Income vs. Expenses
Income items are connected with operational Expenses through the company's income statement, although both concepts are different. Revenue report is a report that you review to determine what happens in the company's records in front of profitability.
When income is more than the Expenses, there is a budget surplus The situation is sustainable and remains financially feasible. You can choose to reduce income with, say, work less. More likely, you will use a surplus in one of two ways: consume more or save it. If consumed, income is lost, even though you might enjoy it. However, if saved, income can be saved, maybe in piggy banks or cake jars, and use later. A more profitable way to dive is to invest it in a certain way in a bank account, lend it with interests, or exchange it with assets, such as stocks or bonds or real estate. The method of savings is how to sell your excess capital in the capital market to increase your wealth.
Opportunity Expenses and sinking Expenses
There are two other important types of Expenses than the Expenses that affect your financial life. Suppose you can buy a new jacket or new boots, but not both, because your resources - income you can use to buy clothes - are limited. If you buy a jacket, you also can't buy boots. Don't get boots is the Expenses of buying a jacket; This is a fee for sacrificing your next best choice.
In personal finance, there are always opportunity Expenses. You always want to make choices that will create more value than Expenses, and so you always want the Expenses of opportunity to be less than the benefits of trading. You buy a jacket instead of boots because you decide that having a jacket will bring more benefits than the Expenses does not have boots. You believe your benefits will be greater than the Expenses of your opportunity.
In personal finance, opportunity Expenses affect not only consumption decisions but also financing decisions, such as whether to borrow or pay cash. Loans have a clear Expenses, while paying with your own cash or savings. However, using your cash does have opportunity Expenses. You lose any interest you have on your savings, and you lose liquidity - that is, if you need cash for something else, like a better or emergency choice, you no longer have it and even have to borrow it at a more Expenses tall.
When buyers and sellers make choices, they weigh opportunity Expenses, and sometimes regret them, especially when the benefits of trade disappointing. Regret can color future choices. Sometimes regret can make us not recognize the sinking Expenses.
The Expenses of sank is the Expenses spent; That is, whatever resources you trade are lost, and there is no way to recover it. Decisions can be made only for the future not about the past. Trade, when it's over, ends and is done, so it recognizes that the Expenses of sinking is truly sinking can help you make a better decision.
For example, the money you spend for your jacket is a sinking Expenses. If the snow goes down next week and you decide to really need boots, the money is gone, and you can't use it to buy boots. If you really want boots, you have to find another way to pay for it.
Unlike price labels, opportunity Expenses are not clear. You tend to focus on what you get in trade, not on what you don't get. This tendency is a cheerful aspect of human nature, but can be a weakness in a type of strategic decision making that is very important in financial planning. Human nature can also make you focus too much on the Expenses of sinking, but all anxiety or regret in the world cannot change past decisions. Learning to recognize the Expenses of Sunk is important in making good financial decisions.
Budget
The budget is an action plan to balance your expenses with your income. It is usually displayed as a table of income items in one column and expenditure items in the other. The last line of the budget shows the difference between income and expenses. When income exceeds expenses (your income is more than your expenses), it is called a surplus. When expenses exceed income (your expenses are more than your income) then it is called a deficit or deficiency.
Personal income is the money paid to you, or who comes to yours or bank account. Income can be paid to you in the form of salary or wages for the work done, and it ranges from gifts or pocket money (eg your parents) for drinking or loans, savings, interest obtained with your savings
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