financial

Commons Methods Used to Prepare Financial Budgeting Spreadsheets Financial Planning

There are two methods commonly used to prepare the Financial Budgeting Spreadsheets. These two methods are “Bottom Up Budget’ and “Top Down Budget”. Both methods share the same objective to produce an accurate Financial Budgeting Spreadsheets.

Bottom Up Budget

In the “Bottom Up budget” method, the company let the all the managers of departments (HODs) to come up with their own budgeting spreadsheet justified by formulae, researches and plans. The HODs will do the first review of the spreadsheets. Once they have finalized, the spreadsheets will be submitted to the Financial Planning Unit for further review. During this review process, the budget figures will be fine tuned. During this review stage, it is quite common for the spreadsheets to flow in and out between the respective Departments and Financial Planning Unit.

Once the Financial Planning Unit finalized the spreadsheets, it will be submitted to the Board of Directors (BODs) for final review and final approval. During the review by BODs, there may still be spreadsheets flow to and backward to the BODs. But the frequency of these would be very much reduced at this stage. Once the BODs finalized the budget figures, the financial budgeting spreadsheets will be final and ready to be implemented by the respective departments.

Top Down Budget

In the “Top Down budget’, the Financial Planning Unit uses the historical reports such as Balance Sheets and Profit and Loss Statements, to comes up with preliminary budgeting spreadsheets. The Financial Planning Unit will hold a meeting with all the BODs and HODs and presents the preliminary spreadsheets to all. During this meeting, the spreadsheets will be discussed and fine tuned to the satisfaction of the meeting. Once the meeting finalized, the spreadsheets will be circulated to the respective departments for implementation and to draw up plans to achieve budget figures.

Pro and Con

Both the above methods have their pro and con. The “Bottom Up Budget” is slow but the budgeting spreadsheets tend to be more accurate as all levels of the company staff, from bottom to top, are involved in the preparation of the budget numbers.

The “Top Down Budget” is faster but the budgeting spreadsheets are less accurate as the budget numbers are decided at top level meeting and the participation of lower level staff are limited. The impact of this less accuracy can be minimized by applying some financial analytical ratios and formulae to fine tune the final budgeting spreadsheets.

The review process may be differ from organization to organization. But the main objective of the review process, that is, to produce Financial Budgeting Spreadsheets as accurate as possible, is the same.

I personally prefer the “Top down Budget” method and fine tune it with various analytical rations and formulae.

financial planning

Effective Financial Goal: The Five Characteristics Financial Planning

In financial management studies, an effective financial goal should have 5 characteristics which could be easily remembered as S-M-A-R-T. The following paragraphs explain all the 5 characteristics:

1) Specific

We might be thinking of being financially free but do you know what it takes? This goal is seems to be too general. Our goal needs to be specific so that we can focus particularly in each area of financial planning and easily to manage our own expectations. Specific goal normally has only one outcome.

For example, goal to invest RM200 per month in unit trust and accumulate at least RM2400 in a year; or spend within our budget every month. These specific goals are going to have different outcomes but when combined, they will ensure our cash flow to be healthy. When each specific goal is accomplished, we are getting nearer to financial freedom.

2) Measurable

We might be working very hard, but how do we know whether our goal is achieved? Therefore, our financial goals should be quantifiable.

For instances, we want to invest and accumulate RM50,000 in 2 years and the progress can be easily quantified by looking at our investment account statement.

In fact, we must be able to measure or review the progress of achieving the goal such as calculating our current net worth, debt-to-income ratio and reviewing, return-on-investment (ROI) and our current insurance policy. It is good if we can keep a journal and review our current planning.

3) Achievable

Many people are influenced by the ‘Law of Attraction’ and believe that ‘nothing is impossible’. Because of this, we’re tend to set difficult goals which require great effort. However, are these goals realistic and achievable? It’s important to know whether the goal is within our potential and logical norm.

For example, if your target is to achieve RM1 million in a year by only investing RM1000 per month in any scheme. How likely can these be achieved? In fact, such investment scheme will require very high ROI within a short duration and often comes with very high risk. You might lost your capital easily.

The most importantly, we should not stretch ourselves to achieve unrealistic goals. This is to avoid frustration over failure which could ended up in great disappointment.

4) Rewarding

We want to achieve a goal because want to get something in return or else nobody will work hard. While working towards goal achievement, we must be certain on the outcome to be achieved and it’s importance to our life. In fact, it must be meaningful and enjoyable.

