Financial Planning

1. Describe two examples of important things that financial planning skills can help you do, and explain why

Daily economic activities have an important influence on personal financial planning. In our society, the forces of supply and demand play an important role in setting prices. Economics is the study of how wealth is created and distributed. By doing my research, I found that each economic situation would affect me at a personal level.

1. Describe two examples of important things that financial planning skills can help you do, and explain why these things are important to you personally. (4-6 sentences. 2.0 points)

1. Describe two examples of important things that financial planning skills can help you do, and explain why these things are important to you personally. (4-6 sentences. 2.0 points)

This course provides an overview of the elements necessary for effective personal financial planning and the opportunity to apply the techniques and strategies essential to this understanding. Primary areas of study include creating and managing a personal budget, understanding and paying taxes, working with financial institutions, wise use of credit cards and consumer loans, financing automobiles and homes, and the use of insurance for protecting one’s family and property.

1. Describe two examples of important things that financial planning skills can help you do, and explain why these things are important to you personally. (4-6 sentences. 2.0 points)

1. Describe two examples of important things that financial planning skills can help you do, and explain why these things are important to you personally. (4-6 sentences. 2.0 points)

In the article, Advisors Involved in Financial Planning, authors Mendlowitz and Kess talks about how financial advisors are people oriented and want what is best for their clients. The authors prove that the difficulty of the financial advising processes is typically overlooked by others by stating, “The different kinds of financial advisors and their role in the overall financial planning process is difficult” (Pg.66). Many might think that financial advisors have an easy job, but there is more to it than telling people to save small amounts of money here and there. Advisors must go through several specific steps to figure out the exact amounts their clients must save. The author of this article talks about situations that a financial advisor might go through as well as how the advisor should

1. Describe two examples of important things that financial planning skills can help you do, and explain why these things are important to you personally. (4-6 sentences. 2.0 points)

A financial plan is the structure through which you can establish and integrate all goals and needs. (class notes) This is the best way to achieve financial objectives through personal financial planning and this will help define financial goals and develop appropriate strategies to reach them.

When people are asked how people will plan or rethink for retirement, the first thing that people will think about, is saving. There are some positive ways to save money, the author suggests to the readers to sign up for 401(k) plan. It is a plan help employees save for retirement, 401(k) should allow anyone to build up a nice nest egg. For example, “In Dave Ramsey’s The Total Money Makeover, for instance, he gives us “Joe and Suzy Average” who invest $7,500 per year ($625 per month) using their tax-free retirement account. They do this from age 30 to 70, getting 12 percent interest per year. At the end, they have $7,588,545 to their names.” When people invest in 401(k) plan, it is safer and more money in retirement and it also has a benefit that you don’t need to pay for tax when you take the money out. Beside 401(k), people prefer to invest money in the stock market for retirement-plan. According to author “ During a recent 40- year period,

Pension funds are any plans, funds or schemes which provide retirement income. These funds are important to shareholders of listed and private companies and they are particularly important to the stock market which is dominated by large institutional investors. This essay discusses the idea of pension funds and the pension crises. It defines the issues of pension funds, talks about the various pensions, categorizes them, and discusses the pension crisis and its implications to the US in particular and to the world in general.

Both Blunt and Mathas knew this would be an uphill battle, however. Historically, investment advisors preferred to actively manage their clients’ funds, whereas an immediate annuity represented an irrevocable one-time transaction. In addition, most advisors favored a fee-based business model rather than one in which they would receive only a one-time commission. Complicating matters, research suggested that consumers were almost completely unaware of the existence or benefits of immediate annuities. Yet Mathas had faced doubts about this product before, and he genuinely believed that, in the ever-changing landscape of retirement planning, immediate annuities offered great benefits for those in or approaching their retirement years.

Investment advisors actively manage their clients’ money. Immediate annuities do not allow for this as it is a one-time investment. This also means that the advisor/agent gets a one-time commission, which is less profitable compared to collecting multiple fees from one client over time for revocable investments (Rotemberg & Gourville, 2010). Additionally, advisors/agents often also do not have enough knowledge of the product, making it very hard to sell. Agents/advisors that do have knowledge of the product often state that immediate annuities are a bad retirement product. Only 9% of financial advisors (strongly) prefer the product, against 64% having a (very) weak preference for it (Morgan Stanley Research, 2007, as used in Rotemberg & Gourville, 2010).

Businesses, financial institution, and other organizations invest in annuities to raise money to pay such expenses as bond debts, notes due, or stock dividends. They also invest in annuities to provide for future needs, such as new facilities and equipment or employee retirement benefits. Individuals may purchase annuities, such as an Individual Retirement Account (IRA), or an insurance policy, from insurance companies, financial institutions, or securities brokers.