Financial Plan, an important tool for handling finances

A Financial Plan is a set of stages which is carried out and is related to an individual’s or family’s or a business’s financial matters. This technique is derived from the well defined procedure of Financial Planning.

                           In Personal Finance, a Financial Plan for an individual or a family refers to a set of stages for defining fixed targets related to money expenditure and savings. This kind of financial plan, can be used for allocating money for payment of taxes, daily expenditure and other miscellaneous expenses. Further in Personal Finance, a financial plan can also help in investing of income towards financial sectors like Stock Market Equities or Bank Savings. In Business Finance, a Financial Plan consists of Strategic Planning Procedures like Forward or Future Planning and Financial Year Forecasts of a company. Here, financial documents like Company Balance Sheets and Cash Flow Statements are also prepared.

                           There are various advantages of creating a Financial Plan. In Personal Finance, it can help an individual or a family in channelizing their money. This is done for meeting future expenditure and planning out further savings for long term financial gains. In Business Finance, it can help an enterprise in prevention of it’s fund misuse and also help in Wealth Generation. It can also help an enterprise in installing confidence within banks and financers, for giving them financial help if required.

                           There are various disadvantages of creating a Financial Plan also. In Personal Finance, it can take a lot of time of an individual or of an entire family, if the plan is not sorted out in a well defined manner. This plan can only provide a road map for future personal financial planning but can’t provide guaranteed returns of financial gains for a person. This can only depend upon the person’s or family’s lifestyle and spending habits, which can enhance or spoil the personal finances of a household. In Business Finance, it can take a lot of time of an enterprise, if the Strategic Planning Procedures of a financial plan are not carried out in an analyzed manner. This plan can also turn into a liability if a lot of money has to be spent on a financial advisor for making it and ultimately if the end result turns out to be unsatisfactory.

                           In today’s IT World, various softwares for constituting a financial plan are available on the Internet. Examples of such softwares are Excel Templates which are used as Financial Projection Softwares, Expert Softwares for carrying out Strategic Planning and Tally for making financial documents like Company Balance Sheets and Cash Flow Statements. Some of these softwares are available for free download on the Internet and are known as Free wares, where as some of them are available for download only in exchange of some online payment. Even for Personal Finance, softwares like Microsoft Excel and Access are available for jotting down a financial plan and they don’t need to be downloaded from the Internet.

                           Thus, a Financial Plan has become an important tool in the handling of Personal as well as Business Finances. It is also the base of a Financial Planning Process.

Personal Loan, a Growing Financial Trend

Personal Loan is a kind of Short - Term Loan, which can be used by an individual for getting an assistance in covering his or her personal expenses. This loan covers expenses like Holiday Expenses, Medical Expenses and Marriage Expenses to name a few. This loan may be termed as an unsecured loan because banks usually don’t require the borrower to submit any security deposit item also known as Collateral. Objects like a House or Car are examples of a Collateral.

            There are two types of Personal Loans known as Secured Loan and Unsecured Loan. A Secured Loan also known as Personal Bad Credit Loans are usually offered to a borrower that has a low credit score or if a credit history has a record of  missed payments. A Secured Personal Loan needs a collateral to recover some amount of money lent in case of default in payments by the borrower. An Unsecured Loan is usually offered to people who have a high credit score, who have a long record of timely payments in their credit history and can make adequate  money to be able to pay the loan off  in an easy manner.

             There are various advantages of a Personal Loan are as follows. If compared to other loan items such as home loans, a borrower does not need to submit a collateral to apply for a personal loan. In the case of Personal Loan, the paper work is also minimum if compared with other loans, making the loan procedure faster. A borrower also does  not need to specify the end use of the money when he or she applies for a personal loan. The lender is only interested in knowing that whether a borrower is capable of paying the Loan EMI every month on or before the due date. It is also cheaper for a borrower to get a Personal Loan than to borrow on basis of the credit card. Thus, if a borrower has to accumulate an enormous outstanding amount on his or her credit card and the accumulated interest is making it very difficult to clear the outstanding, a personal loan might be the way to go. Here, a borrower can use the money borrowed at a lower interest rate through the personal loan and can pay off the money borrowed at a higher rate through outstanding amount on the credit card.

