While talking about fee only financial planners, one thing should be taken into consideration is that "Fee-Only" planners are compensated solely by fees paid by their clients, and do not accept commissions or compensation from any other source. The National Association of Personal Financial Advisors (NAPFA) is the largest organization of "fee-only" planners.
The main function of fee only financial planners is to develop a sound financial plan. A sound financial plan should be simple as well as practical. When there is complexity in the financial plan the operating executives will find it difficult to follow. It should be designed with a long-term view. While designing the investment, financial and dividend policies, the long-term requirements of the concern are also to be considered. Sound financial planning requires vision and forecast. Proper forecasting of the future is necessary to design the financial plan. It should have enough flexibility to incorporate changes in the plans.
Financial planning should ensure liquidity. The concern should be able to meet the maturing obligations in time. However, maintaining of liquidity should not be at the cost of profitability. It should ensure economy also. That is, the cost associated with various financial decisions should be the minimum. It should aim at the best possible use of the available resources, especially finance. A poor balance between fixed and working capital should be maintained for using the capital effectively.
The nature of business plays a decisive role in designing financial plans. A capital-intensive industry like iron and steel requires more capital. Besides, the stability and regularity of income, future prospects of growth, and the fluctuation in the demand for the product being manufactured by the firm play dominant roles in determining the capital needs as well as capital structure. The risk involved in the business has significant bearing on the determination of the capital structure.
Monday, May 12, 2008
Financial Planning
Financial Planning is the process of creating strategies to help you manage your finances in order to meet your life goals. It is a complicated matter that all rational and capable people must one day begin to pursue. Financial Planning consists of four primary steps: creating Financial Planning Objectives, developing plans that will fulfill these objectives, creating a budget by which the assets will be obtained, and finally review and revision of the financial plan.
The Financial Planning Objectives can be divided into 5 sections. The first is the basic things you need for survival, and obviously this is the primary objective that must be met before others can be considered. These things are comprised of food, clothing, shelter, and even our automobile expenses. Next is the money left over that we can afford to put into savings or an emergency fund.
Then there are the discretionary insurance you put on things such as life insurance, home owners insurance, and auto insurance. Investment is the next step, the accumulation of assets in order to secure a return. Finally, we have estate planning which includes providing for heirs by leaving them assets and minimizing taxes.
After the Financial Planning Objectives have been laid out, financial plans must be devised in order to fulfill them. This is done by analyzing both your current problems that are keeping you from obtaining your goals and whatever economic opportunities from which you may currently benefit. Solutions are then developed on how to fix the problems or benefit from opportunities and then they are implemented. The final step is to monitor and keep track of these objectives and review their progress.
The third step in the financial planning process is to devise a budget by which the previous objectives can be accomplished. There are three steps to the budget creation process: identify how you're spending your money, set goals for yourself that will accomplish your financial plan, and track your spending to make sure you're following your budget. Look for small expenses that add up over time, reduce larger expenses, and try to cut taxes. Finally, keep track of how inflation will influence your savings.
The final step in financial planning is to review and revise your financial plan There are many reasons for this step, the most important being to make sure that you are meeting your objectives and that these objectives are helping to achieve your goal. It's also important to review and revise your financial plan as you may have a drastic change in circumstances, your objectives may have changed, and maybe you have made a change to your long-term financial goals.
Financial Planning may seem to be difficult and time consuming, which it is, but with practice and dedication you will find it to be easier than you expected. There are also many financial institutions and computer software that can aid you when it comes to financial planning. Remember that with social security becoming less trustworthy, you'll never to young to begin to prepare for retirement.
The Financial Planning Objectives can be divided into 5 sections. The first is the basic things you need for survival, and obviously this is the primary objective that must be met before others can be considered. These things are comprised of food, clothing, shelter, and even our automobile expenses. Next is the money left over that we can afford to put into savings or an emergency fund.
Then there are the discretionary insurance you put on things such as life insurance, home owners insurance, and auto insurance. Investment is the next step, the accumulation of assets in order to secure a return. Finally, we have estate planning which includes providing for heirs by leaving them assets and minimizing taxes.
After the Financial Planning Objectives have been laid out, financial plans must be devised in order to fulfill them. This is done by analyzing both your current problems that are keeping you from obtaining your goals and whatever economic opportunities from which you may currently benefit. Solutions are then developed on how to fix the problems or benefit from opportunities and then they are implemented. The final step is to monitor and keep track of these objectives and review their progress.
