Financial Planning In Global Market

Financial planning in global market

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Introduction

Financial planning means preparing for your future by making informed money management decisions in the present. There are many tools available that will help you achieve the security you desire – but none are as important as simply taking a steady and committed approach to funding your longterm

goals.

Nowadays in the business environment they are many aspect effect the especially in the global market. They are many financial aspects that are link with the changes of the market global. The financial aspects that link in the global market: financial literacy, monetary attitude, financial practices and financial well being. The first step toward planning for your financial future is to understand where you are today.

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Learning about financial literacy

Financial literacy is the ability to understand finance. Raising interest in personal finance is now a focus of state-run programs in many countries including[1] Australia, Japan, the United States and the UK. The Organization for Economic Co-operation and Development (OECD) started an inter-governmental project in 2003 with the objective of providing ways

to improve financial education and literacy standards through the development of common financial literacy principles. Consumer financial literacy has become a growing concern to educators, community groups, businesses, government agencies, and policymakers. Correspondingly, there has been an increase in the number and types of financial education programs available to households. Many of these programs focus on providing information to consumers and operate under the implicit assumption that increases in information and knowledge will lead to changes in financial-management practices and behaviors. Based on article written by Marianne A. Hilgert, Jeanne M. Hogarth, and Sondra G. Beverly, focuses on four financial-management activities; • cash-flow management, • credit management, • saving, and •

Investment.

Data from the Surveys of Consumers are used to analyze some of the connections between knowledge and behavior-what consumers know and what they do. Overall, financial knowledge was statistically linked to financial practices: Those who knew more were more likely to engage in recommended financial practices. In addition, certain types of financial knowledge were statistically significant for particular financial practices--knowing about credit, saving, and investment was correlated with higher probabilities of engaging in recommended credit, saving, and investment practices

respectively. Although the causality could flow in either direction, this finding indicates that increases in knowledge may lead to improvements in financial-management practices. Thus, financial education in combination with skill-building and audience-targeted motivational strategies may be one way to elicit the desired behavioral changes in financial-management practices. Attention to financial literacy has grown in recent years, in large part because technological, market, and legislative changes have resulted in a more complex financial services industry that requires consumers to be more actively involved in managing their finances. Consumer and community interest

groups,

banking

companies,

government

agencies,

and

policymakers, among others, have become concerned that many consumers lack a working knowledge of financial concepts and the tools they need to make decisions most advantageous to their economic well-being. Such financial literacy deficiencies can affect an individual’s or family’s day-to-day money management and ability to save for long-term goals such as buying a home, seeking higher education, or financing retirement. Ineffective money management can also result in behaviors that make consumers vulnerable to severe financial crises. As a result, considerable resources have been devoted to financial literacy, with a wide range of organizations providing training, including banks, consumer and community groups, employers, and government agencies. Overall, studies suggest that financial literacy training can lead to better decision making; however, the findings raise numerous questions about the

best means of providing that training, the most appropriate setting, and the most opportune timing. Findings from recent research on personal money management styles, combined with awareness of human behavioral traits, offer insights that may be useful in developing successful training programs and strategies As concern about financial literacy has increased, so too have the number and variety of financial literacy training programs and program provider some offering comprehensive information on savings, credit, and similar topics for a broad audience and others tailored to a specific group, such as youth or military personnel, or focused on a specific goal, such as home ownership or savings. The forces of technology and market innovation, driven by increased competition, have resulted in a sophisticated industry in which consumers are offered a broad spectrum of services by a wide array of providers. Compelling consumer issues, such as the very visible issue of predatory lending, high levels of consumer debt, and low saving rates, have also added to the sense of urgency surrounding financial literacy. Other important demographic and market trends contributing to concerns include increased diversity of the population, resulting in households that may face language, cultural, or other barriers to establishing a banking relationship; expanded access to credit for younger populations; and increased employee responsibility for directing their own investments in employer-sponsored retirement and pension plans.