              There are various disadvantages of a Personal Loan also and are as follows. Since banks identify a high risk in this category, many banks follow a list of categories of borrowers who are well approved. If a borrower’s profile doesn't match with any of these already approved categories, the loan application will not be accepted. Another drawback is that the interest rate of a personal loan can be high, at times double the amount of home loans. This can happen especially if a borrower’s credit profile is not strong enough.

              Nowadays, most private and public sector banks provide Personal Loans to their customers, if asked for.

The Importance of Financial Advice in today's time

In today's fast pace world, where time is money and people need to handle their finances in an efficient manner, taking Financial Advice at times from Financial Advisers has become very important. An advice given to an individual, family or to an enterprise, on topics like Money Management, Home Loan, Investment, Pension Plan, Personal Finance or Tax Savings, is known as a Financial Advice. It is better to take a financial advice from a well qualified financial adviser, who is well versed in the field of Finance and Commerce. A Financial Adviser is a professional who gives financial services to individuals as well as to businesses. These services can include investment advice which may include pension planning and other financial advice related to topics like mortgages and insurance. Thus, a financial advisor helps the client in maintaining a balance between income from investment, gains from capital and an acceptable level of risk by using proper allocation techniques on assets.

            There are various types of financial advice to adhere to. Some of them are Insurance Advice, Investment Advice, Tax Advice and Personal Finance Advice. An Insurance Advice is related to various types of insurance policies like Health Insurance and Car Insurance to name a few. An Investment Advice is related to various kinds of investments like Stock Market Equities or Fixed Deposits in Banks. A Tax Advice is related to the know how of various types of taxes to be paid by an earner or business like Income Tax, Sales Tax, Property Tax and so on. A Personal Finance Advice is related to the handling of an individual's or family's Personal Finances like Household Expenses and Personal Loans to name a few.

            There are various advantages of listening to a Financial Advice. Through such advices, an individual or a family can be able to manage their finances and income in a better manner and can be prevented from debt and unnecessary expenditure. The same thumb rule also applies to businesses, as they can also prevent themselves from debt and can move towards profit generation and can maximize their wealth. A good financial advice also helps in bringing discipline in the handling of one's finances, so that there is minimum requirement of taking risks.

            There are some disadvantages of listening to a Financial Advice also at times. If a financial advice is followed over the Internet, then it must be followed from a valid and reputed finance based website. If the website is not properly checked, then it may result in the following of wrong or inaccurate financial advice, resulting in financial loses. Even off line, if financial advice is followed from a financial advisor, who may not have a sound knowledge on financial issues, may result in suffering financial losses.

            Thus, it's also important to take a financial advice from an authorized and reputed financial advisor to take accurate and useful financial advices. Other forms of media like reputed finance based newspapers, journals and magazines are also to be taken in account for following useful financial advices.

The Importance of Financial Management in today’s time

Financial Management can be defined as the managing of finances by an individual, family or enterprise in an efficient manner. It is more to do than just managing one’s finances for the needs of the present and of the future. Financial Management also deals with future planning, keeping in mind how a person can support dependents in the event of his or her death. Death can be untimely or eventual. Even retirement planning and saving for a financial hardship are essential treats of Financial Management.

            The most important point in Financial Management is that a person should not live beyond his or her means, at any cost. If an earner has to decide on how to spend on a daily basis for all the present needs, that person should assume that roughly one - third part of the income can go to taxes, around one - third of the income can go towards daily expenses and around one - third of the income can be saved for a later point of time whether that is for any emergency, retirement and so on.

            The second half of a person’s post - tax income can go towards Savings, Retirement Planning, various types of investments and the list goes on. It is a good practice to put one - third of the post - tax income into Liquid Savings, another one – third into Retirement Planning and lastly another one – third into Stock Markets. Liquid Savings or Liquidities are known as the money stored in Savings Accounts and Fixed Deposits of banks. Liquidities are easily available when needed and are usually not subject to large fluctuations in terms of value. A person should use his or her Liquid Savings only during the time of an emergency. Retirement Accounts and all other investments should be organized in a way that they need not have to be accessed until the earner retires.

            A person’s daily expenditure should be budgeted and should include house tax / rent or mortgage payments , utilities , food , car payments , student loan payments , insurance related to home , medical or car and any work related expenditure . If the earner is a parent then there should also be a reasonable budget for clothing so that the children can get new shoes when they require them and so on. A person’s budget should also include any medical expenses that a person may have, if the insurance doesn't pay for that expense. A person’s budget should not include shopping expenses, any new car purchases or purchases of any unwanted things, especially if they are expensive.

