Personal Financial Planning Analysis Assignment Sample

Introduction of Individual Financial Planning Analysis Assignment

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Finances are the most required source of living. It is as important as other materials for ensuring the living of individuals. Financial planning is an inseparable part of managing finances. Families and individuals can make sure that with the help of proper financial planning their standard of living can be improved at the same time can be protected from any financial uncertainty and causality in future. The study about the financial analysis highlights the important segments of the financial protection products. These products assist the individual in making sure that they have a proper financial backup in the hour of need.

The study further focuses on the usage and benefits and its positive impacts on the users of the financial products. The protection in terms of finances assures that there are a certain number of positive responses in times of trouble. The study has been prepared by keeping the impacts and aspects of the financial planning in mind and that can be further utilized by the firm by trainee advisors. A case study related to the need and challenges that can be faced by the individuals and families has also been discussed to focus on the positive impacts of the financial protection products

Financial protection products

Financial protection products are the products combined with different benefits which give protection to the individual in critical conditions. As opined by Vogel (2020), these financial protection products have several tax benefits in the terms of deductions, because they encourage a person for savings and investments within a company. In this way, it can be said that it becomes important to consider the financial products and their usage in the normal living of the individuals.

 financial investment type

(Source: statista.com, 2022)

It can be witnessed that the majority of the individuals are engaged in alternative financial investment approaches where savings in the bank's accounts comes at the top which is 71 % in checking accounts followed by the savings account with 60%. Individuals are less aware of the investment in financial protection products available in the markets.

In the personal cases, the availability of the finances can be understood with the different types of the financial protection products which may be categorised intorelevant life insurances, key person insurance, income protection, life cover and others. Pension funds are an important source for personal savings and individual personal financial planning. The individual needs to consider all the different aspects such as tax relief on the private financial planning.

In private pension funds, the UK governments provide the tax benefits in the deduction for the pension holders paying tax of 20 % annually. Individuals can claim the tax deduction once they are registered under HM revenue and customs 2005 departments organized by the UK government (UK.gov, 2022). The department aims to provide the full tax benefit to different financial products under the tax deduction process and sections.

Tax is also deducted under the savings of the individuals. The deductions are major under section875 (trading and other income 2005) act.  This section deals with the different types of other income that an individual earns from different sources of income. As stated by Nieuwenhuis and Maldonado (2018), furthermore it is important to consider the financial product taxation as well for analyzing the benefits of the taxation and deduction under the tax system of the UK government.

The benefit of financial protection products on individuals and families

Having a proper and well-structured financial products plan ensures that the individuals are living their best standard of life. It improves the standard of living and protects individuals from any kind of uncertainties.

It helps the individual in having peace of mind, there can be financial assistance available among the individuals who are ill or cannot lead a proper life. As stated by Ahrens and Ferry (2020), in critical health conditions the financial backup will assist the individual collectively in the family. In addition, it also acts as a safety guidelines in certain cases where no financial plans are prepared by the families. Sudden requirement funds can be evaluated with the help of a proper financial backup plan.

 Benefits of Financial protection products

(Source: Created by the learner)

In addition, it also ensures that the health and safety of the individual are protected, by providing protective gears and safety equipment’s like safety gloves and visors in the workplace. it is widely seen that when the funds have been restored the families and individuals avail funds through the process of mortgage and borrowings, which further increases the debt on the family and makes a debt trap to the individuals. As stated by Alali et al. (2021), this worsens the condition and forces the families to sell their periphery such as lands, jewellery,

Options availability for financial protection products

The UK has maintained Income protection insurance policies, Critical Illness Cover, and Life insurance policies. These policies can help the people by covering their existing cover, deferral period, various premiums, making wider financial plans for their retirement, pay down any mortages and to cover any outstanding debts .

Income protection insurances policies

In the UK, income protection can be observable as it is counted on the daily income rates. These protection policies can be segregated under various terms and conditions for recovering the financial risks. These risks can be segregated along with the financial areas that lack proper funding due to the non-payment of premiums by the people. In the UK, income protection policies can be permanent health insurance for those people who have a disability or sickness (Amaral and Kolsarici, 2020). This protection can be returned by the financial institution if it is not utilized until, the retirement of that particular person. In UK, there are different types of protection insurance like agreed value, indemnity, and loss of earning insurance. It is being observed that if any people have the income protection coverage’s it can have the benefit of saving the 75% of the entire income in the future.