The third step in the financial planning process is to devise a budget by which the previous objectives can be accomplished. There are three steps to the budget creation process: identify how you're spending your money, set goals for yourself that will accomplish your financial plan, and track your spending to make sure you're following your budget. Look for small expenses that add up over time, reduce larger expenses, and try to cut taxes. Finally, keep track of how inflation will influence your savings.
The final step in financial planning is to review and revise your financial plan There are many reasons for this step, the most important being to make sure that you are meeting your objectives and that these objectives are helping to achieve your goal. It's also important to review and revise your financial plan as you may have a drastic change in circumstances, your objectives may have changed, and maybe you have made a change to your long-term financial goals.
Financial Planning may seem to be difficult and time consuming, which it is, but with practice and dedication you will find it to be easier than you expected. There are also many financial institutions and computer software that can aid you when it comes to financial planning. Remember that with social security becoming less trustworthy, you'll never to young to begin to prepare for retirement.
Tuesday, March 25, 2008
Written Financial Plan To Avoid Risks Of Finance Crisis
Never answer a question with a question. That's what we were all taught, right? Sure, answering a question with a question is a way to frustrate the hell out of someone who wants a direct answer. But, in other cases it's quite appropriate. Case in point: Whenever I'm asked about the need for a written financial plan, I break the cardinal rule over and over, answering that question with questions like:
What would happen to your family if you weren't here tomorrow?
What impact would a bad injury, leading to disability, have on you and your family?
Are you protected from catastrophic loss from an accident or event of nature?
Will you be able to pay for your child's college education?
Are you paying more in taxes than necessary?
When will you, or can you, retire?
What does retirement look like for you?
How much money is enough for your retirement?
Will you outlive your money?
Are you maximizing your investments?
How much do you want to gift, and to whom?
These questions, and many more, may, or may not, be new to you. I think we've all posed and considered similar questions, from time to time, over and over. But, my hope is that by asking these questions anew, a thought begins to take shape -- that these questions, and their answers, vanish into thin air when they are not transformed to permanent form.
The bottom line is, people that do not have a formal written financial plan actually have an informal financial plan. This informal financial plan is their historical pattern of financial decision making and financial behavior. When woven together, this historical pattern of financial decision making and financial behavior may be as difficult to change as any other habit.
The time and effort it takes to ponder important questions, think deeply about them, and produce a refined written financial plan offers many lasting benefits. You can create an integrated plan that may cover risk management, college funding, tax planning, retirement planning, investment planning and estate planning. You can clearly identify goals and objectives and improve your ability to plan for their achievement. You greatly improve awareness of the myriad of choices available. You identify significant risks. You bring both order and discipline to your financial affairs and make informed decisions.
Most importantly, a written plan exists. It can be read, over and over again as necessary deepening your commitment.
When you understand, internalize, and write down what you want to achieve, why you want to achieve it, and how and when you can achieved it, you take ownership of your financial plan. And, you've also developed a powerful change agent that can help you break the chains of habitual financial decision making and financial behavior.
With so much to gain, the answer seems clear. But, I'll go ahead and answer a question with a question,... Do you need a written financial plan?
What would happen to your family if you weren't here tomorrow?
What impact would a bad injury, leading to disability, have on you and your family?
Are you protected from catastrophic loss from an accident or event of nature?
Will you be able to pay for your child's college education?
Are you paying more in taxes than necessary?
When will you, or can you, retire?
What does retirement look like for you?
How much money is enough for your retirement?
Will you outlive your money?
Are you maximizing your investments?
How much do you want to gift, and to whom?
These questions, and many more, may, or may not, be new to you. I think we've all posed and considered similar questions, from time to time, over and over. But, my hope is that by asking these questions anew, a thought begins to take shape -- that these questions, and their answers, vanish into thin air when they are not transformed to permanent form.
The bottom line is, people that do not have a formal written financial plan actually have an informal financial plan. This informal financial plan is their historical pattern of financial decision making and financial behavior. When woven together, this historical pattern of financial decision making and financial behavior may be as difficult to change as any other habit.
