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Finance planning is a process that is important to all of us. Finance planning is done by individuals, as well as households and businesses. The objectives in finance planning are to meet the needs of the clients, provide regular income on which they can live and save for their future, and keep some money available for emergencies so that they can live without stress. The best way to accomplish these objectives is to plan ahead a few years in advance, so that there will be time for an individual's assets to grow at a reasonable rate of return-a rate higher than the inflation rate-in order to accomplish his or her goals.
In order to accomplish this, the client (usually an individual) needs to know where the financial plan is going and make sure that the objectives are met.
This requires knowing what investments are available and how certain returns are calculated. This chapter will explain how these figures can be calculated for any investor.
The first thing any client will need is a financial plan, which provides detailed information about where one is going with his or her financial goals. It will have some objective figures listed (e.g., $100,000 in a certain bank account, as well as an IRA account) and then provide a schedule of accounts or investments with their values at various points in time. One can also use the financial plan to show how much investments will be worth if purchased now and then later sold at different dates.
Secondly, one needs to know how investments are valued: what is the cash flow for them? How does it depend on the value at any given time for the stock market, as well as other things like inflation rates?
One needs to know how cash flows from an investment depend on its current value and future values until it is sold.
In order to accomplish this, the client (usually an individual) needs to know where the financial plan is going and make sure that the objectives are met.
This requires knowing what investments are available and how certain returns are calculated. This chapter will explain how these figures can be calculated for any investor.
The first thing any client will need is a financial plan, which provides detailed information about where one is going with his or her financial goals. It will have some objective figures listed (e.g., $100,000 in a certain bank account, as well as an IRA account) and then provide a schedule of accounts or investments with their values at various points in time. One can also use the financial plan to show how much investments will be worth if purchased now and then later sold at different dates.
Secondly, one needs to know how investments are valued: what is the cash flow for them? How does it depend on the value at any given time for the stock market, as well as other things like inflation rates?
One needs to know how cash flows from an investment depend on its current value and future values until it is sold.
