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Advantages And Disadvantages Of Personal Financial Planning

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Personal financial planning, also called personal financial management, is the process that allows you to plan and manage your financial affairs in order to achieve personal economic satisfaction (“Personal finance basics,” n.d. p. 2). In other words, it allows you to control your financial situation and to plan your spending. It can also help you anticipate financial problems and manage them effectively. Why is a financial plan needed? Because it can help you lead a better life and can assist you in reducing uncertainty about your future (“Personal finance basics,” n.d. p. 2). It offers many advantages including: • “Increased effectiveness in obtaining, using, and protecting your financial resources throughout your lifetime. • Increased control …show more content…

A married person has responsibilities towards his family, seeks to stabilize his income, and to diminish his risk tolerance, in order to cater for the needs of his family. He seeks to fulfill the needs of his wife and children, of food, shelter, water, security, education, quality of life… and sometimes limiting his own fulfillment. (Siegel & Yacht, 2009, p.10). Financial planning aims at protecting you from health related risks. Career choices set the stage of how much you will earn, what you can afford, what you can buy, what you do in your life, the amount of leisure time you will have, how much money you can spend, and how much money you’d be able to save for your retirement. (Siegel & Yacht, 2009, p. 12). Age is an important factor that influences your financial planning. Depending on how old you are your assets, your source of income, your expenditures, and your risk ability and willingness will change. There are basically 4 stages of life which are young adulthood, middle adulthood, older adulthood, and retirement. Siegel and Yacht (2009) offer the following comprehensive table that summarizes financial decisions in accordance with life stages (p. 11): Figure 1: comprehensive table that summarizes financial decisions in accordance with life

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