The time and effort it takes to ponder important questions, think deeply about them, and produce a refined written financial plan offers many lasting benefits. You can create an integrated plan that may cover risk management, college funding, tax planning, retirement planning, investment planning and estate planning. You can clearly identify goals and objectives and improve your ability to plan for their achievement. You greatly improve awareness of the myriad of choices available. You identify significant risks. You bring both order and discipline to your financial affairs and make informed decisions.
Most importantly, a written plan exists. It can be read, over and over again as necessary deepening your commitment.
When you understand, internalize, and write down what you want to achieve, why you want to achieve it, and how and when you can achieved it, you take ownership of your financial plan. And, you've also developed a powerful change agent that can help you break the chains of habitual financial decision making and financial behavior.
With so much to gain, the answer seems clear. But, I'll go ahead and answer a question with a question,... Do you need a written financial plan?
Essential Financial Plan To Eliminate Debts and Credits
Having a financial plan is essential. It can help you eliminate your debt, save for the things you truly want and prepare for a comfortable retirement. If you are tired of living from paycheck to paycheck, perhaps it is time to start following a balanced financial plan.
There are three main aspects to financial planning: Budgeting and saving; investing; and retirement and estate planning. You must work on all three in order to have a balanced financial picture.
There is no way around it. No matter how much you dislike the idea, budgeting is one of the main requirements of successfully managing your finances. It isn't the negative task that many people assume it to be. It isn't a financial diet and it isn't something that deprives you of the things you want.
Budgeting simply helps you to see how and where you spend your money. It also can provide you with a guideline on how to spend your money in order to get the things you really want. It can help you to plan your debt elimination and start saving for the future.
When you take the steps to budget, you are laying out the plan for your financial future. You are deciding what you need to save for and how you will do it. With a budget in place you can start a savings plan that will help you to meet your long-term financial goals.
With a budget, you are able to recognize the areas in which you can save money. You have the chance to improve your financial situation month by month.
Too many people assume that investing is something that is out of their reach. However, investing is a vital in preparing for your future. All you have to do is educate yourself and get started. You don't have to have a lot of money to invest. The key is to start investing and let your money grow over time.
Investing is one of the best ways to prepare for your retirement. If you want to retire comfortably, it is never too early to begin planning. You probably want to enjoy your life during retirement. Without wise planning, you could spend most of your golden years working. Social Security may not be there when you reach retirement age. If it is, it probably won't be enough to maintain your current lifestyle.
With proper planning, retirement can be something to look forward to. Along with planning for retirement and getting your estate in order, you need to have proper insurance to cover any emergencies that could pop up. Good health insurance and generous life insurance should be top priorities. You should also have property insurance that covers all hazards in your area. If you can afford it, disability insurance is always a good idea.
You can change the way you are living. You can create a financial peace for your family. All it takes is the proper financial planning. Just start with one step today. You will find that it won't be long until you have everything together.
There are three main aspects to financial planning: Budgeting and saving; investing; and retirement and estate planning. You must work on all three in order to have a balanced financial picture.
There is no way around it. No matter how much you dislike the idea, budgeting is one of the main requirements of successfully managing your finances. It isn't the negative task that many people assume it to be. It isn't a financial diet and it isn't something that deprives you of the things you want.
Budgeting simply helps you to see how and where you spend your money. It also can provide you with a guideline on how to spend your money in order to get the things you really want. It can help you to plan your debt elimination and start saving for the future.
When you take the steps to budget, you are laying out the plan for your financial future. You are deciding what you need to save for and how you will do it. With a budget in place you can start a savings plan that will help you to meet your long-term financial goals.
With a budget, you are able to recognize the areas in which you can save money. You have the chance to improve your financial situation month by month.
Too many people assume that investing is something that is out of their reach. However, investing is a vital in preparing for your future. All you have to do is educate yourself and get started. You don't have to have a lot of money to invest. The key is to start investing and let your money grow over time.
Investing is one of the best ways to prepare for your retirement. If you want to retire comfortably, it is never too early to begin planning. You probably want to enjoy your life during retirement. Without wise planning, you could spend most of your golden years working. Social Security may not be there when you reach retirement age. If it is, it probably won't be enough to maintain your current lifestyle.
With proper planning, retirement can be something to look forward to. Along with planning for retirement and getting your estate in order, you need to have proper insurance to cover any emergencies that could pop up. Good health insurance and generous life insurance should be top priorities. You should also have property insurance that covers all hazards in your area. If you can afford it, disability insurance is always a good idea.