            There are various advantages of Financial Management for individuals or families like Improvement of Personal Finances, Increase in Savings and Prevention from Debts. Similarly, for enterprises also, Financial Management is very useful as it gives advantages like Profit Maximization and Reduction in Misuse of Funds.

            There are also various disadvantages of Financial Management like unnecessarily buying Gold and other such hard currencies, purchasing insurance policies in the name of Financial Management and unnecessarily purchasing private or government bonds. Financial Management should not become too much rigid.

            Even in the world of Information Technology or IT, various IT companies are designing many softwares for handling Financial Management. SAP or Systemanalyse und Programmentwicklung is the German Name for System Analysis and Program Development. It has become a very popular Financial Management Software as it is well known for it’s ERP or Enterprise Resource Planning Solutions.

The Importance of Saving of Money

Saving of Money or Money Saving has become a very important aspect of Personal Finance . It is very important for an individual or family to save money for channelizing expenditures related to Personal Finance . Money Saving can be done on a personal level as well as on a banking level . On a personal level , money can be saved at home by storing it categorically in various places like safes or cupboard lockers . On a banking level , money can be saved into facilities like Savings Bank Account or Fixed Deposits .

            An individual or family should know where the money is spent . A record of the next month should also be kept . Every purchase occurred should also be noted . A bill or receipt for particular branded items should also be demanded from the shop keeper . Ultimately at the end of the month , account for every single amount of money should be kept .

            Notes of money can also be divided and kept into various envelopes according to their amount and denomination , based on the type of expenditure to be carried out . On such envelopes , names of the particular source of expense can also be mentioned by names of such as Milk Vendor , News Paper Vendor and so on .

            Various grocery items can also be bought from Government Sponsored Retail Stores as items over there are sold at subsidized rates than their actual maximum retail price . Thus , the total bill amount  arising out of the grocery shopping will be a bit less than expected . It is also better to buy food items like fruits and vegetables from Government or Private Sector Supermarkets as they can be bought at a reasonable amount , rather than having to pay more while buying from AC Malls .

            Even on a banking level , a certain amount of money can be saved into Savings Bank Accounts and Fixed Deposits . A Savings Account is meant for keeping one’s money in a safe manner and it earns a small amount of interest every month. This account requires either a low minimum balance of around Rs. 1000 or may require no minimum balance at all . This depends on the type of bank and the type of account .

            On a banking level , a Fixed Deposit is also another way of money saving . A Fixed Deposit Account allows a person to deposit his or her money for a fixed period of time , thereby earning that person a higher rate of interest in return . Fixed deposits also give a person a higher rate of interest than a savings bank account can . In developing countries like India , many people prefer to opt for investing their money into Fixed Deposits than into Stock Market Equities .

            Even in financial life , a person should avoid car loan or a credit card debt which is unsecured , as they can drain out money savings and are bad personal finance practices to follow . It is also better to avoid unnecessary buying of new gadgets and other such recreational items like toys , books , antiques and so on , if the need does not arise . Cutting down expenses on travel expenses is also essential , as a holiday trip can also be planned at a later point of time , when there is enough money saved for it .

            If such kinds of steps are carried out in the saving of money , then it would be a big boost for an individual’s or family’s Personal Finance Expansion .

Role of Online Shopping in Personal Finance

In today’s Computer Era , Online Shopping has become an important and fast growing process , which can greatly help in handling Personal Finances of an individual or a family . Online Shopping is the procedure through which consumers can directly purchase services or goods over the Internet , without the need of having any middle party service . It is a type of Electronic or E – Commerce Facility . The two most prevalent types of Online Shopping Models are B2C or Business-to-Consumer , where a consumer interacts with a Business Entity online ; where as B2B or Business-to-Business is where a business entity interacts with another Business Entity online . B2B Commerce is also known as B2B Hub for Online Market Exchange .

            Online Shopping started during the E – Commerce 1 Period also known as “Dot Com Era” , between the year 1995 and 2000 . During that time , Amazon.com, Inc. was probably the First Multinational Company in the world to launch it’s Online Shopping Website in 1995 . Then in 1996 , eBay Inc. which is a C2C Enterprise launched it’s Online Shopping and Auction Website in 1996 . In this way many other multinational companies also known as MNCs of  USA and other countries have launched their Online Shopping Websites over the past fifteen years .