The challenges for policymakers and educators in designing and delivering financial literacy education to meet the needs of all groups within the population are many. The elements that must be considered can be defined broadly in a set of questions: • Who is the targeted audience and what are the group’s information needs? • What does the audience need to know to understand personal financial circumstances, identify future goals, and implement behaviors consistent with attainment of those goals? • When is the appropriate time to expose individuals to both general and specific information about financial issues and options? • Where should financial literacy education be provided to reach the broadest audience? • How can financial literacy education be effectively delivered, both at specific points in time and over time, to assist households in adjusting their financial plan to suit their circumstances? • How can the effectiveness and impact of financial literacy programs be measured? The task, which may appear simple when reduced to a series of bullet items, becomes complex when these variables are considered simultaneously or the multiple implications of just one variable are evaluated fully. For example, in considering where to introduce financial management topics to youth, the public school system may seem a logical place. However, issues of funding and teaching priorities complicate the use of this venue. Even when states mandate personal finance education, the question remains of how to incorporate training into existing student curricula, as specific requirements related to academic performance and the desire to offer worthwhile but

competing electives, such as foreign languages and music, may leave little room for a separate course. Similarly, while research identifies the workplace as an effective venue for extending financial literacy to adults, the existence of workplace programs is dependent on management philosophy and corporate culture, and as a result, programs may not be available to large segments of the population. The challenge of providing financial training to adults is particularly vexing in light of the wide variety of information needs arising from differences in prior experience, language and cultural background, current financial situation, and time availability, given work and family commitments. The wide variation in needs also poses challenges in the development and delivery of relevant information. Most classroom-style programs take a ‘‘one size fits all’’ approach, in a well-intended effort to provide as much information as possible in a limited amount of time. Such training may not be enough for some participants and too much for others. Many education providers use the Internet to offer resources and referrals, allowing consumers to choose, among a range of topics, the information that best suits their needs. But this approach has limited utility for consumers who cannot access a computer, have limited language or reading skills, or need a more personalized training experience. In an ideal world, financial educators would analyze each individual’s needs and provide customized training based on that assessment. But such one-on one interaction is time- and resource- intensive. Thus, educators are seeking other ways to analyze consumer needs more effectively and deliver pertinent information more efficiently. One approach might parallel in some ways the

use of a credit-scoring model in loan underwriting, which has enabled lenders to quickly and effectively construct an individual risk profile. A similar approach might be taken in determining a consumer’s financial literacy profile, with a database on an individual’s or group’s financial status, behavior, and learning preferences used to identify an individual’s information and educational needs. Knowledge of those needs, coupled with an assessment of the individual’s motivation and confidence, could assist in providing relevant financial information at the appropriate time. The development of consistent standards for measuring results, too, could increase the success of financial literacy programs. Practitioners who can demonstrate the effectiveness of their programs can contribute significantly to the identification of ‘‘best practices’’ and the setting of policies that may lead to consumers who are better equipped to survive and, more important, thrive in our vibrant, diverse, complex financial marketplace.

Financially educated consumers are better able to make good decisions for their families and thus are in a position to increase their economic security and well-being. Financially secure families are better able to contribute to vital, thriving communities and thereby further foster community economic development. Thus, financial education is important not only to individual households and families but to their communities as well. Amid growing concerns about consumers’ financial literacy, the number and types of financial education programs have grown dramatically since the mid-1990s. Many of these programs focus on providing information to consumers and operate under the implicit assumption that increases in

information and knowledge will lead to changes in financial management practices and behaviors. To look at the different types of financial practices, measures of financial management behaviors and financial product ownership were combined. Practices were categorized as cash-flow management, credit management, saving, investment, and other.

