Financial planning is the art of achieving goals by creating a plan with the help of financial instruments. Financial planning is an important element in one’s total life and career. Financial planning is an objective and analytical process that helps individuals in realizing their goals and in reaching relevant goals at a planned time. Financial planning is the methodology used to achieve financial objectives through the use of financial tools and strategies. Financial planning is the branch of economics that is concerned with the movement of resources from the source to the end consumer.
The field of financial services has become extremely diversified and involves a variety of activities in support of the financing of financial transactions. Financial planning helps in the measurement of financial risk, in understanding the role of financial institutions in our economy, and in the analysis of the design of sound financial products. A wide range of financial products and methods are available in the market to assist individuals in buying financial products that suit their circumstances and preferences. An extensive range of financial services is also provided by financial institutions including investment, wealth building, estate planning, retirement and pension plans, lending and deposit facilities. There are many other financial services that are often offered by financial institutions such as asset protection, purchasing government bonds, buying commercial real estate, collecting premiums on insurance policies, making business loans, borrowing money from family members, and managing overseas funds.
The most basic function of financial institutions is to extend credit to individuals or companies who require financing to meet their particular needs. They do so by offering loans to the borrower at a low rate of interest and by keeping the loans repayable. Most banks in developed countries provide primary financial services to customers through banks and other forms of financial institutions. Customers may also choose to go through brokers or financial planners to provide specialized financial advice.
The word “financials” refers to the various processes of obtaining and managing financing. It includes all the various financial instruments such as cash, securities, equities, derivatives, mortgages, lines of credit, trade lines, loans and so on. All these instruments are used to borrow funds. Borrowing is a common and prescribed activity in modern finance.
All these financial instruments are traded between banks. In the process, some kind of intermediary role is played by banks such as making temporary settlements between parties. Financial markets also include various types of financial instruments such as futures, options, forward contracts, swap agreements, commodity markets and so on. All these financial instruments are traded in the Forex markets.
This article would not be complete without a reference to the main article of this series. In this main article we looked at three main elements of finance. The main elements of finance are capital, liquidity and risk. We looked at some possible sources of capital financing. And we looked at the use of derivatives and other financial instruments to provide additional funding to businesses and other organizations.