Critical Illness cover

The critical illness cover can help the people to protect the policy terms by paying out the tax lumps and covering other financial gaps like long term care and disability of the individuals. These insurance policy protects and saves people from the health-related covers (Dimmocket al. 2021). In these regards, it can be measured that heart attack, stroke, cancer, coronary artery disease, and other diseases. It is observed that 90% of the critical illness claims can be covered by ABI within the year 2017. On the other hand, in monetary terms, it can be measured that the total sum up values can be approximately around 1 billion pounds.

 Life insurance policies

In the UK, two major types of life insurance policies can be going to help the people for covering their financial gaps. These life insurances can be term-based and whole life-based. These two policy has different segments to working in a different manner for leading a healthy and standard life. The life insurance can be quoted under Scottish widows, LV (Liverpool Victoria), Aviva, Aegon, Royal London, and others can be the best life insurance offered by companies in the UK (Fischet al. 2019). In the very recent segment of life insurance, the business market justifies that more than 70% of the people is being related to the UK insurances market. This UK insurances market includes different ranges of financial investments of financial protection products along with financial insurance.

Structure of financial protection products

In the UK, three financial protection products can help people for recovering financial issues. These financial protection products can help utilize the advantages of financial issues and loss that has been faced due to having financial issues. Various types of financial plans can be helpful for the people who are wanted to save their money from financial issues. It can be maintained that there are various financial planning for covering the future financial issues. These financial protection plans can be played a vital role in having better lifestyle maintenance along with client’s better financial position.

There is some tax protection like all the payout received by the individuals will be tax-free by applying for financial protection. In the financial protection structure, the tax rate allocation can be determined in three segments a Higher rate of 40%, an additional rate of 45%, and a basic rate of 20%. These three segments of financial protection can be applied for financial protection with respect to the individual’s earnings by the financial protection institutions (Rabbani and Arwiyah, 2021). It has been seen that the people whose income rate will be within the 37700 pounds have a 20% basic coverage rate. In these basic tax payments, people have to pay near about 12570 pounds as personal allowances for the tax payments. On the other hand, the highest rate for the tax allocation is 40% of people’s family income ranging from 37701 to 150000 pounds.

In that case, they have to pay near about 50270 pounds as tax allowances. In the last tax slab, additionally 45% is applicable for the people who have income for over 150000 pounds. These tax allocations can be allocated by the UK government for maintaining the financial conditions of people having different standards of life. On the other hand, some other tax slabs can be applied to the Cost to the Company (CTC) and dividend payments. These payments and other tax payments can be segregated under the residents and non-residents of the country. Hence, the availability of financial protection products can be segregated under those tax protection slabs and are covered under these remittances.

The drawback of financial protection products

The disadvantages of financial protection products can be expensive, and there must be some critical health issues that could not be recovered by these insurances policies. On the other hand, there are some new terms of the financial products that cannot be covered by the people having a lower standard of living due to the complicated process and other financial issues. In this regard, there are lots of people who have not been interested in implementing financial protection policies.

In this regard, it can be maintained that some financial protection institutions ' policies could not be covered by the accumulated cash values (Zhang et al. 2021). On the other hand, there are some critical policies that are being not recovered easily and due to that people are facing financial disruption after investing in financial protection products like irregularity in payment of premiums, lack of acceptance of the policies in different sectors. In these regards, it can be determined that this disadvantaged can be reduce the opportunity of having financial disadvantages in the future by those financial protection plans. It would also bring the disadvantages of having the esteemed financial loss after having the investments in those protection products. 

Case study on Individual Financial Planning

Investment decisions are the most critical decision as they can impact the financial availability in the long term for the families as well as for those individuals who are single earning and given to take the financial decisions. As stated by Harvey (2018), it becomes of utmost importance to consider the important factors before making investment decisions such as interest rate, inflation rate, Growth rate and others. In the current scenario, the circumstances of the family named as Pearson family have been highlighted. The case study focuses on the uses of the protection products of the family and also highlights the condition of the family which is critical and resorts to proper financial security to ensure a proper standard of living and improved living conditions.

