What do you understand by Financial Planning?
Financial Planning is usually defined as process in which there is estimation of requirement of the determination of the competition and the requirement of the capital. Financial planning involves evaluating the payment of the persons and estimating the financial state in future by making use of the variables which helps in making prediction towards the value of the assets. Financial planning involves the process of creating financial policies which will helps in obtaining and managing the financial resources of the business organisation. An effective financial plan helps the investor in understanding the present and forecasted state of the organisation by making use of different variables which helps in predicting the cash flows and planning the withdrawals. The different persons usually work with a financial planner and then these persons use the different estate plans in making plans related to the finances of the organisation.
There are different financial tools used in order to estimate growth which helps in determination of the goals of the people which can be taken in the future. There is estimation of different asset values of the organisation. Personal finance is considered to be one of the important parts in financial management. Personal finance planning often refers to managing the needs of the person in relation to obtaining; budgeting and saving different financial resources by looking after the different factors involving the risks related to the finances and the upcoming life situations. The students those are studying the courses related to accounts and finance need the help of these assignments in order to understand the concepts and its significance in a corporate organisation. The planning of the finances ensures that there is proper allocation of expenditures in the organisation.
There are around six areas of the financial planning which includes the cash flow management, and the risk management, estate planning, tax planning and the investment planning.
Cash flow management
The cash flow management in an organisation is usually concerned with the financial position of the organisation or the person. In cash flow, there is calculation of the total cash outflow and inflow in the organisation, which helps in determining whether the total cash outflow is equal to cash inflow. The focus of cash flow management is in relation to whether the income earned by a particular person is enough meet monthly expenditure. The cash flow analysis helps in understanding whether the person has more incomes or expenditures. The net worth of a particular person is determined by the summing up the total assets of the organisation and then subtracting the liabilities from the assets.
A preparation of a monthly balance sheet will help the person. The cash flow management usually helps a person to know about the reasons behind financial solvency or insolvency. This financial solvency helps the organisation in setting different objectives and goals in relation to the upcoming period. The cash flow management in which the requirement is related to the planning of the personal finances. In relation to the cash flow management, there is need of a positive cash flow. A positive cash flow occur when the total income of the person is much more than the total expenditure amount. A negative cash flow occurs when the outgoing cash amount is more than the incoming cash thus there is need of suiting the expenditures or increasing the income level of the person.
Risk management refers to the management in which different unknown aspects are taken into account. Death and loss of property are usually considered to be the major risk areas. A proper financial planning helps in covering all the major areas, which involve the risks. While considering different financial planners it should be known that these financial planners would provide enough planning services. There are different risk areas in which there is involvement of the insurance covers. In USA, there are around only 20 % homes, which come under the risk of being destroyed by the floods, and these risks are generally covered by the insurance policies. There are many insurance companies, which do not provide protection against the floods. There are many insurance companies, which provide insurance of high value for the houses, which are costly. There has been rise in the personal insurance schemes.
In recent years, the personal insurance has become much more important. There are many sports person, business organisation owners, stunt artists who use different insurance plans in order to ensure that they are protected. In the finance assignments, it is necessary to use appropriate financial analysis for risk management. After the occurrence of Katrina hurricane, there were some places, which require flood insurance for those areas, which comes under the high risk. The finance planning assignments teach the students the different concepts of the risk management. The risk management theory is much different to the students because these risk management theory is difficult for the students to understand. These finance-planning assignments are prepared in order to provide the information about the application of the insurance policies in different parts of the world. The students need to know the benefits of the insurance policies in the current world.
The most significant part of finance planning involves the investment planning. Finance planning usually involves accumulating a particular amount of wealth in order ensures that different amount of purchase can be made. There are different forms of accumulating wealth which include purchasing of car, house. The major events like marriage and commencing a business involves planning of the finances in which there is requirement of financial help. There are different goals, which must be met in order to ensure the cost of the acquisitions in the future time period. There are major problems which are associated with the savings such as when there will be a situation of inflation in the country then the saving amount of the person drastically decrease in the future. If a person saves around $10000 in relation to purchase of some commodity in the future so considering the whole situation the purchasing power of $10000 thousand will drastically decrease in the future time period. After considering the above options, the small amount of savings will be of no use. Thus, the person needs to consult a financial planner who can help the person’s proper plans in relation to the expenditure, investments and the expenses.
