BBA2114 Financial Environment and Financial Planning

Contact Information

• Suvarnabhumi Campus: MSM building, 2nd floor Room MSM 0208
• Phone: 02-723-2222 Ext # 5135
• Email: financemajor@msme.au.edu

Performance Competency

• Financial Planner Competency Profile (FPSB)
• Globally recognized title of excellence: Certified Financial Planner (CFP)
  • Recognized in 27 countries, including USA, UK, Canada, Australia, Thailand

Finance Curriculum Mapping

• Curriculum aligned with CFP training modules and exams.
• Includes AFPT and IC Licenses.

Financial Planner Ability Framework

• FPSB = Financial Planning Standards Board
• Financial Planning Functions:
  • Collection
  • Analysis
  • Synthesis
• Financial Planning Components:
  • Financial management
  • Asset management
  • Risk management
  • Tax planning
  • Retirement planning
  • Estate planning

Basic Practices

• Integrate core competencies in financial planning.
• Understand interrelationships among relevant factors.

Wealth Management and Financial Planning

• Considers current financial status, financial goals, consumption expenses, and saving status.
• Aims for financial freedom through design and projection.

Individual Financial Life Cycle

• Stages: Basic Wealth Protection, Wealth Accumulation, Wealth Distribution.
• Financial planning should incorporate insurance, tax, consumption and estate planning.

Financial Planning Process

• Evaluate financial position, set goals, make planning, act accordingly, review and revise.

Finance in Daily Life

• Managing spending, saving, and retirement:
  • Collection of Personal Financial Data
  • Financial Planning
  • Personal Financial Statement Analysis
• Increasing wealth and managing investments:
  • Risk and Return Analysis
  • TVOM
  • Financial Institutions (FIs)
  • Financial Instruments
  • Financial Markets (FM)
• Taxation:
  • Knowledge of Taxation
  • Financial Products

Learning Objectives

• Understand the definition, importance, and process of financial planning.
• Identify reasons for neglecting financial planning and its impacts.
• Recognize people involved in financial planning.

Definitions and Importance of Financial Planning

• Personal Financial Planning: Plans and processes regarding a person’s financial activities.
• Includes:
  • Retirement planning
  • Insurance planning
  • Tax planning
  • Investment planning

Financial Planning Definitions

• A process of evaluation and improvement to achieve a stable personal financial status.
• Involves studying economic factors, resource management, and aligning with financial goals.
• Benefits: Higher standard of living and stable financial position.
• Bridges the financial gap between current status and future goals under individual restrictions.
• Financial GAP = Financial Planning = Financial Goals

Importance of Financial Planning

• A lifelong activity creating ability to meet needs and goals and to create stability.
• Covers comprehensive activities like investment, insurance, and retirement planning.
• Requires effective planning to meet unexpected events and sufficient money during the lifecycle.

Reasons People Neglect

• Personal and Financial Status:
  • Middle Income: Think they lack assets/income.
  • High Income: Think good living conditions negate the need.
• False Beliefs and Wrong Attitudes:
  • Unwillingness to face future uncertainties.
• Financial goals must be SMART (Specific, Measurable, Achievable, Realistic, Timely).
• Financial goals must be based on personal status and capability.

Impacts of Negligence

• Failure to achieve financial goals, burden on self and others.
• Financial losses and missed income opportunities.
• Difficulty during retirement.

People Involved

• Personnel from commercial banks, insurance companies, securities companies, and asset management companies.

Financial Planning Components

• Preparation of personal financial statements
  • Personal balance sheet (B/H)
  • Personal cash flow (CF) statement
  • Personal budgeting
• Investment planning
• Risk management and insurance planning
• Retirement planning
• Tax planning

Personal Budgeting

• A short-term financial plan that sets financial goals within a specific time frame.
• Allocates limited resources (e.g. income).
• A tool to audit and control personal finance.

Personal Budget Components

• Income (cash inflows):
  • Total cash inflows expected.
• Taxes and employment obligations:
  • Deductions to determine "take-home pay."
• Expenses (cash outflows):
  • Fixed and variable expenses.
• Savings and investment:
  • Set aside for future wealth creation.

Objectives of Personal Budgeting

• Know sources of cash inflows/outflows.
• Prepare for expenses and emergencies.
• Review progress toward long-term goals.

Characteristics of Good Budgeting

• Align with long-term financial goals.
• Consider future income and expenses.
• Have flexibility and understanding among family members.

Steps to Budget

1. Collect financial information
2. Calculate all income
3. Lists of monthly expenses
4. Determines fixed and variable expenses
5. Totals monthly expenses
6. Reviews and adjusts expenses to align with income.

Personal Budget Example

• Provides a structure to record monthly income, expenses, and savings.
• Track income vs. expenses

Budgeting Process

• Collect information to collect all INC/EXP
• Estimate future earnings and expenses.
• Analyze cash flows.

Expenses

• Consumption EXP = Savings + Investment + Fixed EXP + Variable EXP

Project inflows and outflows

• Compare actual to projected and act accordingly
• Solutions when over budget.
  • Stop spending or cut back spending.
  • Increase income or use current savings.

Financial products

• Overview with example analyses.

Investment Planning:

• Align investment strategy with objectives and risk.

Investment Objectives:

• Short-term
• Long-term
• Safety
• Income
• Capital gain
• Growth
• Wealth accumulation
• Tax saving

Risk and investment across life stage and mutual funds.

Investment Strategies:

• Consumer Investing (tangible items)
• Business Investing
• Financial Investing (securities)

Types of Financial Investment

• Saving account
• Stocks
• Bonds
• Real Estate

Investment Objectives:

• Consumer Investing
• Business Investing
• Financial Investing

Risk Management and Insurance Planning:

• Risk = future uncertain events
• Speculative Risk
• Pure Risk
• Examples and objectives of risk management with insurance products.

Retirement planning:

• Manage expenditures for life.
• Retirement planning process overview with savings.

Retirement planning

• Government Pension Fund.
• Provident Fund.
• Social security fund.
• National savings fund.

Problems with Retirement Planning

• Starting too late.
• Too much confidence.
• Lack of financial planning knowledge.

Tax Planning

• Minimize tax legally.
• Many investments available for tax planning.
• VAT basics and global examples.