Mr Pearson and Mrs Pearson are the earning individuals in the family, they have to take care of the four children, their parents and Mr Pearson's dependent brother. The family has a huge responsibility for the expenses of every individual in the family. The monthly salary of Mr Pearson is earning 4000 pounds monthly while Mrs Pearson is earning 3500 Pounds. The total income of the family is 7500 Their family has the expenses of the children in the form of school fees, tuition fees, dance fees, which overall expenses become on the children are 900 pounds per child which turn out to be 3600 pounds monthly. On the other hand, the couple expedites on parents for about 500 Pounds. The brother of Ms Pearson is suffering from critical health issues and has been found with the symptoms of cancer for the last years. The medical and health expenditures are 1500 pounds monthly.

The expenditure related to the household is approx 1500 pounds, In this way, the savings of the family are only 400 pounds in a month. The family used to save money by using the personal saving approach and collecting the cash within the house. The decision makers in the family believe that the availability of the cash in the house will ensure that their family has enough finances for the trip to meet their parent and can use the money whenever required, in this way it can be said that the family is involved with the saving with only 400 pounds, that too is not fixed due to other expenses that include health bills of the parents of Mr Pearson family.

Financial protection plans are negligible in the current scenario as the family's overall income is based on single income sources. The number of years for which the couple has been working is 14 years. As per the years of experience in the working sectors Mr Pearson does not have timely promotion and increments. The rate of increment is much lower than the growth rate in inflation and increasing prices of commodities. Similar conditions have been faced by Mrs Pearson as she is not granted any promotion at the workplace. This has impacted the financial condition of the family to a great extent. In context to the assets and liabilities, the family has a limited number of assets and negligible liabilities.

 knowledge of financial protections products among families

(Source: statista.com, 2022)

The report depicts the information available among individuals in the UK on financial protection products. The Data shows that most of the tenants nearly 88% have knowledge and wareness about critical illness protection. Most individuals do not know the availability of different types of financial personal protection products, as a result thru end up having the conventional mode of financial planning which is not sufficient in the changing environments. A situation such as a pandemic and natural calamities affect the savings made by the individuals and families and further worsens the condition of the financial prospectus. It becomes vital for the families to have a proper and well-structured backup for ensuring the financial planning is in place. It can benefit the families in several ways and assist in meeting the requirements. It further provides the families to deal with the contingencies and critical conditions with confidence.

The current scenario does not depict any liabilities to the family and they are surviving with an available source of income as well as with the availability of the little savings that the company is expecting to have. As opined by Jarzabkowski et al. (2019), the assets are the major part of the personal income. It saves the families and individuals in a time of contingency. It can be understood that the assets of the family combine personal savings, lands, buildings, jewellery, gems, stock and securities and others related to the family assets. The family is surviving like any other normal family in the town and does not bother to have any alternative options for the investment stages in the form of financial protection products.

Further information related to the employment income can be understood by the PF details and Pension funds for the people in the employment services, The PF account of Mr Pearson has an annual investment of 400 pounds annually whereas the PF of Mrs Persons is 300 pounds annually. The value of the house in which the family resides has the value of 30000 pounds. The family has a farmhouse in Manchester worth 25000 pounds. These are the information related to the total assets that are owned by the Pearson family. As stated by Lenoël and Young, (2020), the information related to the assets and liabilities helps the family and individuals in accessing the related findings when they are needed. The further information depicts that the couple is planning to buy a car on Equated Monthly Instalments (EMI) worth 17000 Pounds. Monthly EMI will be paid in 7 years at the rate of 9 % annually. In this way, the couple is required to pay 2600 annually for the first year and 202 monthly EMI rates for the car purchase. This brings extra expenses to the family and impacts more than saving procedures.

It is wise to have a proper financial product plan to be updated with the financial security and can help the family with the entire financial assistance. As opined by Lu (2018), financial products not only show the path to regain the required finance on time, it also proceeds the families and individuals a matter of safety and peace of mind and brings the positive impacts of an improved standard of living. In the current scenario it can be seen there is no financial plan backup in the form of an insurance plan, saving plan, tax deduction benefits and others.

The further scenario of the current case of the Pearson family shows the critical changes that can be faced by any family in managing the finance and making the budget made for the income and expenditure of the family. The doctor revealed that their brother of Mr Pearson is suffering from cancer and is in the second stage of cancer. It will require extra medical facilities worth 8000 Pounds, worsening the condition, the impact of the pandemic all around the world also affected the remuneration of the family and they had to settle down for 6 months with nothing due to it.. The scenario has impacted the family and further impacts the quality of education of the children of the family as well as the health of the elder citizens in the family is also compromised due to the lack of any financial suitability.

