The financial system is the movement of all money in the world in general: between state and regional budgets, extra-budgetary funds, companies and individuals.
The state budget. It is sometimes called the federal budget or budget fund. This is an annual plan for the collection and use of money for the needs of the country. The state budget funds support the army, build hospitals and schools. The state budget helps to correctly allocate finances, provide for the social needs of the population, control profits from the production of goods and services in the country.
Regional and municipal budgets. These are the finances of the subjects of the state. Some of them go to the state budget, while the other is used for the needs of regions and cities.
extrabudgetary funds. They are formed from mandatory insurance premiums paid by legal entities and individuals.
What fees do IPs pay?
They have a specific purpose: for example, providing the population with medical and social services. Off-budget funds in Russia are a pension fund, a social insurance fund and a compulsory medical insurance fund.
Enterprise finance. This is the money of legal entities that they receive as a result of the sale of goods or services. The finances of enterprises are the main source of state income, therefore, the general financial situation of the country depends on their condition.
Population finance. This is the money of citizens with which they pay for purchases, pay taxes and mandatory insurance premiums.
To avoid crises, it is important to maintain a balance between the budgets of all levels, so the main functions of finance are accumulation and distribution.
What finances are
There are three types of finance according to the form of ownership: state, corporate, public and personal.
State. This is the money of state funds and budgets of different levels: federal, municipal and regional. State finances consist of the country’s budget, gold and foreign exchange reserves, government loans and insurance contributions.
Corporate. This is all the company’s money: revenue, profit, investments and savings, as well as property that can be valued in monetary terms. The main function of corporate finance is to cover business expenses.
Public. Public finance is a concept that unites the money of all non-profit organizations: charitable foundations, political parties and other public associations. Their income is made up of dues, contributions and gifts.
Personal. This is the money of citizens that they receive in the form of salaries, pensions, scholarships or social benefits. People are more likely to live in families, which is why personal finance is commonly referred to as household finance.
Financial management is the redistribution of money. It consists of three elements:
Planning is the selection of goals based on needs, external circumstances and available resources.
Operational management – execution of the plan and making changes to it, if necessary.
Financial control – checking compliance with the plan.
To analyze the movement of money, reports are compiled. Based on them, you can evaluate the effectiveness of investments, make forecasts and plans where to send money.
At the state level, this is done by the government of the Russian Federation, the federal assembly and the presidential apparatus: they approve the budget and accept reports on the targeted use of funds.
A financial manager is in charge of financial management in a company. He draws up annual and quarterly plans, controls all financial transactions, analyzes the company’s income and expenses.
Individuals also manage personal finances. For example, a person receives a salary and must distribute the money for his needs: pay utility bills, make a monthly payment for a bank loan, buy food.
Estimating Finances and Making Forecasts
An assessment of finance is needed to determine the well-being and development prospects of a state or company. To do this, use the audit – analysis of reporting information on income and expenses. The data are compared by periods, that is, they are analyzed in dynamics.
To assess the prospects for the distribution of resources and income, forecasts are made.
For example, Iskra LLC wants to open a branch in a neighboring city. To do this, you need to rent a room and purchase equipment. The total amount of initial expenses is forecasted to be 4 million rubles for the first quarter. Further, the branch should become a plus and begin to provide for itself. Now the company’s net profit is 5 million rubles a month. This means that Iskra will be able to open a branch and maintain it for the first time until it reaches payback.
There are three types of forecasting depending on the period for which the assumptions are made:
- Long-term – from two years.
- Medium-term – from one year to two years.
- Short term – up to one year.
For example, the State Duma made a short-term budget forecast for 2022. According to the forecast, the revenue side will amount to 20.6 trillion rubles, and the expenditure side will be 21.88 trillion rubles. The economy should grow by 3.4%.
Individuals also evaluate finances. To do this, they compare the total amount of income and mandatory expenses. For example, before taking out a mortgage, a family calculates whether their regular income will be enough to cover the mortgage payment and at the same time provide themselves with everything they need: buy food, pay transportation, pay for housing, clothes, entertainment and hobbies.
What is important to remember
Finance refers to the money that is received, saved and used by the state, company or citizen.
Personal finance is the money of citizens that they spend on their own needs.
Managing finances means redistributing money. To do this, you need to correlate income and expenses, draw up a plan on what and how much you need to spend, and, if necessary, make changes to it.