When looking at personal finance it is important to draw the parallels between the household and business finances. Both of these environments rely heavily on maximizing income and minimizing expenses.
As within a corporation we make investments as we move forward in the personal business of running our households. One thing that most of us do is accumulated assets when we are in periods of prosperity and we end up with a budget surplus. Our text defines a budget surplus as being “when income for a period is greater than expenses” (Siegel & Yacht 2009). It is when we avoid budget deficits and have a surplus in our budget where we can invest in things like real estate, natural resources and stocks.
There are times where there are opportunities to invest in something and we do not have enough cash to meet the minimum capital investment to take advantage of the opportunity. It is in these times that we must weigh the benefits and risks involved with borrowing capital to acquire the asset. People do this all the time when they take out a …show more content…
When looking at homes, one could rent rather than taking out a mortgage. On the other hand if the home has a good chance of increasing in value it might make sense to invest in owning the home via a mortgage. The other thing to consider would be the interest rates attached to the loan. It would be a good idea to factor in the cost of interest, taxes, insurance and appreciation/depreciation when making the decision.
There will always be unknowns when acquiring an asset. For example home owners in Flint Michigan had no idea that there water supply would become toxic prior to purchasing their homes. I think the best thing when making an investment is to research the asset as much as possible and moving forward only if the outlook for the future is
As within a corporation we make investments as we move forward in the personal business of running our households. One thing that most of us do is accumulated assets when we are in periods of prosperity and we end up with a budget surplus. Our text defines a budget surplus as being “when income for a period is greater than expenses” (Siegel & Yacht 2009). It is when we avoid budget deficits and have a surplus in our budget where we can invest in things like real estate, natural resources and stocks.
There are times where there are opportunities to invest in something and we do not have enough cash to meet the minimum capital investment to take advantage of the opportunity. It is in these times that we must weigh the benefits and risks involved with borrowing capital to acquire the asset. People do this all the time when they take out a …show more content…
When looking at homes, one could rent rather than taking out a mortgage. On the other hand if the home has a good chance of increasing in value it might make sense to invest in owning the home via a mortgage. The other thing to consider would be the interest rates attached to the loan. It would be a good idea to factor in the cost of interest, taxes, insurance and appreciation/depreciation when making the decision.
There will always be unknowns when acquiring an asset. For example home owners in Flint Michigan had no idea that there water supply would become toxic prior to purchasing their homes. I think the best thing when making an investment is to research the asset as much as possible and moving forward only if the outlook for the future is