            There are various advantages of Online Shopping over Traditional or Physical Shopping for consumers be it individuals or families . Consumers can save upon their time , money and energy as Online Shops are open for twenty four hours a day and many consumers can access them through their Internet Connections , from their home or workplace . Expense and time on a visit to a conventional shop is saved in this case . Some online shopping sites also have more flexible return policies to compensate rather than the physical retail shops .

            There are various disadvantages of Online Shopping over Traditional or Physical Shopping for consumers be it individuals or families . There is a lack of ability to inspect an Online Shopping Site before purchase , consumers are at a higher risk of fraud because of an online merchant than in a physical shop . Online Merchants also take the risk of fraudulent purchases using stolen credit cards at times .

            The procedure of Online Shopping is quite simple for consumers . Here , first the consumer has to visit the particular online shopping site , where various goods and services are usually listed in categories . Then the consumer has to chose a specific category , where items can be listed further into sub categories . Then from a sub category , the consumer has to choose a particular item of his or her choice to buy . After choosing that item , a list of similar items will be displayed in front of the consumer to choose . Then it’s up to the consumer to avail that service or product through online auction or instant buying . After choosing that payment option , the consumer may be required to register with that shopping site by opening a user account over there . Then further , the consumer can go ahead with the online credit or debit card payment method and finally purchase the particular item or service from the shopping website .

            In this way , we can see that Online Shopping has become a method of modern Electronic Commerce procedures . Thus , it's becoming very prevalent among people be it individuals or families in handling their Personal Finances , when it comes to shopping expenditure .

Usage of Credit Cards in Personal Finance

A Credit Card today , has become a very convenient way of handling Personal Finance for an individual or a family . Credit Card is also known as Plastic Money and is one of the most important inventions of the 20^th Century , which is being used rampantly even in the 21^st Century all over the world .

            Credit is the procedure of selling services or goods to a buyer , without the buyer having to pay in Cash . Thus , a Credit Card is a standard size smart card usually made of  plastic that consists of a machine readable code . It is a convenient way for cash , in offering credit to a customer and is issued by a financial enterprise like a bank or service provider . An internet information says that John Biggens of the Flatbush National Bank located in Brooklyn , New York was the inventor of the credit card issued by a bank way back in around 1946 . The internet also informs that the introduction of the First Credit Card in India is claimed by the Central Bank of India , in 1980 by the name of “Central Card”.

            There are various advantages of using Credit Cards for improving one’s Personal Finances . By Credit Cards a customer can make purchases of high amounts without having to carry so much of cash in hand . Credit Cards also enable a customer to withdraw cash from Automated Teller Machines known as ATMs , anytime and wherever they are located . Credit Cards also provide the facility of accurate recording of various purchases by a customer into a Single Statement .

            Apart from advantages , Credit Cards also carry some disadvantages . At times Credit Cards can turn a person into a spendthrift , resulting in over spending on redundant expenditures . If a Credit Card is lost or stolen then it may result into unwanted expenses or fraudulent charges . Thus , Credit Cards must be handled carefully .

            The procedure of using a Credit Card is stated as follows . When a purchase on any goods or services is made , the credit card user agrees to pay to the bank . The goods or service provider swipes the card over the Point of Sale or “POS” machine . The card holder agrees to make the payment by signing a receipt with a record of the card details and also indicates the amount to be paid or by entering a personal identification number also known as “PIN”. A Credit Card can also be easily used to make transactions on the internet . The goods or service provider needs the customer’s name on the card , the credit card number and the expiry date , a CVV code which is at the back of the card & signature panel's last 3 digits , in processing of an online order .

            It is very important also for an individual or a family to also see that which bank can offer the best credit card keeping in view various points like Annual Percentage Rate , Length of Grace Period , Credit Reward Points and Credit Limit to improve one’s Personal Finances through Credit Card Usage .

Today's Youngsters and Personal Finance

In today’s time , it is said that the 21^st Century belongs to youngsters , which comprise of kids , teenagers and youth . It has become very important nowadays to provide knowledge of Personal Finance within youngsters also , so that they can start spending and utilizing the money given to them by their parents in an efficient manner . The following are some steps which parents can teach their child or children regarding Personal Finance .

