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.