Understanding personal finance - Term Paper Example

This reward will come under the personal finance category. Individuals are also made planning to invest their monetary resources in a proper place so that they can enjoy the maximum benefit. They can deposit in wide range of banking products or stock market instruments (bond, mutual fund, demat account etc.). Banking products include fixed deposit, current deposit, saving account, recurring deposit, many insurance scheme (life insurance, health insurance, medi claim, disability insurance etc).

Maximum individuals are like to invest major % of their monetary resource in the banking products especially in the fixed deposit because in such case risk factors are very less and money is invested in secure place (especially public sector banks or government undertaking banking organizations). They also make strategic plans for proper pension scheme, retirement plans, income tax management, wealth tax management, property tax management and social security benefits. Financial planning is the most important part in the personal finance.

This can be said that planning is the key component in this field. Without proper and effective planning enhance the amount of personal finance and monitor the flow of financial resources (both inflows and out flows) is very difficult. There are few steps involved in the financial planning. These steps are as follows. Assessment- Assessment is the 1st step of the personal finance planning. It is required to understand the actual situation and financial or monetary position of a person. Financial statements are required to assess the financial situation.

The balance sheet will be prepared on individual person and not on the organization. So this is called personal balance sheet. Personal assets such as car, furniture, house, stocks, cash at bank, cash in hand will come under the asset side of balance sheet and personal