Quiz 1: Understanding the Financial Planning Process
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Standard of living is the level of wealth, comfort, which is desired by an individual or his family. It refers to the level of wealth, comfort, material goods and necessities available to a certain socioeconomic class in a certain geographic area. It is often used to compare geographic areas, such as the standard of living in the United States versus any other country. It can also be used to compare different points of time. For example, when compared with a decade ago. The factors influencing standard of living are given below: • Income, • Quality of living, • Employment, • Poverty rate, • Gross domestic product, • Inflation rate, • Affordable access to quality healthcare, • Affordable access to quality education, • Life expectancy rate, • Cost of goods and services, • National economic growth, • Political stability, • Religious freedom and many more.
Person TC is in his last semester of college, and decides to create his resume in order to seek-full time employment. He seeks out a friend, Person TE, to help with the process. While they are working, Person TE indicates that she found a personal financial planning course to be extremely helpful. Person TC appreciates her advice but is leaning towards taking a golfing course next semester instead. Person TE strongly feels that Person TC will benefit greatly from taking a financial planning course instead of a golfing course. 1. The process of financial planning is the best away to achieve personal financial goals, and brings many rewards along the way. They include: • Improving your standard of living • Spending money wisely • Accumulating wealth 2. The term financial planning is defined as a systematic process aimed at meeting financial goals through the consideration of important financial elements. Everyone - no matter what their circumstances in life - should develop a personal financial plan. It is meant for every person, of every income. This is because personal financial planning helps a person to not only spend and invest their money wisely, but it also improves their lifestyle. 3. The dynamic economic environment of financial planning is affected by the roles of the government, business, and consumers. A strong economy can lead to strong returns on investment while a weak economy can lead to inflation which makes it hard to make ends meet. The role of the consumer in the financial planning environment is important - they are at the center. The demands of consumers have an ultimate effect on the goods and services provided by businesses. In addition, the decision of consumers to spend or save their money has a direct impact on the health of the economic environment. Individual consumers should also be aware of the limitations in their ability to significantly change the current economic environment on their own. Instead, consumers should plan their financial transactions within the current environment. 4. While Person TC is leaning towards taking a golfing course, there are strong arguments in favor of taking a financial planning course instead. Having a strong knowledge of financial planning is important for all individuals , as explained above. The course will prepare Person TC well for life after college, and enable to him to develop his own personal financial goals and the actions needs to achieve them.