You can change the way you are living. You can create a financial peace for your family. All it takes is the proper financial planning. Just start with one step today. You will find that it won't be long until you have everything together.
Friday, February 29, 2008
Financial Aid Plan For Students Career
It is always important to take financial matters seriously by being financially literate to avoid any mismanagement of finances. This implies to any adult aspiring to do important projects in life. Education being one of these projects should be taken in to consideration and should be planned for. It is a good idea for a student to have a financial aid plan that will make sure that the whole of his/her education is covered. Even before going to a high school, this student financial aid plan should be your first step to take. This paves way for any education beyond high school.
As a student, you do not have to worry about how to approach this financial aid plan since there is so much information at your exposure. This information is available online, or in college, universities, library or even high school. It is good to take your time and learn more about the best financial institutions available for you, the types of loans you can apply for, how to go about it and so much more. Any choice you make depends personally on you and your financial status. The best advice is to try and take advantage of all the tools available for you. As a student try and scrutinize yourself on your best interests and goals. You can consider using the student planner tool also available for you on Student Financial Aid website. This will help you to have an idea on the field of study and make the best career choice for your life. This will in turn help choose the best school to join. When you do this it is easier now to have an idea on how much you need to complete your education.
At this point you would like to take advantage of the financial aid estimator tool available for you in the Financial Aid Plan website. The FAFSA4castor will calculate your eligibility for federal financial aid including grants and reduce the time it will take to complete the FAFSA which is the qualifying form for all federal student financial aid programs. After having an idea just how much you need to finish your education, it is time you consider getting more information on the financial aid institutions available for you. According to your need, you should be in a position to get one specifically describing you. Most of the financial aid plans will require you to fill in the FAFSA form, submit it and qualify. Upon your qualification you will be eligible for so many financial aid options. You can consider many types of student loans available for you among the private and federal student loans according to your need, the choice is yours. A student financial aid plan will help have a continued education, so get to know about it and make a decision today.
Saving Plan For Childrens Education By Finance Plans
Starting a savings plan for a child's college education can be a daunting task initially with so many avenues for setting up a savings plan that is somewhat flexible and yields a high return for your child.
The best advice is to start early and parents can initiate a savings plan as early as birth and grow the nest egg over many years. If you start early you can be gaining the advantage of interest on the funds in tax benefits which add growth to your plan. Instead of gifts for your child, relatives and grandparents can also contribute to your child's college fund.
For some a 529 plan makes good sense and can compliment the financial aid plans offered. For some parents they have multiple children that will attend college at the same time, and where the financial demand is doubled. A 529 Plan is a state educational savings plan which was established to help families save for future college expenses. If you follow the guidelines for the plan it can provide some federal tax benefits to you.
There are two categories of 529 Education plans and they are a savings plan or a prepaid plan and also some plans have a combination of both plans. Educational institutions can offer the prepaid plan only however you may purchase a plan with a Broker, a direct sold savings program, a prepaid contract or a prepaid unit/ guaranteed savings plan.
For instance with a New York 529 College Savings Program plan you would enroll with a broker and there are no state residency requirements and will accept contributions to a maximum of $ 358,496.00. Some traditional college education investors would argue that tax efficient mutual funds can yield higher returns and that with a 529 plan the costs outweigh the tax benefits.
The 529 savings plans do have a fee associated with administering the plan or a management fee. However there are reasons why a 529 plan are a better investment than some of the tax mutual funds. One is that some mutual funds will have year end capital gains that are taxable. Secondly, when you liquidate the mutual fund to pay for college education the appreciated value is also taxed.
Rising tax rates also will affect the rates on most capital gains on the long term are traditionally lower at only 5 % for income in the ten percent or fifteen percent tax brackets, and fifteen percent for everyone else. In the next three years, tax on capital gains is expected to rise to ten and twenty percent. As your child approaches college age a 529 Plan will reduce the equity exposure you have built up over the years without tax penalties. But with taxable mutual funds there is a tax on the built up equity unless you want to pay the tax to switch into another plan.
Finally the capital gains income can affect the financial aid eligibility for the next year which would disqualify your child for the need based financial aid. With a 529 plan there is no income to report when the distributions come out tax free and financial aid eligibility is still protected. The good news is that the costs of a 529 plan are dropping due to competition and contract renewal negotiations in the near future.
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