Define the financial planning process. List the elements of a good financial plan. Identify and discuss the three most important personal factors and the three most important economic factors that affect your financial planning decisions.
According to Siegal, R. and Yacht, C. (2009), a financial planning process is a process of determining goals, analyzing situations, making decisions, evaluating them, etc. I would say that for me it is a process of creating a plan which shows you how you will achieve the desired result: what choices you need to make, whether they are good enough, and what decisions will bring you there.
There are several factors that affect people’s financial planning decisions; while some of them are common for everyone, the other ones depend on different circumstances and depend on situations. However, all good financial plans have similar elements, such as financial goals, net worth statements, budget and cash flow planning, debt management plan, retirement plan, emergency funds, insurance coverage, and estate plan (Schwab, 2021).
I believe that the three most important personal factors that affect my financial planning decisions are career choice, health, and family structure.
First, career choice determines how big your salary can be and whether it is enough for your financial aims. Second, it can also affect your health, which brings us to another important personal factor: working too hard can bring you more health problems and your economic needs might grow. However, you never know what can happen, especially with our bodies. For example, I have Takayasu syndrome, which affects my daily life and ability to move. This disease is rare, and it’s said that it can appear without any reason. Therefore, it is always better to protect yourself and include such needs in your financial plan beforehand. Finally, a family structure shows whether you need to provide any financial help to your family members or whether you can receive it. This can affect your financial planning a lot; for example, in past, my mother helped me with the apartment rent, because it was too difficult to pay for everything myself when I just moved and started living alone. Later I started dating my ex, and my expenses were twice cut: he paid his half for everything (rent, food, entertainment, etc.), and I paid my half. Now I have a better job and do not need to support any family members, or need their help. However, as soon as I’m planning to build a family of my own one day, I’m trying to keep this in mind and save some money in advance.
References
Siegal, R. & Yacht, C. (2009). Personal Finance. Saylor Foundation. Licensed under Creative Commons CC BY-NC-SA 3.0. Retrieved fromhttp://my.uopeople.edu/pluginfile.php/57436/mod_book/chapter/37371/BUS2204.Textbook.pdf
Schwab, C. (2021). 8 components of a good financial plan. Schwab Brokerage. https://www.scwab.com/financial-planning-collection/8-components-of-good-financial-plan.