The family has to survive on the small savings made earliest that lasted after 4 months of expenditure. In the current scenario, it can be said that the family is now struggling to survive on the basic facilities. The standard of living of the family has decreased and the education of the children is also compromised due to the larger financial impact of adversity. As opined by Mikhaylov et al. (2019), the requirement of the online gadgets by the school, the medical bills of the dependent brothers, health issues of parents as well EMI of the family have turned out to be a burden on the family. This can be said as a critical family condition where the family is struggling to arrange the funds for fulfilling the requirements of the individual collections in the family.

In other words, it can be said that due to insufficient savings and financial planning the family does not have a proper financial backup plan. The family has a non-option left but to cut down expenses or sell personal property to handle the expenses and requirements of the individuals in the family. As stated by Mikhaylov et al. (2019), the usual problem that can be witnessed among the families in such scenarios is that most the individual believes in loans from friends, relatives and banks, without the support of the savings and financial assistance these a loan ascites as the future contingency which can make the situation much worse in the form of interest payment and principal payment. It is not wise to opt for the loan for making the requirements as well as for facing the issues of contingency.

As stated by Muggleton et al. (2021), this can impact future financial planning and further damage the financial security of the family. Selling of the assets is also critical and inadequate and brings lo9ss in the higher number. The current market value of the property of the family is about 75000 pounds, to maintain the contingency requirement that either the family can choose to borrow or sell the property.

The borrowing will impact the financial condition of the family in the form of regular interest payments at the same time theory will be an obligation to repay the total amount of the loan at the maturity period. As stated by Murphy et al. (2020), on the other hand, if the family chooses to go for selling the lands and buildings it will cost the family in terms of market value, and the value of the property is about to increase in the coming years, and it has been sold without proper market value and considering all the environmental factors. As stated by Pazarbasioglu et al. (2020), such types of scenarios are majorly seen in the normal families which do not have any financial planning and affect the individual aim majoring the total finance availability. In such a case the availability of proper financial protection products such securities, investment, and personal insurance can help the families in a much wider way. It can not only provide them with a strong financial solution but also allow them to manage the contingent condition.

As stated by Sabri et al. (2018), strong financial protection products allow the familiar and individuals to spend based on requirements and assist in the critical conditions like such as illness condition, casualties and major contingencies. The family should have financial plan backup in the form of fixed deposits, time deposits, personal insurance, health insurance and others. The government is also providing tax benefits in financial planning in terms of tax deductions and subsidies. The deduction encourages the individual to have greater consideration of the financial planning products and further motivates them to have strong financial conditions. As opined by Šimonová, et al. (2019), this helps the families in maximizing the average standard of living and also assists in an improved standard of living, this is of great tool to have the battle shield in facing the emergency similar to the family condition faced by the Pearson families.

Recommendation

• It is recommended that individuals and families should focus on different financial protection products for a better standard of life as it can help the individual as well as the company at the same time. Comity can be benefited from the law of saving and investment. In other words, it can be said that better the financial products the better is the standard of living of the people.
• As stated by Thorpe et al. (2020), reallocation of the investments is important for the individual. They should look through the different financial products available like securities and investments, from which they can get the benefit of investment approach.
• The families and individuals should focus on buying a suitable financial protection plan for them that can improve their standard of living even in their retirement or at present.

Conclusion

Financial planning includes the different facets in terms of personal savings, fixed deposit, time deposit, investment, personal insurance and others. These are the major segments of the proper financial planning structure, to ensure that the families and individuals can have access to the funds whenever required. To facilitate more attention and awareness of the financial planning for the betterment of the services it is suggested that everybody should follow the process if referring to the financial products and include one of the products as a financial backup plan. Securing lives and health are the most critical conditions where finances are required. In the case, it becomes important for the individual to have a certain fixed range of funds whenever they require. The current study has put forward the importance and benefits that a person can achieve by having a strong financial backup plan.

References:

Books

Nieuwenhuis, R. and Maldonado, L., 2018. The triple bind of single-parent families: Resources, employment and policies to improve well-being. Policy Press.

Vogel, H.L., 2020. Entertainment industry economics: A guide for financial analysis. Cambridge University Press.

Journals

Ahrens, T. and Ferry, L., 2020. Financial resilience of English local government in the aftermath of COVID-19. Journal of Public Budgeting, Accounting & Financial Management.

