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Title:

Introduction to

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The process, both artistic and scientific, of formulating, implementing, and ... and reality and purges the client of 'pie in the sky' ideas and wishful thinking. ... – PowerPoint PPT presentation

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Title: Introduction to


1
Chapter 1
  • Introduction to
  • Personal Financial Planning

2
Personal Financial Planning
  • The process, both artistic and scientific, of
    formulating, implementing, and monitoring
    multifunctional decisions that enable an
    individual or family to achieve financial goals.
  • involves the management of personal financial
    risks through cost benefit analysis.
  • capitalizes on personal and financial strengths
    while managing financial risks and weaknesses.

3
Benefits of Financial Planning
  • Integrates the financial mission, financial
    goals, and financial objectives into one cohesive
    plan.
  • Identifies and plans for goals making them more
    likely to be achieved.
  • Identifies risk exposures.
  • Gives more control over financial destiny.
  • Allows for better strategic choices.
  • Creates a framework for feedback, evaluation, and
    control.
  • Establishes measurable goals and expectations.

4
Benefits of Financial Planning (contd)
  • Develops an improved awareness of financial
    choices and of how the internal and external
    environments affect those choices.
  • Establishes rationality and reality and purges
    the client of pie in the sky ideas and wishful
    thinking.
  • Brings financial order and discipline to clients.
  • Instills confidence that personal financial goals
    will be achieved.
  • Identifies the changes in actions and behaviors
    necessary to accomplish financial goals.
  • Provides a forum for rationalizing the need for
    change.

5
Financial Success A Relative Concept
  • Financial success for a particular client is a
    relative conceptsubjectivity tends to dominate
    the clients thinking.
  • Objectivity should dominate the planners
    thinking.

6
Resource Allocation in Financial Planning
  • Personal utility curves
  • Opportunity costs

7
Financial Planners Pyramid of Knowledge
Planners
Professional
Responsibility
Establishing
Data Collection
Financial
Direction
External
Communication
Analysis
Internal Analysis
Time Value
Planning for
of Money
Childrens Education
Insurance
Investments
Retirement
Estates
Tax
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