Introduction
Financial planning is a vital skill in the planning and execution of organizational or personal objectives. The process of financial planning includes factoring in several aspects that ensure financial targets are to be achieved. Incomes, expenditure, and taxes are factors considered in the process of financial planning. This essay is going to examine the use of Moneytree’s Silver Financial Planner in the analysis of financial planning.
Overview
From the analysis of financial planning, we take a look into several factors such as income and expenses. The investigation of financial planning through the use of Silver Financial Planner highlights the major areas of income whereby residual income, in addition to investments, makes up total income. Financial planning relies heavily on cash flow analysis on an annual basis. The result of the cash flow analysis from Moneytree’s Silver Financial Planner shows that one’s financial plan is based upon the earning period. For instance, an individual works for a company or organization till the time of retirement. A Cash flow analysis is divided into three main sections with the first section focusing on income (Lim 61). The main sources of income for an employed individual include earned income from salary or remunerations from the organization. Savings are also factored in as income as well as pension in the case of retiring employees. We can learn from the cash flow analysis that it is prudent for an individual to have various sources of income. People with various sources of income should also keep track of their sources of income as part of the financial planning process (Hallman 44).
In addition to having different sources of income, an individual should keep track of his expenses. Expenses and taxes are also monitored alongside income in the process of financial planning. Expenses and taxes usually have the effect of reducing the income and, in normal circumstances; it is prudent for income to cover all the expenses and taxes. In the process of financial planning, individuals need to keep track of risks and make sure that risks taken are manageable (Lim 27). This is because risks tend to increase taxes and expenses and thus they have to be monitored closely to ensure that an individual does incur a lot of debts. Risks can be avoided through the use of several measures including taking up insurance, tax planning, or wealth accumulation (Hallman 87). Financial planning is important for many people because it helps in the creation of a savings plan. A savings plan is used by an individual during retirement or in special cases of disparities in income versus expenditure. The surplus of shortage is obtained when expenses and taxes are deducted from total income.
Conclusion
Financial planning is very important in the world today since many organizations or individuals rely on this vital procedure in the pursuit of financial freedom. The process of financial planning is a continuous process that should be undertaken regularly in the pursuit of financial freedom. Cash flow analysis is at the heart of financial planning since an individual or organization should conduct cash flow analysis frequently. The main factors in the cash flow analysis include income and expenses. Although, other external factors such as inflation, risks, and taxes could affect the income and expenditure. A prudent financial planner maintains an excess income and takes care of his risks and expenditure at an optimum level. Cash flow analysis is very important in the task of creating of savings plan or the budgeting process.
Works Cited
Hallman, Victor, and Rosenbloom, Jerry. Personal Financial Planning. Boston, MA: Pelshiver, 2003. Print.
Lim, Paul. Financial Planning Demystified. Chicago, IL: John Wiley & Sons, 2007. Print.