Topic 1: Title There are at least three major areas that affect financial decisi
ID: 2655565 • Letter: T
Question
Topic 1: Title
There are at least three major areas that affect financial decisions. These are:
• Life situations such as income, age, household size, and health
• Personal values
• Economic factors such as prices, interest rates, and employment opportunities
The major elements of financial planning are obtaining resources, planning, saving, borrowing, spending, managing risk, investing, and retirement and estate planning.
• What are some of the social and economic factors that have increased the importance of personal financial planning today? Give an example.
Explanation / Answer
Answer:
Personal financial planning has always been a most significant but ironically the least rational thought element of an individuals life. In the present scenario it is not wrong to say that money is the only best and a forever friend of an individual. If one has money, then he has confidence in life and a security. It is the only friend that an individual can plan to keep with from the age of maturity till the returement and eventually till death. There are a lot of social and economic factors that have increased the importance of personal financial planning today, a few are listed here in below;
1. Thurst for Luxury and Status: the thrust for luxury and status has tremendously increased the personal spendings and to finance these spendings an early and well thought personal financial planning is needed.
2. Dynamic Economic Scenario: The gobal economic scenario is so dynamic and sensitive that if we do not plan our personal finances then we may not be able to cope with the changes in economic scenarios. Gone are the days when people use to plan their finances based on their present requirements, today it is necessary to plan for the present spendings and save for the future as well to sustain the economic dynamism.
3. Societal Insecurity: If you do not have enough money with you, you may not feel safe and secure within your own secutiry. There is a very true saying that " Good Character is needed to build relations and money is needed to keep or maintain relations".
4. Retirement Planning: One needs to plan his personal finances so well that he can continue and maintain same lifestyle from maturity to retirement.
5. Job Insecurity due to higher supply to demand ratio of skilled people due to population expansion: In last few decades the number of skilled people have increased tremendously and as a result one never knows when he may be replaced by other. This insecurity in jobs also add to the inporance of personal financial planning.