Personal finance and you
Personal finance is now a byword.
But that's not been always the case.
I am lucky to be one of the first few who started in the profession in 2005, during the first Registered Financial Planners Philippines (RFP) program. Back then, I was a banker who only wanted to know more how to serve my clients better.
But when I took up the program, everything changed.
It is as if a whole new world opened up to me: that finance is not only about savings, checking accounts and time deposits, it is also about investments, insurance, taxes, wills, budgeting, and estates. Now, after almost a decade, I am still learning, and I feel that I have barely scratched the surface.
Nowadays, I am seeing discussions on behavioral finance, financial planning for divorcees, end-of-life planning, long-term care planning, and financial planning for same-sex couples. But that is still not deepening each area.
Investments, for instance, are a world in themselves: there are topics such as risk management, portfolio management, valuation, and stock selection, to name a few.
Personal finance defined
But what really is personal finance?
Personal finance is managing one’s financial resources to achieve life goals.
It is both a science and an art: science because it uses laws, theories, and techniques from Economics, Math, Psychology, and law, to name a few; art because it takes creativity to put together from different fields advice or plans for clients, not to mention different financial and legal tools.
At its simplest, personal finance covers 8 areas:
- Cash flow management – includes budgeting, managing income, handling expenses, as well as projection of future cash needs
- Debt management – deals mainly with handling personal debt such as mortgages, credit card loans, and other related issues
- Investment planning – focuses on the different financial tools for goal achievement, portfolio management, and risk management
- Insurance planning – deals with protection coverage and managing the risks that a person and his/her family faces like life, accident, property, and liability insurances
- Educational planning – zeroes in on projecting future educational expenses, funding, selecting financial instruments, and managing that portfolio to achieve those goals
- Tax planning – concerns itself with the efficient and legal managing of resources to minimize tax exposures and liabilities
- Estate planning – covers the legal, efficient, and cost-effective management of wealth in case of the person’s death
- Retirement planning – the area where retirement goals are tackled, as well as retirement lifestyle, funding retirement expenses, and long-term care
You are the client
Such different areas come together into one, cohesive, living document called a personal financial plan that serves as a roadmap or a blueprint to achieve a person’s financial, and, ultimately, life goals.
Since personal finance covers a wide array of disciplines and fields, the best financial plan then comes from a team of experts in their own fields.
The team might be composed of a lead financial planner, lawyers, accountants, investment professionals, bankers, and insurance specialists, each bringing their own knowledge for the benefit of the client.
With or without a team to help you with your personal finance planning, you can still do it.
Treat yourself as your very own client because personal finance is all about your needs.
Know what financial products, tools, and instruments that are best, most efficient, and cost-effective for you.
Personal finance is not about product-pushing.
Elevating it to a higher level, personal finance is about being a “fiduciary” – you act solely on your client’s interests, not where the most profits or commissions are.
Overall, personal finance is such a wide-ranging topic that one can easily be overwhelmed when studying it.
But that is why personal finance is all about you. – Rappler.com
Rienzie is also an accredited investment fiduciary of Pennsylvania-based fi360 and an international member of the Financial Planning Association, the largest association of financial planners in the US. You may reach Rienzie at firstname.lastname@example.org, his Facebook account or Twitter @rbiolena.
Personal finance illustration and concept from Shutterstock