Personal Funds

Personal Funds are any funds that you borrow, receive or have as an individual in your own name and not under the business.
Personal Funds
3 min

Personal funds refer to payments received by individuals, whether from earnings or other sources, encompassing wages, pensions, Social Security benefits, and retirement benefits.

In this article, we will look into the concept of personal funds, a crucial aspect of personal finance management. We will start by defining what personal funds are and provide examples to illustrate their diverse forms.

Additionally, we will explore the benefits of maintaining personal funds, emphasizing how they can enhance financial stability and security. To deepen our understanding, we will also compare personal funds with mutual funds, highlighting the key differences between these two financial tools.

By the end of this article, you will have a comprehensive understanding of personal funds and their significance in effective financial planning.

What are personal funds?

Personal funds refers to the borrowing, receiving, or possessing of funds by an individual in their name but not under their business. An individual may self-fund their start-up through their savings. This means no additional costs will be involved, which is a positive. The downside to this is that should the business fail, there will be no reserves to support their day-to-day existence.

Example of personal funds

An example of personal funds could be personal debt, such as mortgaging the family home to a lending institution or bank to raise a loan, taking a second mortgage on it to get funds for a start-up, or simply purchasing equipment or stock or renting premises by using a credit card.

If the individual’s credit rating is good, this can be a relatively simpler way to get the business started, which could be an advantage. They have to efficiently manage their credit card debts by paying them off promptly to avoid attracting high rates of interest on outstanding amounts. Additionally, they should not borrow more than what they can actually afford.

Benefits of personal funds

The most notable benefit of having personal funds is the full control one has over them. This control usually ensures that the business succeeds if it is funded by someone who pays from their own resources. Furthermore, it also implies that they are answerable only to themselves.

When personal funds are involved, the business owner’s determination, focus, and application of innovative approaches increase, especially because their family finances and livelihood are linked to it. Using personal funds also means that there is an added responsibility of checking each operation and function of the business with more care since every rupee is spent from the owner’s pocket. Also, the additional advantage that self-funders get is that no external influence can force the owner to go against their agenda or ethos.

How is a personal fund different from a mutual fund?

A personal fund is different from investing in a mutual fund by virtue of its management and structure. A personal fund’s management is typically by a small group of individuals or a single individual for purposes of personal investment. This enables more control over investment decisions and strategies tailored to risk tolerance and specific goals. Conversely, a mutual fund gathers capital from numerous investors to subsequently invest in diversified asset portfolios, which are managed by professionals.

Mutual funds are characterised by broader diversification and liquidity, but investors have relatively less control over their personal investment choices. While personal funds offer flexibility and customisation, mutual funds emphasise more on professional management and diversification.

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What are not as considered personal funds?

Retirement accounts, such as IRAs or 401(k)s, stocks, and savings accounts, are not personal funds. Individual stocks are directly owned, retirement accounts come with specific tax advantages, and savings accounts offer lower returns and limited investment options.

The following are also not categorised as personal funds:

1. Personal gifts and loans

A personal gift or loan is a financial transaction between two or more individuals and falls outside the sphere of formal investment activity. Gifting is about voluntarily transferring money or assets without any repayment expectation and is often motivated by generosity or personal relationships. On the other hand, a loan entails lending money on the condition that it will be repaid with interest (if required). While both concepts involve interactions based on personal finance, they differ on grounds of legal obligations, intention, and any potential financial implications for the concerned parties.

2. Bank loans used in connection with campaign

Bank loans used for campaigns are funds that political candidates borrow to finance their campaign activities. Such loans are usually taken from commercial banks or other financial institutions. Moreover, they are legally bound to comply with laws for campaign financing and other regulations. Political candidates are eligible to use such loans for travel, advertising, and staffing expenses. The loan terms, including repayment schedules and interest rates, may vary on the creditworthiness of the borrower and the lender's policies. However, they need to be compulsorily disclosed in the reports on campaign financing to ensure accountability and transparency in the overall electoral process.

How do personal funds help an individual?

Personal funds enable individuals to manage their finances according to their preferences and goals. Moreover, they make investment choices more flexible, allowing individuals to tailor their portfolios to match their risk tolerance and investment objectives. Those who possess personal funds can diversify their holdings over several asset classes to reduce their total risk exposure. Furthermore, personal funds also empower individuals to take full control of their finances, along with opportunities for wealth accumulation over the long term and achieve specific financial milestones in their lives.

1. Focus areas of personal finance

Personal finance’s key focus areas are saving, investing, budgeting, debt and risk management, and retirement planning. Budgeting helps prioritise spending and track expenses while saving and regular investing lead to wealth creation. Debt management strategies reduce debt burdens, whereas retirement planning will always ensure financial security post-retirement. On the other hand, risk management protects income and assets against any unforeseen event.

