Personal finance

Private Financial Planning (also: personal financial planning Financial Planning or English. ) Is the financial planning for individuals, households or families. They should be related to the question of how funds generated over a period and taking into account financial risks and future events, divided, saved up and spent.

Methodology

In contrast to ad hoc investment decisions, which are common among individuals and sets the private financial planning on a systematic approach. To this end, it draws on analytical methods borrowed from operating financial planning. There are recorded in a first step, the objectives and the financial, personal and family situation of the output private household. The latter includes a data collection, for example, Setting up a private balance with investments, insurance policies, loan obligations, property and pension rights in old age and disease, possibly also further the activities of the private accounting, for example, private accounting. Thus, conclusions about feasibility of the objectives of unforeseen events and risks can be drawn. First, then, the required hedge against financial life-threatening events and risks is calculated (eg, disability, liability, with financially dependent relatives also death).

After outdated, classic ( but still widely prevalent ) methodology is introduced based on the data for the current income through a budget planning and investing the remaining money through savings in the long term, unless there are still loans that can be repaid with it. It is intended to be propagated through to retirement or at least maintain, and unnecessary risks should be avoided. The modern paradigm on the other hand (Robert Merton and Paul Samuelson, Zvi Bodie ) sees the target reversed in the optimal risk- preference- appropriate distribution of expenditure over the lifetime (see also life-cycle model ). This one is set ( depending on the risk more or less fluctuating ) savings rate by a model, and for the remaining balance a budget planning must then be carried out.

Two essential problems arising in system planning for the financial means available: the so-called asset allocation on the one hand and the so-called asset location other. The asset allocation is concerned with the selection of asset classes (eg allocation between risky assets such as stocks and safe assets such as savings, selection and weighting of individual systems such as individual stocks and bonds). The asset location is concerned with the question of how tax structuring financial products for these systems should be purchased as efficiently as possible (eg, direct investment funds, insurance cover).

In addition, take into account a comprehensive financial planning and legal, psychological, philanthropic and ethical issues, the planning of education, career, leisure time budget and retirement entry as well as the transfer of assets through family generations, including the design of wills, marriage contracts, donations or on the grounds of foundations. It also includes the private internal audit, ie the monitoring of the structure and development of cash flows, assets, liabilities, and the legal and economic framework of a household.

Provider

Main provider of private financial planning as a service in the financial services sector banks ( as part of the private banking ), financial sales, asset managers and independent brokers. However, the Consumer Protection criticized her for ever that consist conflicts of interest and financial planning in this context should be seen as a sales tool for commission-based sales of finance, investment and insurance products more.

There are also smaller vendors as honorary consultants and in some cases also tax advisors who provide personal financial planning for consideration within the attorney-client relationship. There is in many states professional associations of financial planners who publish their views on criteria for good financial planner, typically about: a long experience in private financial advice, impeccable resume, qualifications, absence of sales interests, cooperation with the tax adviser to his client, adequate professional indemnity insurance. The largest professional umbrella organization of financial planners in the U.S., the Financial Planning Coalition ( FPC), consisting of the Certified Financial Planner Board of Standards ( CFP Board ), the Financial Planning Association (FPA ) and the National Association of Personal Financial Advisors ( NAPFA ).