1. Summary of ‘The Personal Financial Planning Process’
• The purposes
• The Benefits
Most people want to handle their finances so that they get full satisfaction from each available dollar. Typical financial goals include such things as a new car, a larger home, advanced career training, contributions to charity, extended travel, and self- sufficiency during working and retirement years. To achieve these and other goals, people need to identify and set priorities. Financial and personal satisfactions are the result of an organization process that is commonly referred to as personal money management or personal financial planning.
Personal financial planning is the process of managing your money to achieve personal economic satisfaction. This planning process allows you to control your financial situation. Every person, family, or household has a unique financial position, and any financial activity therefore must also be carefully planned to meet specific needs and goals. Most of these decisions are quite simple and have few consequences. Some are complex and have long-term effects on our personal and financial situations. While everyone make decisions, few people consider how to make better decisions. The financial planning process is a logical, six step procedure that can be adapted to any life situation.
Personal Financial Planning Process is important because it is the key to financial success. At the same time, it is a life-long process or also knows as life-cycle planning which can control one’s financial situation. In fact, a good financial planning can lead to enhancing the quality of life and increasing personal satisfaction by reducing uncertainty about future needs and resources. The findings of this study are useful to personal finance as it could analyze the process for making financial decisions thus, leads one’s to develop his or her personal financial goals. Apart from that, it could assess personal and economic factors that influence personal financial planning. Besides, it helps one’s to determine personal and financial opportunity costs associated with personal financial decisions. With personal financial planning process, one’s manage to identify strategies for achieving personal financial goals for different life situation.
Personal financial planning involves the following process such as determine your current financial situation, develop financial goals, identify alternatives courses of action, evaluate alternatives, create and implement a financial action plan and reevaluate and revise the financial plan. In order to develop personal financial goals, the financial goals itself should be realistic, be stated in specific, measurable terms, have time frame and indicate the type of action to be taken. Essentially, the financial decisions are affected by a person’s life situation in term of income, age, household, size, situation and personal values. Economic factors also affected in term of prices, interest, rates and employment opportunities.
In addition, every decision involves a trade-off with things given up. Personal opportunity costs include time, effort and health. Financial opportunity costs are based on the time value of money. Future value and present value calculations enable one’s to measure the increased value or lost interest that results from a saving, investing, borrowing or purchasing decision.. Therefore, successful financial planning requires specific goals combined with spending, saving, investing and borrowing strategies based on your personal situation and various social and economic factors.
The first step of proper...