2. Income

Income management is personal finance’s principal focus area and encompasses strategies that optimise revenue sources. The concept includes pursuing opportunities for career advancement, negotiating higher salaries, and generating extra income sources through passive investments or side hustles. Efficient income management also encompasses budgeting for wise allocation of funds, investing in education or skill development to enhance earning potential and saving for both long-term goals and short-term needs. Proactive income management helps individuals enhance their financial stability, build wealth in the long run, and achieve their financial goals to ensure a prosperous future.

Also read about: What is a mutual fund

3. Spending

Spending management is another notable aspect of personal finance and focuses mainly on effective financial resource allocations for meeting goals and needs while maintaining overall financial stability. It means the creation of a budget first and adhering to it, knowing the difference between discretionary purchases and essential expenses, and reducing unnecessary spending. Techniques like negotiating better deals, tracking expenses, and mindful spending can help an individual avoid debt. Individuals can always curb their spending habits, gather more funds for saving and investing, and achieve financial success over the long term by prioritising needs, controlling their impulse purchasing habits, and being frugal in their habits whenever possible.

4. Savings

Savings are also a pillar of personal finance and emphasise the criticality of keeping a portion of a person’s total income to meet future financial goals. Savings also imply the creation and maintenance of an emergency fund to protect against unexpected expenses, along with major purchases or vacations. Moreover, savings play a pivotal role in long-term financial planning, such as education funding or retirement. Techniques such as automated savings contributions, tracking progress on the achievement of savings goals, and optimising interest earnings from high-yield accounts enable individuals to build security and financial resilience over time so that they are always prepared to tackle unforeseen and anticipated expenses.

5. Investing

Investing revolves around the deployment of saved funds in assets with growth potential and subsequent income generation. Strategic decisions on allocating resources across several vehicles of investment like bonds, stocks, real estate, and mutual funds are an integral part of investing to achieve financial objectives over the long term, such as wealth accumulation or retirement planning. Successful investing techniques include asset allocation, diversification, and regularly rebalancing portfolios to mitigate risk and simultaneously optimise returns. A disciplined investing approach helps individuals harness the unique powers of compounding and build capital to secure their future amidst economic uncertainties and market fluctuations.

6. Protection

Protection is again another important facet of personal finance. It encompasses measures to safeguard income, assets, and family members from financial uncertainties and risks. The area includes appropriate and adequate life, health, and disability insurance coverage to tackle financial emergencies arising out of illnesses, accidents, or other unexpected events.

Furthermore, protection also means creating legal documents such as wills, powers of attorney and trusts to ensure proper estate planning and distribution of assets in compliance with the owner’s wishes. Individuals can preserve their wealth, reduce financial vulnerabilities, and be financially secure along with their families should they face uncertainties in life by implementing suitable strategies for risk mitigation and taking appropriate protection measures,


Personal funds refer to money possessed by an individual or borrowed in their name instead of their business. A self-funded start-up with personal savings may eliminate extra costs but leaves no financial cushion should the business fail. Personal funds may also involve incurring personal debt in the form of a mortgaged home or credit card expenses. Personal funding, therefore, requires careful debt management to avoid high interest costs and over-borrowing.

If you are an investor and want to start your investment journey, you can visit the Bajaj Finserv Mutual Fund Platform to learn more about mutual fund schemes. Furthermore, you can utilise the lumpsum calculator and SIP calculator to calculate your financial goals and understand your investment horizon.

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Frequently asked questions

What is a personal fund?

A personal fund may refer to several aspects of a person’s financial situation, including goal-specific savings, emergency savings, overall management of personal finances, and investment portfolios.

What are examples of personal funds?
Examples of personal funds are an emergency fund to tackle unexpected expenses like car repairs, sudden loss of job, or medical emergencies; a vacation fund to finance a vacation or any leisure activity; an education fund for education-related expenses that usually include tuition fees, books, and other educational costs.
What is a personal fund in business?

Personal funds in business are financial contributions that founders or owners make to establish, grow, and sustain the business. These funds comprise the initial capital, cover operating expenses, support expansion efforts, and mitigate financial risks. Such funds are different from external sources of financing, like third-party investments or loans.

What are the components of a fund?

The components of a fund are investors, fund manager, custodian, investment portfolio, net asset value (NAV), expense ratio, distribution, investment objective, investment strategy, regulatory compliance, unitholders or shareholders, and offering document or prospectus.

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Bajaj Finance Limited (“BFL”) is an NBFC offering loans, deposits and third-party wealth management products.

The information contained in this article is for general informational purposes only and does not constitute any financial advice. The content herein has been prepared by BFL on the basis of publicly available information, internal sources and other third-party sources believed to be reliable. However, BFL cannot guarantee the accuracy of such information, assure its completeness, or warrant such information will not be changed. 

This information should not be relied upon as the sole basis for any investment decisions. Hence, User is advised to independently exercise diligence by verifying complete information, including by consulting independent financial experts, if any, and the investor shall be the sole owner of the decision taken, if any, about suitability of the same.