FIN1 FTU - Stage 1

F1 – Project-Stage1: Gearing up TCHE322 Lawrence et al (2011). Chapter 1 Thomas (2009). Chapter 1 CFP Handbook (2015). Chapter 6 Lecture of Shahnawaz Ali 1 Schedule of lectures Project topic covered • The rewards of a sound financial planning • The financial planning processes • Setting financial goals Groupwork project activities • Group formation • What-Why-When-How activities 2 Rewards of Sound Financial Planning • Improving your standard of living • Spending money wisely • Accumulating wealth – an abundance of money and other financial resources. Financial success – achievement of financial aspiration. Financial security – being able to fulfil any needs and most wants. Financial freedom – the state where work is an option, you choose. Not compelled to opt. 3 What is Financial Planning “A holistic process whereby a client’s total position, both financial and nonfinancial, is examined and […] a plan is put in place, which once implemented, will assist in meeting the client’s ultimate goals and objectives.” - - Taylor & Juchau 2018, p.4 Where Did It Come From? Origins • Financial planning has its origins in the fund management sector that pool and invest money on behalf of their clients in the mid-1970 (US) then mid-1980 (Australia). • Where do Vietnameses go to get financial advice? Bankers, brokers, accountants, insurance advisers. • Who were the first financial advisers? They had a background in life insurance, salesdriven, commission-based culture. -> Traces of this culture are still present in the industry today. Where Did It Come From? Financial Planning Theory • Financial planning enables people to set in place personal objectives and arrange financial means to satisfy the objectives. • Theoretically founded in Modigliani’s life-cycle hypothesis of consumption and saving. • Life cycle theory provides a framework to “smooth” consumption and savings over a life-time taking into account current wealth, current and future income and consumption needs. Where Did It Come From? Financial Planning Theory Why Financial Planning is Important. Financial Planning • Increasing numbers in older age groups • Increase in longevity • De-emphasis on age pension and increased importance of superannuation for retirement planning • Low financial literacy & poor financial habits