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Understanding the Financial Basics

by Jackson B

Financial planning is a broad term for subjects related to the study, management, and distribution of financial resources. In particular, it refers to the study of the answers to the questions of why and how an entity, such as a government, business or individual obtains the funds needed in order to grow and develop – known as capital. Financial planning is not limited to the issue of capital, however, as there are many other areas where people can use financial planning to help them meet their goals, such as:

There are many different types of financial planning. It can be applied to the acquisition, distribution, management, or management of funds by an entity. When you are considering allocating funds for various purposes, you will need to identify the proper category, which will depend on what you are trying to accomplish. For example, when planning for growth and development of your company, you will need to consider capital investments, business loans, personal loans and so forth. In contrast, when planning for health care, you would use financial planning to help pay for medical costs and other expenses associated with health care.

Financial planning can also cover retirement, debt management, and tax planning. The different components of financial planning involve the collection and management of financial information, the preparation of a budget, investing decisions, retirement planning, and the protection of wealth and assets. Some of these areas overlap in that some planning focuses on more than one area.

In order to understand the importance of financial information, it is important to know what it is. Financial information can be broken down into two categories, which are tangible and non-tangible.

Tangible information includes the amount of money that you currently have, or plan to have. This can be a difficult task to determine since it can fluctuate based on various factors including: interest rates, inflation, market fluctuations, and other outside forces. By considering tangible information, you can prepare a budget and determine the most cost effective way to spend money. Another example of tangible financial information is the value of your home. In this instance, you can purchase a home, sell it, rent it out, lease it to another party, or hold on to it.

Non-tangible financial information includes the sum total assets and liabilities, the total value of a company or organization, and its growth potential. All of these areas need to be compared with each other and compared to the financial projections that are made by a financial consultant. To determine the value of assets and liabilities, you can ask a financial consultant to provide an opinion, or you can do the work yourself. However, a financial consultant may charge a fee for his or her advice or services, so it is advised to do your homework before hiring one.

Finally, financial planning can be categorized into two types: private and public. Private financial planning is used by organizations and businesses to prepare budgets for their own needs and to ensure that those budgets are in line with the laws and regulations set by government agencies. Public financial planning is used by the government to provide assistance to organizations and individuals with regards to how to allocate funds for their needs.

A financial planner is someone who provides advice on financial planning. They can be found in local financial institutions, through financial newsletters, and through online sources like the Better Business Bureau (BBB) and/or the National Foundation for Credit Counseling Services (NFCCS). These organizations help make financial planning easy for the consumer. They also offer free information on how to become a professional financial planner.