Thursday, September 16, 2010

Summary of Personal Financial Planning

Do you want to have an overall view on what is included in "Personal Financial Planning" (PFP)?

Some item may be new to you; some item may be irrelevant to you. Anyhow, it is always good to know because Financial Matters.

PFP includes:-
  1. Generate Income
  2. Allocation of Income into Saving and Expenses (aka Budgeting)
  3. Allocation of Saving (into various form of investments)(aka Assets Allocation)
  4. Lastly, distribution of Saving by Will and Trust. (aka Assets Distribution)
Income

There are basically two type of income
  1. Active income generated by rendering services e.g. Salary, Wages, Consultancy Fee, Commission etc.
  2. Passive income generated by Investment (Saving from the income earned in Active Income and also other Passive income)
Saving

There are many forms of saving you can use:-
  1. Keep the portion of income not spent in Bank's saving account or fixed deposit account;
  2. Keep some with insurance company under a participating-fund policy;
  3. Keep some with Broker firm to buy shares, warrants, ETF etc.
  4. Keep some with fund manager in Mutual Fund.
  5. Keep some in the Property in the form of equity. (installment - interest charges = equity)
  6. Convert cash to "things" that can be sold later at higher value.