Financial knowledge can be statistically linked to financial practices related to cash-flow management, credit management, saving, and investment— those who knew more had higher index scores, and those who learned from family, friends, and personal experiences had higher index scores. It is worth noting that certain types of financial knowledge were found to be statistically significant for particular financial practices. With the exception of the cash-flow management practices, which did not have a corresponding subsection on the quiz, the relationships between specific financial knowledge scores and the corresponding financial practices indexes were statistically significant. Thus, knowing about credit, saving, and investment was correlated with having higher index scores for credit management, saving, and investment practices respectively. This pattern may indicate that increases in knowledge and experience can lead to improvements in financial practices, although the causality could flow in the other direction— or even both ways. One way to increase knowledge is to gain experience. And one way to gain additional education is to learn from the experiences of others, as can happen in classes and seminars and through conversations with family and friends. There is a difference between providing information and providing education. Education may require a combination of

information, skill-building, and motivation to make the desired changes in behavior. The distinction between information and education is an especially important point for policymakers and program leaders making decisions about the allocation of resources. Financial education awareness campaigns and learning tools (for example, web sites or brochures), all important in their own right, may need to be coupled with audience-targeted motivational and educational strategies to elicit the desired behavioral changes in financial-management practices.

Stress-related variables tend to impact each other. According to Williams (1982), financial problems result from unexpected changes which necessitate reevaluation of the use of resources. It is not surprising that many of the "situations" outlined by Williams are also stress related variables. For example, situations which may create severe financial problems include: changes in family income, changes in employment status, unscrupulous or fraudulent schemes, adverse job politics, loss of ability to fulfill home responsibilities, need to support parent or other persons, premature death of spouse, birth of child, illness or disability, accidents, divorce, major unexpected bills, lawsuits, and changes in consumer prices. According to Williams (1982) also, specific situations that cause financial stress include: underestimating expenses because of inexperience or poor records, overestimating income, lack of family communications, being overwhelmed with bills and expenses to the point of being afraid, inability to say "no", lack of planning, buying products and services on credit, poor money handling skills, credit overextension, using money for emotional

reasons, not having a cash reserve for emergencies, and not controlling expenses such as gambling, alcohol, tobacco, and drugs. Stress inducing variables eventually have an impact on a family's financial well-being, which in turn, influences individual response to stressful situations. For example, an individual who faces increasing levels of stress will, according to the literature, be more likely to miss work on a regular basis. This action tends to increase feelings of guilt, resentment, and loss of hope. Many such individuals turn to alcohol, gambling, tobacco, or drugs to dampen the effects of stress in their lives. Factors contributing to stress are cumulative and interlinking. Consequently, when employees exceed their coping threshold for stress, it is likely that workers' compensation claims—both legitimate and fraudulent—will increase (Gilmore, 1994). Unfortunately, these activities force reallocation of financial resources towards the maintenance of unhealthy habits. In turn, poor financial management leads to increasing levels of stress, which tend to support other types of behavior, further reducing employee productivity. In other words, the relationship between stress, stress-related variables, poor financial management, and overall reduced employee productivity is not linear; it is, in fact, a spiraling sphere which ultimately leads to physical, financial, and employment failure. Changing family structures will have an impact on the well-being of the older population now and into the future. Changing family structures also influence the need for formal support systems. There are several alternative forms of family and generational structure that are shaped by changes in marital status, fertility, mortality and migration. Much of the research has focused on the traditional paths through the life course (e.g., marriage, bearing children and widowhood) and has not considered the alternative

pathways and their consequences on living arrangements and well-being in later life. 3.0

Conclusion

Changes over time in living arrangements and caregiving patterns appear as responses to changes in other spheres of life. Demographic trends in fertility, mortality and migration have an impact on family size and household structure, especially as these trends interact with changing gender roles, increased education and expanding employment opportunities. In “older” industrialized countries, current elderly cohorts have lived through a complexity of twentieth-century changes, and this is reflected in the pattern and diversity of living arrangements that have emerged. The major question today in industrialized societies is whether the observed trends in living and care arrangements will (and, in a qualitative sense, “should”) continue. In less industrialized countries, many of the social changes associated with modern economic development are fairly recent phenomena: the overarching question in these countries is whether the basic family structures will come to resemble those of the so-called Western model. These questions have policy implications as government and other agencies grapple with how best to plan for the inevitable growth in the older population.