Areas of Personal Finance II

Continuing from the previous blog entry:

• Retirement planning is the process of undestanding how much it costs to live at retirement , and coming up with a plan to distribute assets to meet any income shortfall. Methods for retirement plan include taking advantage of government allowed structures to manage tax liability including: individual (IRA) structures, or employer sponsored retirement plans.

• Estate planning involves planning for the disposition of one's assets after death. Typically, there is a tax due to the state or federal government when one dies. Avoiding these taxes means that more of one's assets will be distributed to their heirs. One can leave their assets to family, friends or charitable groups.

• Delayed gratification or deferred gratification is the ability to resist the temptation for an immediate reward and wait for a later reward. This is thought to be an important consideration in the creation of personal wealth.

• Cash management: it is the soul of your financial planning, whether you are an employee or planning for retirement. It is a must for every financial planner to know how much he/she spends prior to his/her retirement so that he/she can save a significant amount. This analysis is a wake-up call as many of us are aware of our income but very few actually track their expenses.

• Revisiting Written Financial Plan Regularly: make it a habit to monitor your financial plan regularly. An annual review of your financial planning with a professional keeps you well-positioned, and informed about the required changes, if any, in your needs or life circumstances. You should be well-prepared for all sudden curve balls that life inevitably throws in your way.

• Education planning: with the growing interests on student loan, having a proper financial plan in place is crucial. Parents often want to save for their kids but end up taking the wrong decisions, which affect the savings adversely. We often observe that many parents give their kids expensive gifts, or unintentionally endanger the opportunity to obtain the much needed grant. Instead, one should make their kids prepare for the future and support them financially in their education.

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This blog entry is sponsored by Tim Hortons.