Question: What Types Of Decisions Are Involved In A Personal Financial Plan?

What are the 6 steps to financial planning?

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 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.

Which of the following are two personal financial statements that you create yourself?

The two personal financial statements that you create yourself are the personal balance sheet and a credit card payoff statement. The current financial position of an individual or family is a common starting point for financial planning. Net worth is the amount owed to others.

Who is most likely to benefit by inflation?

If wages increase with inflation, and if the borrower already owed money before the inflation occurred, the inflation benefits the borrower. This is because the borrower still owes the same amount of money, but now they more money in their paycheck to pay off the debt.

What are the six components of financial planning?

There are typically six parts to a full financial plan: sales forecasting, expense outlay, a statement of financial position, cash flow projection, break-even analysis and an operations plan.

What are the 6 components of financial planning?

Major key elements are Cash-flow management, Investment management, Tax planning, Insurance assessment, Retirement planning and Estate planning.

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.

What are the four main characteristics of useful financial goals?

An effective financial goal would always has these SMART characteristics; Specific, Measurable, Achievable, Rewarding and Time-bounded. This is to ensure that our goals are meaningful and get us closer to financial freedom. Good luck in your goal setting.

What are the types of financial planning?

Types of Financial Planners and AdvisorsAccountant.Attorney.Estate Planner.Insurance Agent.Investment Adviser.Stockbroker.

What is the objective of financial planning?

The main objective of financial planning is that sufficient fund should be available in the company for different purposes such as for purchase of long term assets, to meet day-to- day expenses, etc. It ensures timely availability of finance.

What should be included in a personal financial plan?

A financial plan should be comprehensive and include a number of elements like:Financial goals.Statement of your net worth.Analysis of your cash flow.Strategy for retirement.Risk management plan.Tax planning.Investment plan.Estate plan.

What types of risks are commonly associated with personal financial decisions?

Common risks associated with financial decisions include inflation risk, interest – rate risk, economic risk, and personal risk (Exhibit 1 – 2, p. 6).

What is basic financial planning?

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.

How do you create a successful financial plan?

Build your own financial plan: A step-by-step guideSet financial goals. It’s always good to have a clear idea of why you’re saving your hard-earned money. … Create a budget. Consider this your monthly cash flow and savings/investing plan. … Plan for taxes. … Build an emergency fund. … Manage debt. … Protect with insurance. … Plan for retirement. … Invest beyond your 401(k).More items…

What is the main goal of personal financial planning?

One aspect of financial planning is to control your use of credit. Which aspect of financial planning does this deal with? The main goal of personal financial planning is: A) saving, spending, and borrowing based on current needs.

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 the 7 components of a financial plan?

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 basic procedures in preparing a financial plan?

The Steps in Financial Planning are as follows:Assessing your Financial Situation.Setting Financial Goals.Identify the Strategies.Develop the Plan.Implement the Plan.Monitor and Review.