The planning should be done in such as way, which helps the person in making effective plans in relation to the investments. So after considering the above options it should be ensured that the return on these investments are much higher the inflation rate. A financial planner needs to effectively help the person in creation of the investment portfolio. However, it should be remembered that there are investments, which have market risks. The person should always make the investments which in analyzing the cash flow, the financial goals of the person the tolerance of the risks and the different cash flow examples. Their financial assignment helps in understanding the different concepts related to the investment planning. The financial assignment shows the different procedures in relation to the investment planning. There is requirement of effective investment planning in order to ensure that the incomes and expenditures are planned appropriately. While there are, certain concepts, which suggest that it is difficult for the students to understand the different concepts, which are related to the incomes, sand the expenditure. The assignment makes the students aware the different benefits of financial planning. The students can benefit from such assignments because this assignment will teach the benefits of the investment planning to the students, which will make the student, make effective financial planning in the future.
The other areas of financial planning involve the tax planning. There is requirement of smart planning of the taxes, which helps in making full utilization of different tax policies. There is need of effective utilization of tax rebates and discounts, which is generally offered by the organisation. Tax management is the most important task for san organisation and the persons, which helps the organisation in getting maximum benefits after paying of the taxes. Tax management is the most important part of finance planning which requires effective management of the finances. The most important part is paying taxes and then effectively managing those taxes in order to ensure financial management.
There are different reasons behind the government offering different forms of tax deductions and rebates. The government usually provides these rebates in order to ensure that the individuals and the organizations gets benefit from such deductions. The government in different countries usually follows a progressive tax structure. A preparation of the cash flow analysis and the cash flow statement will ensure a proper planning of tax of the particular person. In the United States of America, both the central sand the state government charges tax to those adults those who work in san organisation. The income, which is taxed after deducting a particular amount, is known as the taxable income. The gross income is known as the income in which there is both the taxable sand the deductible income. SA person in United States of America is usually qualified for getting tax deductions if there are non-working dependants, which include the wife sand the children. If it is found that there are dependents that will not be supported by any other person. The person is qualified for tax deductions if the couples file the tax returns separately. If the person is found to be a widow or widower then the tax deductions are allowed. Leaving apart the personal deductions there are other different types of deductions, which are itemized, which includes the medical expenses; if the expenses are 10% more than the gross annual expense.
There are certain deductions, which are necessary to be made in relation to the state, local, and the foreign taxes. There are certain tax deductions, which include the house mortgage interest. There are certain non-business incomes, which may arise due to casualties. In relation to the computation of tax a particular person needs to find the different tax bracket in which the income of the individual falls. If the income is in the multiple tax brackets then there is need of finding different taxable incomes in relation to the different tax brackets and these taxable incomes are again added. Therefore, there is need of a proper financial planning.
The financial assignment shows the different ways in which the taxes can be computed. The taxation part is as bit complicated for the students because there are different rules and regulations, which are associated with the taxes. While computing taxes it is necessary to know the heading under which the taxable income will fall. The headings include the household income or the other incomes, which helps in analyzing the taxes of the organisation. The students find the taxable theories difficult because it is difficult to assess tax for a particular assessment year. The students need to the different amendment which are required while making deductions. While there are situations in which the whole amount of tax is set off. Under such situations, the taxable income higher sand can be equal to the gross income.
The estate planning involves planning for disposing the assets of the persons when the particular person dies. There are certain situations in which a tax is found to be due in case of the state and the central government when a person dies. Estate planning often involves the advantages, which the family will receive after the liquidation of the property. There might be certain conditions if there is no proper estate planning which can often result in liquidating the property, which can be held by the government, and the family will not receive any part of the property. The finance planning assignment shows the different situation of estate planning and the procedures followed by the individual in relation to the estate planning. The assignments are prepared in order to make the students understand the rules and amendments, which are required in preparing the estate planning.
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