to make the most of your income and savings, so you can achieve your financial goals and dreams.

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Why is personal finance important?

Understanding your personal finances helps you to manage your money so you can live the lifestyle you want, now and for years to come. With proper planning, you can maximize your income for goals like saving for retirement, buying a home, or saving for your child’s college education. It can also give you personal insights about your current relationship with money and show you steps to improve it.


The five areas of personal finance

These are the five areas that are critical to shaping your personal financial planning:

1.  Income

Income is the money you earn from your job or from other sources, like investments and dividends. It is the entire amount of cash inflow that you receive from all sources.

2. Spending

This is the money you spend on things like rent, mortgage, groceries, hobbies, travel, and entertainment. Keeping track of spending can help you avoid overspending and reduce the likelihood of accumulating debt.

3. Savings

This is the money left over after you calculate spending. You can set aside these funds for emergencies or for large future purchases, such as a down payment on a house. If you strive to save regularly, you can prepare for times when your income and spending may fluctuate.

4. Investing

Investing involves purchasing assets—usually stocks, bonds, mutual funds, and other investments—with the goal of earning a return on investment by taking on some risks and growing your wealth over time.

5. Protection

This refers to the insurance policies you have in place to protect yourself, your loved ones, and your assets from unexpected events (such as accidents, illnesses, and natural disasters). Protection solutions include life insurance, health insurance, estate planning, and retirement planning.


Personal finance services

These New York Life products and services can help you manage and grow what you’ve worked hard to build.

Wealth management

Financial advisors in our wealth management subsidiary, Eagle Strategies LLC, can help you select an investment program that’s right for you with customized solutions centered around your individual needs, risk tolerance, and time horizon. Investment programs include the fund advisory program (a mix of mutual funds designed to meet your investment goals), the rep-directed program (a customized portfolio of mutual funds, exchange-traded funds, and individual securities), separately managed accounts (accounts created by investment managers using customized tax strategies), and unified managed accounts (accounts that combine multiple programs and strategies).


In retirement, it’s important to think beyond accumulating assets and to understand how a stream of income can provide you with freedom and stability. Building a portfolio now to help you generate the income you need later can protect you and the lifestyle of your loved ones. Many people who are planning for retirement annuities, long-term care, and life insurance to address their financial needs.

Estate planning

Estate planning allows you to plan now so your wishes will be fulfilled later. It can also help protect your family’s finances while you’re alive and after you pass away.


We have a variety of investment solutions to help you reach your savings goals. Whether it’s saving for retirement, saving for a new home, or planning for your child’s college expenses, we can help you develop a clear investment strategy.*


While everyone can benefit from life insurance, you may want to consider one type more than another, depending on where you are at this point in your life. You can work with a New York Life financial professional to figure out which type of life insurance is right for you.


Personal finance strategies

Here are some personal finance best practices and tips that you can take to get your financial house in order:

Establish an emergency fund

It’s important to save at least six to eight months of living expenses and keep it someplace safe and accessible. If you’re having trouble getting started, you can automate the process by having your bank transfer money on a regular basis from your checking account to your savings account. In most cases, there's no cost for this service, and you can start with as little as $25 a month.

Protect your most important asset

Since your income potential is probably your greatest asset, be sure to protect it with life, health, and, possibly, disability insurance. That way, if something unfortunate happens during your prime earning years, you and your loved ones will be financially protected.

A couple sitting at a table reviewing paperwork with an agent.

Accept an employer’s 401(k) match

If your employer offers a 401(k) match, be sure to contribute at least enough to qualify for the full match. Typically, companies will match anywhere from 1% to 6% of employee contributions, which is money for the taking. Best of all, any money you contribute will be deducted pretax from your paycheck. You may also be able to build in automatic increases, so the percentage you contribute goes up every time you get a raise.

Prioritize and eliminate debt

While there can be good reasons for taking on debt (like buying a house), the sooner all debts are discharged, the better off you will be. That's why it’s important to look at any debt you have, such as credit cards, car loans, mortgages, and student loans, and eliminate those with the least favorable terms. Credit cards are often a good place to start, since the interest rates they charge can range anywhere from 10% to 24%. Plus, unlike the interest on home mortgages or student loans, the interest on credit cards is not tax deductible.

Take advantage of tax-efficient tools

Better management of your financial strategies is one of the easiest and most effective ways to improve your financial health. Also, there are a host of tools out there that you can use to manage your tax burden and to help you prepare for upcoming milestone events.

For example, if you want to save for retirement, you can investigate IRAs (traditional or Roth), 401(k)s, and tax-deferred annuities. For those interested in helping a loved one pay for college, 529 college savings plans can be an excellent option, or you may want to consider a whole life insurance policy to protect your loved ones if the unforeseen happens. The cash value within a whole life insurance policy accumulates tax deferred and can be accessed during your lifetime, generally income tax free.1

Our financial professionals can help you in managing your personal finances.


Personal Finance FAQs

Personal finance is the process of planning and managing your individual or household finances to achieve your financial goals. It includes reducing debt, reducing reliance on credit cards, saving for retirement, building emergency savings, and avoiding impulse buys.

The five components of personal finance are income, spending, savings, investing, and protection.

Examples of personal finance include planning your monthly spending, balancing your checking account, setting up direct deposit for an IRA, and using cash to pay for expenses like groceries, so you don’t overspend.

Personal finance is about knowing the best ways to manage your finances and becoming more financially disciplined, so you’re able to meet the financial goals you set for yourself—from saving for retirement to paying off credit card and student loan debt.

Cash flow management is a particularly important aspect of personal finance. Knowing how much money you have coming in from all sources, and where every dollar goes, will help you follow through on the financial priorities you set.


Want to learn more about financial solutions?

A New York Life financial professional can help determine what’s right for you?

*Investments are offered by properly licensed Registered Representatives of NYLIFE Securities LLC (Member FINRA/SIPC), a Licensed Insurance Agency and a New York Life Company.

1Accessing cash value will reduce the death benefit and available cash surrender value.