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by: Jeffery Rohan


Jeffery Rohan
GPA 3.67


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Class Notes
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This 2 page Class Notes was uploaded by Jeffery Rohan on Saturday September 12, 2015. The Class Notes belongs to HACE 3250 at University of Georgia taught by Chatterjee in Fall. Since its upload, it has received 23 views. For similar materials see /class/202285/hace-3250-university-of-georgia in Housing And Consumer Economics at University of Georgia.

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Popular in Housing And Consumer Economics




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Date Created: 09/12/15
1 Personal Financial Planning Defined a 97 Personal Financial Planning The process of formulating implementing and monitoring multifunctional decisions that enable and individual or family to achieve financial goals Risk s through cost benefit analysis Capitalizes on personal and financial strengths while managing financial risks and weaknesses 2 Benefits of Personal Financial Planning a 57 Equot 9 5quot f Afinancial plan integrates a financial mission goals and objectives into one cohesive plan that allocates financial resources consistently Benefits of financial planning i Goals identified and planned for are more likely to be achieved gt Most Important ii Planning process helps clearly identify risks that can undermine goalsexposures 1 Can be managed with a variety of techniques 2 Learning growing and choosing wisely iii It is proactive rather than reactive giving clients more control over their financial future iv Creates a framework for feedback evaluation and control v Establishes measurable goals and expectations that can be compared to actual results vi Develops an improved awareness of financial choices and how internal and external environments affect those choices Provides the client an opportunity to increase commitment to selected goals 1 When clients understand what they want to achieve why they want to achieve it and how and when it can be achieved they often take ownership of their financial plan and become more committed to it A comprehensive personal financial plan helps to establish rationality and reality and purge the client of unrealistic ideas and wishful thinking The Financial planning process brings financial order and discipline t instills confidence that goals can be achieved and identifies the behavioral changes necessary to accomplish those goals It provides a forum for rationalizing the need for change and helps to view change as opportunity rather than a threat Financially successful individuals tend to do more financial planning to prepare themselves for the inevitable fluctuations in their internal and external environments They tend to make more informed financial decisions They also tend to better anticipate both the short and long term consequences oftheir decisions NOT as financially successful tend to underestimate the value of planning and may attribute their lack of financial success to uncontrollable factors such as poor economy foreign completion government interference or just bad luck The more we plan the better we get at planning and the less risky our plan will be 3 Financial Success is a relative Concept a Financial success For most individuals it means accomplishing one s financial goals b Subjectivity relating to the client s perception of reality dominates the client s thinking about financial success Objectivity relating to facts without distortion by personal feelings or prejudices dominates the planner s thinking about financial planning 4 Resource Allocation in Financial Planning a Financial planning is about making financial choices and allocating scare resources C Personal Utility Curves Economic curves that describe the satisfaction that an individual receives from a selected item or additional units of that item They are subjectively based and reflect our knowledge values and beliefs and therefore may be quite different for each person b When making choices we are faced with alternatives Each alternative poses risks and consequences C a b Basic i a ii ii iii iv v c Opportunity Cost The highest valued alternative not chosen When choosing among alternatives clients need a framework for comparison d Once a financial planner presents a client with a framework of objective alternatives that identifies the opportunity cost associated with each alternative the client can make a more informed more rational choice among alternatives 5 Why do people Hire Professional Financial Planners People hire professional financial planners because they believe that doing so is more effective and efficient than attempting to create and implement a financial plan on their own 6 The Financial Planner s pyramid of Knowledge Two themes Personal financial planning is about attaining financial goals and managing financial risks The professional practice of personal financial planning emphasizes data collection and analysis Financial Planning Skills Financial Phases These phases include the asset accumulation phase the conservationprotection phase and the distributiongifting phase Six steps 1 Establishing the clientplanner relationship 2 Gathering client data and determining client goals and expectations 3 Determining the client39s financial status by analyzing and evaluation general financial status special needs insurance and risk management investments taxation employee benefits retirement planning and estate planning 4 Developing and presenting the financial plan 5 Implementing the financial plan 6 Monitoring the financial plan Financial mission a broad and enduring statement that identifies the client39s long term purpose for wanting a financial plan Financial Goals Highlevel statements of financial desires that may be for the short or the long term Financial objectives statements of financial desire that contain time and measurement attributes making them more specific than financial goals Basic Financial Planning Tools


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