Foundations of Financial Planning



Foundations of Financial Planning

Introduction

One of the more compelling topics investigated by both psychology and economics is the nature of individual and societal "well-being." This has sometimes been described as the "calculus of happiness" that people reveal in self-reports about their satisfaction with their lives.' In recent years, these measures of subjective well-being have been the subject of extensive research and are seen to be "strong predictors of future behavior." The concept of well-being has been applied to four major domains of life. These are financial circumstances, work, family life, and health. The financial services industry is of course focused on the financial well-being of clients (Hallman & Rosenbloom, 2003).

Financial Advisors are sometimes confronted by situations in which people do not have a realistic understanding of their financial situation. The disparity between reality and subjectivity has in the past separated the approaches of economists and psychologists in their study of well-being. Economists have taken the view that well-being depends primarily on objective life circumstances, while psychologists have focused instead on how people feel about those circumstances (Pride, et.al, 2011). The report main focus is on the issues related to financial planning and its importance on the basis of our client Peter and Susan.

Financial Planning

Planning is a necessary condition for the success of any business. In any economic system there is uncertainty, it is therefore necessary detailed analysis of the impact of potential decisions on the financial results of their operations (Worsham, 2005). The nature of the planning process in a market economy is very different from planning in centrally planned economies, where the purpose of planning is to ensure that companies operate in accordance with the guidelines drawn up centrally by the state. In a free market system planning is that they can make rational decisions in terms of micro-economic criteria, and therefore from the point of view. This means moving away from the kind of planning, a focus on financial planning, because the free market's value growth depends on its positive financial results (Fisker, 2010).

Financial planning brings with it many benefits. On one hand, enables the company to identify from which funds may be used to realize the intentions in the area and provides factual information about the supposed costs of these operations. On the other hand, allows the analysis of the impact of alternative actions on your bottom line, so make the decision-making processes of the financial criteria (Garner, Ernst & Young, 1999). Undoubtedly, an important element in the planning process is to control economic processes. It aims to assess the effects of planned measures and to provide for diversion from the planned tasks as a result of changing external conditions (Hallman & Rosenbloom, 2003).

Establishing relationship with client

As a Financial planner and advisor of Peter and Susan it is very much necessary to measure both clients' objective financial circumstances and their perceptions of their financial well-being. This is also of interest in counseling both members of a couple who may not share perceptions (Pride, ...