Alali, E., Alhammadi, N., Almarar, M.S., Almheiri, S., Almarar, F., Almarar, M., Alremaithi, L.K. and Nobanee, H., 2021. Financial Analysis and Performance Evaluation of Moderna. Available at SSRN 3896199.

Amaral, C. and Kolsarici, C., 2020. The financial advice puzzle: The role of consumer heterogeneity in the advisor choice. Journal of Retailing and Consumer Services, 54, p.102014.

AREAS, B., 2018. Financial analysis. growth, 30, p.10.

Dimmock, S.G., Gerken, W.C. and Van Alfen, T., 2021. Real estate shocks and financial advisor misconduct. The Journal of Finance, 76(6), pp.3309-3346.

Fisch, J.E., Labouré, M. and Turner, J.A., 2019. The Emergence of the Robo-advisor. The Disruptive Impact of FinTech on Retirement Systems, 13.

Harvey, H.H., 2018. Constitutionalizing Consumer Financial Protection: The Case for the Consumer Financial Protection Bureau. Minn. L. Rev., 103, p.2429.

Jarzabkowski, P., Chalkias, K., Clarke, D., Iyahen, E., Stadtmueller, D. and Zwick, A., 2019. Insurance for climate adaptation: Opportunities and limitations.

Lenoël, C. and Young, G., 2020. Prospects for the UK economy. National Institute Economic Review, 252, pp.F10-F43.

Lu, L., 2018. Promoting SME finance in the context of the fintech revolution: A case study of the UK's practice and regulation. Banking and Finance Law Review, pp.317-343.

Mikhaylov, A., Sokolinskaya, N. and Lopatin, E., 2019. Asset allocation in equity, fixed-income and cryptocurrency on the base of individual risk sentiment. Investment Management & Financial Innovations, 16(2), p.171.

Muggleton, N., Parpart, P., Newall, P., Leake, D., Gathergood, J. and Stewart, N., 2021. The association between gambling and financial, social and health outcomes in big financial data. Nature Human Behaviour, 5(3), pp.319-326.

Murphy, R.O., Lamas, S. and Sin, R., 2020. Identifying What Investors Value in a Financial Adviser: Uncovering Opportunities and Pitfalls. Journal of Financial Planning.

Pazarbasioglu, C., Mora, A.G., Uttamchandani, M., Natarajan, H., Feyen, E. and Saal, M., 2020. Digital financial services. World Bank Group, 54.

Rabbani, I.R. and Arwiyah, M.Y., 2021. Pengaruh Reward Dan Punishment TerhadapKinerjaKaryawanPada Pt AxaMandiri Financial Advisor Area Jakarta CabangGambir. eProceedings of Management, 8(4).

Sabri, M.F., Reza, T.S. and Wijekoon, R.,2018 Financial Management, Savings Behavior, Investment Behavior and Financial Well-Being of Working Women in the Public Sector.

Šimonová, J., ?entéš, J. and Beles?, A., 2019. Financial analysis of innovative forms of money. Entrepreneurship and Sustainability Issues, 7(1), p.69.

Thorpe, J., Viney, K., Hensing, G. and Lönnroth, K., 2020. Income security during periods of ill health: a scoping review of policies, practice and coverage in low-income and middle-income countries. BMJ Global Health, 5(6), p.e002425.

Weedige, S.S., Ouyang, H., Gao, Y. and Liu, Y., 2019. Decision making in personal insurance: Impact of insurance literacy. Sustainability, 11(23), p.6795.

World Health Organization, 2020. Global monitoring report on financial protection in health 2019.

Yan, K. and Maheshwari, S., 2020. Limitations of financial adviser standards and ethics authority’s code of ethics. Delhi Business Review, 21(1), pp.1-11.

Zhang, L., Pentina, I. and Fan, Y., 2021. Who do you choose? Comparing perceptions of human vs robo-advisor in the context of financial services. Journal of Services Marketing.

Websites

gov.uk (2022). About UK tax practices. Available from: https://www.gov.uk/government/publications/spring-statement-2022-documents/spring-statement-tax-plan [Accessed on: April 13, 2022]

statista.com/(2022). About knowledge on financial product Available from: https://www.statista.com/statistics/329638/uk-financial-products-knowledge/ [Accessed on: April 13, 2022]

statista.com/(2022). About usage of financial products Available from: https://www.statista.com/forecasts/997144/financial-product-usage-in-the-us [Accessed on: April 13, 2022]