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Personal Finance

Personal finance refers to managing as well as saving and investing money. It includes budgeting, banking, insurance, mortgages, investments, retirement planning and tax and estate planning. Personal finance is a holistic term that refers to the entire industry and proves financial services to individuals and their family members along with advising about financial and investment opportunities. It is concerned with meeting individual financial goals which can be for short term financial needs, retirement plans or for saving regarding the child education. The Financial planning process is dependent on income, expenses, goals and desires and developing a plan to fulfil the needs. To make a financial plan, individuals need to have the financial literacy to distinguish between good and bad investments and make a correct decision.

Steps in the personal financial planning process

1. Assessment – The process involves planning process through gathering information from the client to understand the requirement of the client clearly. Some of the questions are qualitative which includes health, family relationship, values, earnings, goals and others and some of the information are qualitative which includes income, expense, cash flow, tax, benefits from governments and others. This information is important as it is being analysed by the financial advisor to ensure a clear view of the client’s position.
   
   
2. Goal setting – The next step is goal setting where the advisor uses financial expertise to guide the client regarding goal selection. The client needs to clarify the financial questions that are being asked by the advisor and together they prioritise the goals of the financial plan.

• Plan execution - The planner sets more than one recommendation for the client and evaluates each of the recommendations like assumptions, client goals, integration, priority, and independent decision. Then the plan is being presented to the client and the client chooses the best option that fits best according to their criteria. This helps the client make an informed decision about whether the recommendations are a good fit.
  
  Execution – In this step, the plan is being implemented for work. It is considered the most difficult process in financial planning and many individuals find it difficult to execute the financial plan. The process takes much patience and discipline to execute the planning as desired.
  
  Monitoring and reassessment – After the execution of the plans, there can be certain changes in the plans that are necessary. Thus, monitoring of the plan is necessary so that necessary changes can be made on time to improve the financial plan. With the changes in the external environment such as tax laws, interest rates, inflation and others, it is important to update the financial plan as well.
  
  
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  Personal finance planning

  1. Financial position – It refers to the current balances of the recorded assets, liabilities and equity of an organisation. The information is being recorded in the balance sheet and is one of the financial statements. For financial planning, it refers to the financial position of the individuals according to the statements and financial planning is done according to it.
  2. Adequate protection – The economy can be uncertain at times and thus proper financial protection is necessary for the individual to safeguard their finances. It can be done by following certain steps which are as follows –
  • Paying off debts like credit card balances and interest rates on time.
  • Refinancing of the house by locking into a fixed rate of a loan, even after paying less amount of mortgage.
  • Living in one salary is beneficial even if there is more than one working member in the family. This way, the individual can live on one income and put the rest on savings.
  • Looking for suitable ways to scale back like moving to a more suitable and budget-friendly apartment to encourage more savings.
  • Negotiations
  • Purchasing most of the items in cash and minimising credit card usage.
  • Enrichment of the salary potential, like learning a new skill or joining a part-time job to help an individual add value to the work and company.

   

  • Tax planning – Tax planning refers to the analysis of the financial situation or plan to ensure that all the elements function together to pay low taxes as much as possible. Tax planning should be an essential part of an individual investor’s financial plan. Reducing tax liability and increasing contribution to financial plans are crucial for success.
  1. Investment and saving goals – setting up short term, midterm and long term financial goals is a mandatory step for becoming financially secure. Also, annual financial planning provides a plethora of opportunities to an individual to review goals, update goals and review progress within a certain time period. Goal setting is very important for financial planning and helps an individual to learn and live comfortably within desired means as well as save money for the future.
  2. Retirement planning –Determines income goals and the actions necessary for achieving retirement goals. It includes identifying multiple sources of income, reducing expenses, implementation of savings program and managing assets and risks. The future cash flows are also estimated to measure if the retirement income goal is achievable or not. A retirement plan is a holistic approach that consists of both financial and non-financial aspects of an individual that determines the success of the plan.

  Estate planning – estate planning refers to the preparation of tasks that serve to manage the asset base of an individual in an incident of their incapacitation. In simple terms, it refers to the passing down of assets from one generation to another. The estate refers to property, cars, personal accolades or financial investments and it varies from individuals. The planning process is dynamic and needs to be reviewed at regular intervals to deal with any changes that might occur to an individual’s life or the laws of the country.
  
  

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  Advantages of finance assignment service

  Finance service and literacy have their importance and it plays a pivotal role in financial planning and management. It is important for an individual because it helps with knowledge and skills to manage money effectively. The absence of such knowledge might negatively affect the actions of individuals in terms of financial planning. It helps in understanding the financial concepts better and provides better guidance for managing finances effectively. Some of the guidance includes money management, financial decision and obtaining financial stability.