Quick Answer: What Are The Factors Affecting Personal Financial Planning?

What are the four areas of financial planning?

Successful financial planning contains these four traits:Values.

This is sometimes overlooked, but it’s critical that the objectives of your financial plan are based on your core values.

Retirement Income.

We like to compare retirement income to a three-legged stool.

Taxes.

Estate Planning..

What are some financial values?

GoalsValue: security; Goal: have a fully funded emergency fund, save for retirement.Value: freedom; Goal: achieve financial independence ASAP by cutting living expenses and increasing income/savings rate.Value: travel; Goal: save monthly for one big trip per year.More items…•

What is the main purpose of financial planning?

Financial planning is a step-by-step approach to meet one’s life goals. A financial plan acts as a guide as you go through life’s journey. Essentially, it helps you be in control of your income, expenses and investments such that you can manage your money and achieve your goals.

What is personal financial planning and why is it important?

Having a personal financial plan will help maintain discipline towards maintaining within set targets and thus achieving the set goals. Through a financial plan, you are in a better position to understand your financials through the set measurable financial goals and the effects of decisions made.

What are the key elements to successful financial planning and budgeting?

The 6 components of a successful financial plan for businessSales forecasting. You should have an estimate of your sales revenue for every month, quarter and year. … Expense outlay. … Statement of financial position (assets and liabilities) … Cash flow projection. … Break-even analysis. … Operations plan.

What are the 5 components of a financial plan?

Essential Components to a Financial PlanGoals & Objectives: Goals and objectives should be listed by priority and should be as specific as possible. … Income Tax Planning: … Balance Sheet: … Issues & Problems: … Risk Management and Insurance: … Retirement, Education, and Special Needs: … Cash Flow Statement: … Investment Planning:More items…

What are 2 economic factors that affect financial decisions?

Consumer prices. changes in how much the dollar is worth.Inflation. rising prices for goods and services and lower buying power of the dollar.Consumer Spending. … Interest Rates.Unemployment Rate.Personal Risk.Inflation Risk.Interest- Rate Risk.

What are the main components of personal financial planning?

9 components of personal financeIncome. You can’t rightly think about how to handle your money if you don’t have any. … Taxes. Everything that you earn is going to be taxed, but you can be better prepared if you plan for it. … Insurance. … Debt. … Expenses. … Savings. … Retirement. … Investments.More items…•

Why is it important to have a personal financial plan?

Creating a financial plan helps you see the big picture and set long and short-term life goals, a crucial step in mapping out your financial future. When you have a financial plan, it’s easier to make financial decisions and stay on track to meet your goals.

What are the five steps in the personal financial planning process?

5 steps to financial planning successStep 1 – Defining and agreeing your financial objectives and goals. … Step 2 – Gathering your financial and personal information. … Step 3 – Analysing your financial and personal information. … Step 4 – Development and presentation of the financial plan. … Step 5 – Implementation and review of the financial plan.

How does the business cycle affect your financial planning?

Investors who understand that the economy moves through periods of recovery and recession may have a better perspective on the overall cycle. During recovery, understanding whether the economy is at an early or late stage of the cycle may influence certain investment decisions.

What makes a good financial plan?

A financial plan is a comprehensive picture of your current finances, your financial goals and any strategies you’ve set to achieve those goals. Good financial planning should include details about your cash flow, savings, debt, investments, insurance and any other elements of your financial life.

What is the personal financial planning process?

The Personal Financial Planning Process Identifies Financial Goals and Objectives And Creates A Plan For Achieving Them. The financial planning process is very individual and personal. … Personal financial planning can help you construct the foundation on which to build a secure financial future.

What are the six financial principles?

There are six foundational principles that can be used to study finance: money has a time value; the higher the reward, the greater the risk; diversification of investments can reduce overall risk; financial markets are efficient in pricing securities; a manager’s and stockholders’ objectives may differ; and reputation …

What are the 4 types of planning?

The 4 Types of PlansOperational Planning. “Operational plans are about how things need to happen,” motivational leadership speaker Mack Story said at LinkedIn. … Strategic Planning. “Strategic plans are all about why things need to happen,” Story said. … Tactical Planning. … Contingency Planning.

What are the 5 factors influencing management?

Some of these factors include management functions, structural transformations, competition, socio-economic factors, laws and technology.Changes in Executive Management. … Transformations in Organizational Structure. … Competition from Other Businesses. … Social and Cultural Factors. … Laws and Regulations.More items…

Which stage in the financial life cycle is the longest in terms of years?

accumulation phaseTypically, the accumulation phase is the longest part of the investment lifecycle, spanning over 35-40 years and making it important to have a solid strategy in place.

What are the 7 key components of financial planning?

The 7 Elements of a Financial PlanRetirement plans.Investment management.Social Security Planning.Risk Management.Tax Planning.Estate Planning.Cash flow and budgeting.

What are the 5 critical success factors?

As a reminder, the 5 Key Success Factors are:Strategic Focus (Leadership, Management, Planning)People (Personnel, Staff, Learning, Development)Operations (Processes, Work)Marketing (Customer Relations, Sales, Responsiveness)Finances (Assets, Facilities, Equipment)

What are the types of financial planning?

Types of Financial planningCash flow management.Investment management.Debt Management.Tax Management.

What are the factors affecting financial planning?

11 Factors Affecting Your Financial PlanningSpending behavior. Your financial life is linked directly to your spending. … Financial potential. … Savings and investments. … Provision for emergencies. … A financial planner or advisor. … Responsibilities. … Financial goals. … Your age.More items…•

What are the 6 steps in the financial planning process?

The financial planning process is a logical, six-step procedure:(1) determining your current financial situation.(2) developing financial goals.(3) identifying alternative courses of action.(4) evaluating alternatives.(5) creating and implementing a financial action plan, and.(6) reevaluating and revising the plan.

What is the most important part of financial planning?

The most important initial element in financial planning is Budgeting. Setting a budget is relatively easy; it is more difficult to stick to it! However, having the discipline to take the time and care to record and reconcile your expenditure in some way is what counts.

What are three money management areas?

If financial worries have you down, remember the three M’s: management, monitoring, and maintenance. They can help you get your finances under control and have some well-deserved peace of mind.

What are three economic conditions that can affect financial planning?

3 Economic Influences on Financial Decisions Consumer Prices Inflation Consumer Spending Interest Rates Unemployment Rate Considering the current above factors discuss the following financial dilemma.

What is the difference between a financial planner and financial advisor?

A financial planner is a professional who helps companies and individuals create a program to meet long-term financial goals. Financial advisor is a broader term for those who helps manage your money including investments and other accounts.

What are the factors that affect planning?

EXTERNAL FACTORS THAT AFFECT PLANNINGExternal Surprises.Competitors.Legal/Ethical Factors.Economic/Political Issues.Technology.Social Trends.Forecasts of the Future.