Page 16 - DMGT515_PERSONAL_FINANCIAL_PLANNING

Unit 1: Basics of Personal Financial Planning

A mapping between the investments and goals, i.e., how each investment helps you Notes
achieve your goals.

Details of one time and recurring fees charged by him.
1.5 Scope of Personal Financial Planning

Personal financial planning covers all areas of an individual’s financial needs and should result
in the achievement of each of the financial goals. The scope of personal financial planning would
usually include the following:
1. Risk Management and Insurance Planning: Managing cash flow risks through sound risk
management and insurance techniques

2. Investment and Planning Issues: Planning, creating and managing capital accumulation
to generate future capital and cash flows for reinvestment and spending
3. Retirement Planning: Planning to ensure financial independence at retirement including
401Ks, IRAs etc.
4. Tax Planning: Planning for the reduction of tax liabilities and the freeing-up of cash flows
for other purposes
5. Estate Planning: Planning for the creation, accumulation, conservation and distribution
of assets
6. Cash Flow and Liability Management: Maintaining and enhancing personal cash flows
through debt and lifestyle management

7. Relationship Management: Moving beyond pure product selling to understand and service
the core needs of the client
8. Education Planning for kids and the family members.

1.6 Financial Planner

A financial planner or personal financial planner is a practicing professional who helps people
deal with various personal financial issues through proper planning, which includes: cash flow
management, education planning, retirement planning, investment planning, risk management
and insurance planning, tax planning, estate planning and business succession planning (for
business owners).
The work engaged in by this professional is commonly known as personal financial planning.
In carrying out the planning function, he is guided by the financial planning process to create a
financial plan; a detailed strategy tailored to a client’s specific situation, for meeting a client’s
specific goals. The key defining aspect of what the financial planner does is that he considers all
questions, information and advice as it impacts and is impacted by the entire situation of the
client.

1.6.1 Reasons for hiring a Financial Planner

People enlist the help of a financial planner because of the complexity of performing the following:

Finding direction and meaning in one’s financial decisions;
Understanding how each financial decision affects other areas of finance; and
Adapting to life changes to feel more financially secure.

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