The economy is still trying to recover from the worst meltdown since the Great Depression and now more than ever it may be helpful to introduce some personal financial planning into your life. It is understandable that you may be reluctant about investing either time or resources, but if your personal financial goals are to be reached then you will need to make it happen.
The six key areas of personal financial planning, as suggested by the Financial Planning Standards Board, are financial position, adequate protection, tax planning, investment and accumulation goals, retirement planning, and estate planning.
Financial position is the calculation of availability of resources as represented by the individual or household. A year’s cash flow for the household is the number found after the total income is tallied against the total expenses expected. From this data the individual or their financial planner may determine the how long in which the goals can be met and what it will take to get it done.
The next concern is to stop the destructive force of unforeseen risks and dangers. Such risks as property deflation, death or death of a loved one, and long-term care are a few examples. The majority of these will require the purchase of an insurance contract to protect you and your family against these situations. Choosing the most cost effective policy requires knowledge of the market for personal insurance and you should do some research and be aware of the things to look out for.
The tax burden of a household is often the greatest single expense so it is important to learn the incentives and various tax breaks the government provides when looking into personal financial planning. This may be done by either seeking professional advice or by taking the initiative to educate one’s self to the tax codes.
The investment and accumulation of goals is the planning of how to save enough money to acquire items with a higher than average cost. This is the financial concern of how much something will cost and when you will need to withdraw funds. Here inflation should be factored in as the accumulation of monies must then outpace the rate of inflation. The risks taken in investments will be proportional to the rate of return, and as everyone has their individual comfort level with risks these decisions should be well though out before anything is finalized and signed.
Retirement planning is the process of coming to an understanding of how to meet the financial burdens of life by living off what one has rather than what is coming in.
The final stage of personal financial planning is that of the estate, this being the planning of the distribution of personal assets to heirs, friends, community groups, and/or charities. Everyone should look to be sure that their matters are in order for both long-term life and premature death to avoid the misappropriation of their estate. This process is best performed with professionals that the product is satisfactorily preventative of government taxes.
Personal financial planning is a complicated, lifelong affair that should be dealt with constantly, this will insure that the end goals may be achieved as quickly and effectively as possible.
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