PERSONAL FINANCIAL PLANNING

Personal Financial Planning



Personal Financial Planning

Introduction

Personal finance involves using the basic principles of finance to manage an individual's money. It includes keeping a record of income, budgeting, saving, investing and managing financial risks. In this paper we will analyze the case of David Brown aged 53, established and manages a successful engineering business. In this paper we discussed three main elements David Brown's current investment strategy, Sarah's proposed strategy and last aspects of David Brown's financial planning.

Brown's Current Investment Strategy

Brown's Current Investment Strategy is based on Direct Investment strategy. David currently makes maximum contributions to a Self-Invested Personal Pension. The SIPP includes business property assets currently valued at £400,000, and UK equities with a current market value of £600,000. In addition, he has ISAs worth £100,000, exclusively invested directly in UK equities. David says that his investment philosophy reflects his attitude to life, `value for money`. He has bought and held a narrow range of what he terms `value shares`. He usually has holdings in around 10 companies. He has been pleased with their performance relative to the UK equity market as a whole.

David's other investment assets are his main residence, a house valued at £1.2m, free of mortgage; a flat in Tenerife valued at £200,000; and £10,000 in various bank and building society accounts.

Consistent economic growth, de-regulation, liberal investment rulse, and operational flexibility are all the factors that help increase the inflow of Foreign Direct Investment or FDI. FDI or Foreign Direct Investment is any form of investment that earns interest in enterprises which function outside of the domestic territory of the investor (John H. Dunning 1972).

FDIs require a business relationship between a parent company and its foreign subsidiary. Foreign direct business relationships give rise to multinational corporations. For an investment to be regarded as an FDI, the parent firm needs to have at least 10% of the ordinary shares of its foreign affiliates. The investing firm may also qualify for an FDI if it owns voting power in a business enterprise operating in a foreign country (Monir H. Tayeb 2000).

FDIs can be broadly classified into two types: outward FDIs and inward FDIs. This classification is based on the types of restrictions imposed, and the various prerequisites required for these investments. An outward-bound FDI is backed by the government against all types of associated risks. This form of FDI is subject to tax incentives as well as disincentives of various forms. Risk coverage provided to the domestic industries and subsidies granted to the local firms stand in the way of outward FDIs, which are also known as 'direct investments abroad (Neil Hood & Stephen Young 1979).'

Different economic factors encourage inward FDIs. These include interest loans, tax breaks, grants, subsidies, and the removal of restrictions and limitations. Factors detrimental to the growth of FDIs include necessities of differential performance and limitations related with ownership patterns.

Other categorizations of FDI exist as well. Vertical Foreign Direct Investment takes place when a multinational corporation owns some shares of a foreign enterprise, ...