Page 11 - DMGT515_PERSONAL_FINANCIAL_PLANNING

Personal Financial Planning

Notes 8. Financial planning has no role to play in helping individuals both upgrade and maintain
their lifestyle as well.

1.4 Process of Financial Planning

1.4.1 Old Personal Financial Planning

Earlier the people used various financial advisors such as an insurance agent to manage their
insurance policies, a stock broker for managing their equities and stocks, an attorney and a CPA
for managing their taxation etc.
This method of financial planning led to more complexity and difficulty because of following
reasons:
1. The person or the client has to reveal his financial soundness to all the financial advisors
2. Each financial advisor may give different suggestions for financial planning and many
times conflict each other resulting in confusion(for client) as to which advice to follow
3. The client has to pay service charges or fees to all the advisors separately resulting in
increased cost of management.

1.4.2 New Method of Personal Financial Planning

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, 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 satisfaction
is the result of an organized process that is commonly referred to as personal money management
or personal financial planning.
The specific advantages of personal financial planning include:

Increased effectiveness in obtaining, using, and protecting your financial resources
throughout your lifetime.

Increased control of your financial affairs by avoiding excessive debt, bankruptcy, and
dependence on others for economic security.
Improved personal relationships resulting from well-planned and effectively
communicated financial decisions.

A sense of freedom from financial worries obtained by looking to the future, anticipating
expenses, and achieving your personal economic goals.

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