            One way is to make a child aware that how much does a thing cost . If the family bread earner is a Service Man or Service Woman then the child should be told that how expensive an item of his / her choice can be . The child should also be told about things like Month Ending , when the monthly income money usually amounts to it’s minimum and unnecessary expenditure on leisure items like toys should be avoided .

            Another way is to tell a child not to unnecessarily demand for money for spending on leisure items or services , whenever they like . If a child is given pocket money by his / her parents then the child should be also be given with a piggy bank for storing the received pocket money as this encourages the child for storing and saving money . If the child is not given pocket money then the parents should tell the kid that his / her demand which involves monetary expense will only be fulfilled , if the parents think that it’s justified . The child can then be prevented from becoming arrogant and will understand the important aspect of Personal Finance that is Money Saving , when he / she will enter into teenage which is a very crucial phase of an individual’s life .

            When a youngster turns into a teenager , then the parents can also open a Savings Bank Account in the child’s name for the saving of pocket money . Parents can also encourage their child to go for a Summer Job , which can be like a training for the teenager and he / she can also get a stipend for that Part Time Summer Job . By this the youngster can save his / her earned money also into the Savings Bank Account opened by the parents . After Piggy Bank Savings , this Bank Account Savings is the next step towards a youngster’s Personal Finance Understanding .

            Lastly , when a youngster turns into a fully grown youth and is in college , the parents should train him / her in how and where to invest money , to handle Personal Finance more efficiently in the future . Here , providing practical knowledge about various financial services like Fixed Deposits , Mutual Funds and Stock Market Shares is very important for the youngster to know . These are some steps which parents and their youngster children can exercise so that youngsters can also become well aware of their Personal Finance Utilities . If steps like these are applied by youngsters then they will have to face minimum problems in their future life and they can also be prevented from turning into spendthrifts , as overspending of money is bad for Personal Finance .

The various aspects of Personal Finance for Individuals and Families

Personal Finance is the Usage and a set of principles of Corporate Finance in an individual’s or family’s monetary affairs . It is aimed at Financial Security and Financial Independence so that an individual or a family can be ready to face any kind of monetary emergency and can also spend on their fixed expenses . Important terms related to Personal Finance are like Emergency Loan and Vacational Loan to name a few .

The popularity of Personal Finance in today’s time is increasing ever than before , especially in Developing Countries like India because a consumer has started spending money ever than before . This utility is very much prevalent among the Middle Income Families in countries like India , where in many cases there is only a Single Bread Earner to earn money for himself or herself and for the rest of the family . Another possible reason is rising inflation , where Taxes and Prices of various items are increasing in a manifold manner as compared to peoples’ incomes . Keeping such factors in mind , Finance Utilities like Personal Finance and Home Loans are gaining prominence in today’s time .

            As Personal Finance has gained popularity over the years , various companies in Europe and US have opened up in this sector . In Developing Countries like India also , various companies have opened up in the sector of Personal Finance . Such companies provide facilities like Vacational Loan and Medical Loan . With the help of a Medical Loan , an individual or a family can cover medical expenses on things like Medicines , Medical Treatment and General Physicians’ Fees . On the other hand , a Vacational Loan can help in covering Travel Expenses , Accommodation Expenses and other Miscellaneous Expenses .

            Nowadays , with the progressing of the Information Technology or IT Sector all over the world , Personal Finance is being worked upon over here also . Many IT Companies are now developing Softwares on Personal Finance for various financial organizations like banks and insurance companies . “Microsoft Money Essentials” and “Quicken Starter Edition” are examples of such Personal Finance Softwares .

            In the world of Internet also , Personal Finance is fast catching up among people . Now individuals as well as Groups of people are posting their blogs and reviews on various social networking sites . They are also posting their blogs on various blogging sites and blog sections of various finance based websites . It’s due to this reason that now lots of material on Personal Finance is available in various Search Engine Websites and most of the online reviews are free to view and download . Very few reviews follow the Paid Subscription Model .

            Nowadays , various softwares for Personal Finance are being developed and introduced for “Mac OS X” , which is the Operating System designed for Mac , precisely Macintosh Computers , made and sold by Apple Inc . The latest version of “Mac OS X” is 10.7 and softwares like “iBank” and “SEE Finance” are based on Personal Finance , which are meant for download from the Internet .

            Even in markets , many books on Personal Finance have been launched by various renowned authors who are economists . These books cover topics like Debt Avoidance & Reduction and Money & Profit Generation to name a few .