What is Personal Financial Planning and what it’s the scope of it?- Excerpts of the book "Finance for dad"

What is Personal Financial Planning and what it’s the scope of it?

Personal Financial Planning is the base on which family and personal wealth are built. It is the tool that helps us efficiently administer our economic resources and, therefore, reach our financial goals. In recent years the process of family oriented financial planning has gained importance in many regions of the world as it is contributing to their progress. This is due to the fact that the growth of the basic enterprise (the family) has a positive influence on the entire environment and is reflected in the country´s economy. It is not a coincidence that this discipline is expanding at a great pace in developed countries

What is the scope of Personal Financial Planning?

This discipline covers the fundamental areas related to the

economic welfare of a person or a family. These are:

• Basic Financial Planning

• Essential Assets Planning

• Insurance Planning

• Investment Planning

• Retirement Planning

• Estate Planning

• Tax Planning

What is the purpose of Basic Financial Planning?

Basic financial planning is the most elementary part of personal finance. It consists of the plans, activities and actions of a person in his regular day to day money use: cash management, checking account, credit cards, personal balance, budget, income and expense statement, etc. Financial planning will provide the tools and processes to carry out these tasks in a tidy and systematic way.

What is the purpose of Essential Assets Planning?

This part of planning focuses on the plans and strategies that a person should put in place in order to acquire the essential goods that are indispensable to guarantee good quality of life: a home, a vehicle, furniture, electronic equipment, appliances and other assets that a family requires to feel that they have a home and a comfortable life.

What is Insurance Planning?

Insurance planning is about the provisions a person should make in order to anticipate and protect his/her family against potential risks that could threaten their well-being. Risk management is a fundamental part of Personal Financial Planning. This will help people to determine which contingency measures they can assume directly and which ones they should share with an insurance company.

What is an Investment Planning?

Investment planning is a process the purpose of which is to help people invest their savings efficiently. It has the necessary tools to help people develop effective investment strategies which will permit them to achieve an optimum performance, that is, the maximum return under a level of risk that each person can cope with.

What is Retirement Planning?

A retirement plan, also known as a pension plan, is just another name for a long-term investment plan. The objective is to accumulate the necessary capital to obtain a profit that replaces the regular income when the period of active work finishes.

What is Estate Planning?

Estate planning goes beyond the simple distribution of the inheritance. It includes other topics such as the administration of our goods and the care of our dependents, in case of a serious illness, senility or mental disability, and, of course the will.

What is Tax Planning?

Tax planning will help you find strategies that will allow you to lower your regular tax payments. The state has an important role in our financial plan. On one hand it determines the socioeconomic environment and its policies and regulations, and it also provides us with the macro infrastructure and services that help businesses to prosper and generate income as well for the owners as for the employees. It also provides direct income for many people. It is our duty to contribute to the national fund by sharing a part of our profits. However, we should do so intelligently, in such way that we pay.