Financial Planning Model - Essay Example

This table reflects the typical shifting spending patterns of the group from the years1998 to 2005. The first observation is that purchases by debit card have grown steadily over the years. From 1,736 in 1998 to 4,084 in 2005, there was almost a four-fold jump in the use of debit cards. While there was a consistent growth in purchases by credit card during the same period, it has not grown to the same extent as that by debit card. The use of credit cards seems to have grown by around 10% year on year. It seems to have only increased by 80% in the total period under the study. Purchases by store card went down from 134 in 1998 to 83 in 2005, thus reflecting a negative trend. However, this cannot be generalized as there was a negligible change in the years from 1998 to 2003, after which there seems to have been a steady downtrend.

The total purchase of plastic cards showed continuous and consistent growth during the period under study. From a figure of 3094 in 1998, the purchases grew to almost double or 6094 in 2005.There was also an increase in ATM  and counter withdrawals, though the rise was not a steep one in the period under observation. For automatic transactions (e.g. direct debits, standing orders) there was a steady increase from 1998 to 2005, with the growth being faster in the period from 2003 to 2005.Payment by cheques showed negative growth from 2,988 in 1998 to 1,931 in 2005 i.e a reduction of almost 35%.Thus, there seems  to have been  a decline in the use of cheques for payments in the given period

In 2005, the use of cash for transactions fell to 23,968 from 25,309 in 1998. Withdrawals from Post Offices also fell drastically in the period under observation. In 2005, it fell to almost 25% of the value as compared to 1998.

While the total value of all transactions remained more or less the same till 2005, for the observation period, it grew marginally from 1998 to 2000, from 37,381 to 40,966.Thus, we can conclude that though there was not much change in the value of transactions from 1998 to 2005, the usage of plastic money, especially debit cards grew phenomenally in the given period. Cash transactions showed a negative trend and Post Office cash withdrawals went down drastically. We can also safely conclude that the group was moving from a credit society to a credit-free one. People have realized the value of thrift and do not plunge blindly into credit card obligations. Instead, they spend through debit cards, which draw upon the money already available in their account, and is also safer to carry around than cash. Thus, the consumer seems to have become wiser in the given period.

Financial plans are a means of achieving goals. Therefore, being clear about goals helps when working out financial plans. The following table shows how some goals can be achieved by financial planning. In each case, the financial plan provides a means of achieving a goal.

Goal

Financial plan

Help the homeless

Adjust pattern of spending

Reduce debt worries

Improve debt management

Have some money to draw on in a crisis

Build up an emergency fund

Have a lump sum for specific projects

Build up short-term savings

Have a comfortable retirement

Build up long-term savings

Buy flat

Save for a deposit

Protect dependants

Make a will

Financial planning can take place in four stages. Stage 1 is to assess the situation, including the relative importance of different goals. Stage 2 is to decide on a financial plan, given goals and constraints. Then, Stage 3 is to act on the financial plan, and Stage 4 is to review the outcome of the plan.

The review involves regularly reviewing the outcome of the action and taking account of recent changes or events– is it still the best option? Does further advice need to be sought? Perhaps moving into a new circle of financial planning is necessary.

By the end of 2004, the total value of cash transactions in the UK was overtaken for the first time by plastic card transactions.

As well as this increased affluence, many argue that we now also live in a consumer society in which there is great emphasis on buying more, what people buy is seen to shape their identity, and shopping has become a leisure activity. Changes in technology and sourcing from all over the world have introduced new products and new generations of established products. New tastes, aspirations, and patterns of consumption are continually being created. In this, consumers may think they are immune to the power of marketing and advertising, but the effects of advertising suggest otherwise. Moreover, advertisements themselves illustrate social changes over the years, reflecting different gender roles and new attitudes to family life, sex, and career aspirations.

This is precisely where the “review” stage comes into play and the social and economic factors influence the review of financial plans. Thus, an unplanned holiday or an emergency operation may lead to a review of the financial plans of an individual or family.