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Personal Financial Planning - Coggle Diagram
Personal Financial Planning
Concept of Wealth
Definition of wealth
Something that we have in extra
All property that has money value or an exchangeable value
Categories of Wealth
a) Immoveable Properties
Something that we cant change
For example: house
b) Moveable Properties
Something that we can change
For example: car
c) Financial Assets/ Commercial Papers
Assets that involved money
For example: stocks at investment company
d) Objects of arts
Valuable artwork
e) Animals
Animals that have value
For example: cow or goat
Importance of Financial Planning
i) Bring happiness & prosperity in life
More happy with smart financial planning
ii) Enjoy living with appropriate living style
Living can be specify with better financial planning
iii) Provide comfort to family
Comfortable living with stable finance
iv) Financial freedom & comfort in retirement
Free from debt
Significance of Financial Planning
Improve standard of living
Planning carefully financial position
Minimize financial disaster
Less burden during emergency because of the saving
Ability to invest optimally
Investment can be done with extra money
Accumulate sufficient wealth over time
The more money we invest, the more money that we get
Personal Financial Planning Process
1st. Assess current financial resources status
List all assets, liability, income & expenditure to see the financial status
2nd. Define financial goals
Goals can be long term or short term
Realistic
Specific & quantifiable
Set dates
Priorities
3rd. Develop systematic financial plans
Make plans on how to achieve all the goals
4th. Implement financial plan
5th. Monitor results & review plans/goals
Monitor to see whether the plans can be achieve or not
Risk
Probability that what you expect is different from what you will get
Sources of Risk
(i)
Business risk
- Risk in the business
(ii)
Financial risk
- related to financial such as how the company manage its financial to finance the operation
(iii)
Purchasing power risk
- risk in reducing the purchasing power of money
(iv)
Liquidity risk
- usually exist in bank
(v)
Interest rate risk
- the potential for investment losses that result from a change in interest rates
(vi)
Market risk
- the possibilty of an investor experiencing losses due to factors that affect the overall performance of the financial markets