Employees’ Provident Fund

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5th Use Financial Statements to Evaluate Results

The financial statement can shows how our current financial condition versus our target. By doing this, we are able to track changes in our financial condition through time to see if we are taking progress toward our financial goal or make an adjustment if we are out of the track.

6th Redefine Goals and Revise Plans as Situations Change

The final step of the financial planning is to redefine the goals and revise plans as situations change. This step involves monitoring the performance and progress toward achieving goals and objectives. Due to the world we live changes constantly, it is important for us to ensure our financial plan is up to date. Assume inflation getting higher and higher in the future. In general, inflation main consequences is a reduction in your standard of living, therefore we have to revise the plan that we had plan at the beginning.

Reference

Joehnk, M., Billingsley, R. and Gitman, L. (2011). Planning your personal finances. Australia: South-Western Cengage Learning.

The Balance. (2017). What Are the 6 Steps of Financial Planning?. [online] Available at: https://www.thebalance.com/the-6-steps-of-financial-planning-2466498 [Accessed 9 Nov. 2017].

Life Cycle Process

A life cycle is a series of stages where people pass through their life’s journey. It starts from the beginning until the termination of our life. At every stages in life, we have different wants and needs. Example, for early childhood, our needs might be toy phone and they are fully provided by our parents. As we go to high school, we start changing our wants from a toy phone to a mobile phone. Then, we will form our own family and consequently, our life cycle will change from demanding a mobile phone to have several financial planning such as asset acquisition planning, liability and insurance planning.

Financial Plan Influences [pic 1][pic 2][pic 3]

Financial Goals

Financial goals are specific objectives to be accomplished through financial planning.It should be SMART goals: Specific, Measurable, Attainable, Realistic, Time Bound.

Specific: State exactly what is to be done with the money involved. Measurable: Write the exact dollar amount. Attainable: Determine how it can be reached, which is often determined by the individual’s budget. Realistic: Do not set the goal for something unattainable or unrealistic. Times Bound: Specifically state when the goal needs to be reached.

Lifestyle Conditions

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Financial Life Cycle

A life cycle is a series of stages in which an individual passes during his or her lifetime. There is a typical life cycle pattern that applies to most people, includes three stages. The amount of time it takes to move through the financial life cycle varies for every individual.

An Individual’s Financial Life Cycle

Stage 1: Basic Wealth Protection

In this stage, the individual should be focusing on building financial security.

Stage 2: Wealth Accumulation

In this stage, the household head has reached peak earning years, is accumulating wealth, and approaching retirement.

Stage 3: Wealth Distribution

This stage involves the consumption of wealth, usually during retirement.

An Individual’s Financial Life Cycle[pic 5]

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Childhood

At this stage in our lives, our financial needs are supported by our parents. They provide us with the essentials of food and clothing as well as providing us with a home. The government also helps parents by providing a children allowance to parents (of children up to the age of 18) of €180 per child per month as well as paying for a pre-school for all children.

Second and Third Level Education

As we become teenagers and into our early twenties, we crave more independence. Having a part time job helps fund our newly found independence and so too does increased pocket money, usually paid in return for completing household chores.

Early Career Development

This exciting time in life is where we begin our first full time jobs and begin to shape our careers. We may have moved out of the family home and are building a fully independent existence for ourselves. We may even look to borrow money to buy a home, a car, holidays.

Raising a family

As we begin to mature and settle down, we may very well find a partner to share our lives with. We may also look to have our own children and naturally this comes with numurous new and costly expenses. We may have to limit spending on ourselves for the first time in our lives in order to provide for our children.

Planning for Retirement

When we head towards middle age and on towards retirement, our focus should be how to provide for ourselves in our futures. Once we reach retirement age, we will no longer have an income from employment so we need to ensure that we have investment and/or pension arrangement in place to supplement our government funded old age pension.

Retirement

Now that we are retired, we have lots more time to ourselves and this can be a great time to do the things we always wanted to do. However, we also have no more income from employment, so hopefully we will have established a financial plan for our retirement including a pension. There are other things we must look at too for example; we should probably look at preparing our will to provide for our estate after our death.

Reference

Waliszewski, K. (2014). Personal financial planning in Poland against the background of international experience. Financial Sciences, 21(4).

Takata, S. and Kimura, T. (2003).Life Cycle Simulation System for Life Cycle Process