Planning Personal Finance

We are all faced with various financial risks and information is required beforehand to help plan and achieve our goals. Without proper information, life will be approached in a haphazard manner with no direction. Managing risks and insurance requires being equipped with relevant information, so that correct decisions are made. This can be achieved by accessing relevant information through contact with financial advisers, newspapers, reports, websites etc.

However, the information that we access must be analysed to ensure that there is some form of truth or objectivity. Personal finance planning refers to the income that one owns and how one manages to achieve financial goals. The information required to plan relates to investment, insurance, taxation, mortgages, credit, retirement and career planning. A research must be conducted to see the relevance of accessing information and this essay highlights some key benefits.

Hansen (2011), writing from an experts point of view, stated that career planning is an activity that is best done at a regular basis. In life, interests change and one would find that their calling is in another field much at a later stage. Rather than to be frustrated with a current career, a well planned career development will yield benefits. He further observed that, just as many people make annual visits to physicians, the same should be done to career planning. It would be advantageous to have a periodical review on one's career, to ensure that it is in line with planned objectives Apart from career planning, family life is equally an important area as income earned must be utilised properly.

For example, an article in Financial Planning Info Guide (2011), noted that an individual should check their financial position at all times. It is imperative, that an individual is honest about their financial status by checking their cash flows and balance sheet. It will help them to identify current financial position, liabilities and spending patterns.

Financial Planning Info Guide (2011) further argues that, an individual should think about what kind of events, might prevent them from achieving their goals and risks they could face. Life is full of uncertainty, no one knows what the future holds and being aware of the risks is a stepping stone to a healthy life. Examples include liability risks to others or property risks. Identifying, analysing and controlling these risks as well as classifying them in terms of financial terms must be part of a well planned life.

Larkin (2011) noted that, managing finances is thinking about money instead of worrying about it. Worrying about money, is an indication that adequate provisions have not been made, which will result in having financial stress. When one is in employment or has a regular income, they need to ensure that they start planning for retirement at an early stage.

Larkin (2011) further pointed out that, setting saving goal and figuring out risk tolerance for investments, is important, to avoid investing into riskier investments. It is an advantage to set goals and have a direction, rather than to let things sort themselves. All investments instruments must be researched thoroughly including taxation consequences.

The importance of researching is backed by information contained in an article by Tirbutt (2011), where he reported of having lost £ 21,000 in a Bulgarian property fund investment. It also highlights the dangers of having little information on foreign markets, as they do not often have same regulations and market conditions as domestic markets. Even though foreign markets are riskier, domestic markets do pose a threat to investments failures as well.

King (2011) reported that, Barclays was fined £7.7m by the Financial Services Authority (FSA) for investment advice failures, which resulted in funds nose-diving in values. Such a report indicates that, there is a possibility of bad investment failures even on domestic markets. Apart from investment failures, fraud is another concern, as pointed out by Fuhrman (2011), of a case for Bernard Madoff, who defrauded as much as $50 billion from his clients. A person could be a victim of such scams and to avoid losing money, thorough information research must be conducted.

Accessing relevant information is important in managing personal risks especially where credit management is concerned. According to an article in echeat.com (2011), taking note of credit selection is necessary, on whether to use it or not. Whilst, it is good to obtain credit, if not well managed, it can lead to insolvency. Another article Citi (2010) affirms how good credit is, as it often allows people to buy goods or services, even when they do not have money at that particular moment. If properly managed, one can acquire assets and improve their wellbeing.

Apart from credit, an individual has to ensure that they manage their debts as well, so as to have a healthy life. It is not possible to be completely debt free; management of debt should be a priority, so that all financial goals are accomplished. CNN Money (2011) advised on the importance of paying off highest rate debts first, as the key to getting out of debt efficiently. It would be practical to list debts, in order of quantum, so that the highest is paid off first, as long term debts usually have an impact on the balance sheet.

Throughout various stages of life, one requires different needs, which will push them to borrow. It is important that, one understands the cost associated with borrowing, as there is usually an interest that needs to be paid. A mortgage obtained earlier, can be paid throughout a working lifetime and before retirement, it would have been serviced or a minimal amount would be left.

According to an article by Citi (2010), it pointed out that loans generally are divided into two types, secured and unsecured, with the former having a guarantee by collateral and the latter being based, on credit score or ability to repay. A person seeking a loan has to weigh the risks associated with each type by accessing more information.

Managing retirement is challenging to most people, who are no longer able to work and earn a regular income. An article from Money Advise Service (2011) advised that planning a budget is very important on retiring on a lower income, as the money becomes stretched. Budgeting helps one to see, how much money is coming in and going out. When a person has a low income, they need to ensure that they prioritise their needs and wants.

Barber (2009) affirmed by stating that reviewing an expenditure budget and listing financial assets-not-just pension funds is important. He analysed that in the event that one owns a company car, it would be replaced with an own, though a saving will be made on commuting. These highlights the importance of reviewing expenditure,