For example, a man wants to invest his money to accumulate education fund for his son in 20 years. In the future, this goal will be rewarding because his son will be able to enroll into higher education.

However, the rewards could be in any form such as material, financial, relationship and spiritual.

5) Time-bounded

We need adequate time to achieve our goals. It could be short-term, medium-term or long-term, depending on the type of goals to be achieved. Timeliness has been an important aspect in life. Therefore, we should allocate a time frame to avoid procrastination. It will be good if we can set a schedule for everything to be done.

For instances, saving for retirement would require many years because it is a long-term planning and involved huge sum of money. Therefore, planning for retirement in a short-term (1 to 5 years) could be unrealistic unless someone is willing to have huge commitment on this.

In brief, time is priceless because it gives chances for development and create greater outcomes. Therefore, the wise man always said, ‘start early and stop procrastinating’.

Summary

An effective financial goal would always has these SMART characteristics; Specific, Measurable, Achievable, Rewarding and Time-bounded. This is to ensure that our goals are meaningful and get us closer to financial freedom. Good luck in your goal setting.

financial planning

How To Open A Boutique – Tips On Opening A Boutique Financial Planning

Here are top 11 tips on opening a boutique.

o Name your boutique suitable to what you sell. Opening a boutique with an attractive name surely attracts customers.

o Apply for small business license and other legal permits well in advance. This is crucial for getting power turned on when you start operating. Certain merchandisers also insist on legal permits. By opening a boutique with legal permits you would be able to buy your merchandise from suppliers who offer quality products at a low cost.

o Do a budgeting at the early stage itself. Estimate the startup cost and identify your financial resources well in advance. This will save you from financial pitfalls. Clearly know about the expenses and the resources from where the money would come from. If you try you can even find some investors to finance your boutique. You can even join hands with another partner who is interested in doing business together with you. Before opening a boutique complete financial planning and budgeting. This is the key to a successful start and a smooth running thereafter.

o Select a location where the foot traffic is more. You can even find a shop in a mall. When negotiating for lease, do not forget the duration.

o Fix your target market and cater to them. Before opening your boutique, decide whether you want to sell women’s wear, men’s apparel, kids wear or teenage stuff. Select a specialty clothes range and plan to sell them. Select from sports wear, formal wear, casual wear etc.

o Decide on the colors and sizes you intend to sell in your clothing store.

o Do not consider just one merchandiser. After analyzing a few suppliers and studying their terms settle for the best deal. You can buy your merchandise from more than one supplier if it is cost effective.

o Buy just the right amount of stock. This can be done by having an idea about market analysis and estimated sales.

o Decorate the interior of your boutique attractively. Attractive shops undoubtedly impress your customers. Be creative to design your window displays. Even just an onlooker should be tempted to step in your boutique. Opening a fashion boutique with an unimpressive and unattractive interior is a crime!

o Hire talented staffs. Your employees are the ones through which you communicate with your customers. So when opening a boutique, be sure to employ warm and friendly staff. Take a look at the past records of the employees and decide accordingly. You may also give some initial training to your staff to make them accommodate for your unique business. Also the staff should have knowledge about the fashion trends and have sense of style. They should be able to assist the customers on their selection of clothes.

o Grand opening is a must for a fashion boutique. Make an impressive and attractive start by spending freely on advertising. As far as your budget allows, you should give importance to initial advertising. Give creatively phrased advertisement of considerable size in local newspapers and magazines. This is how you would get to be known in the neighborhood.

That is all! You have opened your fashion boutique successfully. Good luck.

financial planning

Preparation Tips for NISM Mutual Fund Distributors Certification Exam Financial Planning

NISM-Series-V A: Mutual Fund Distributors Certification Examination is one of the important exams, conducted by NISM (National Institute of Securities Market). It’s very helpful module for the peoples, those are willing to work in the field of mutual funds. The aim of this certification is to enhance the quality of sales, distribution and related support services in the mutual fund industry.

To clear NISM Series V A: M. F. D. Certification Exam, candidate should have knowledge of following things:

  1. Concept and role : Before attempting NISM V-A Certification Exam, you should have a clear picture of MF in your mind. In other words, we can say that how it works. So just try to know the concept and role model of a mutual fund. In this section, you have to learn lot of things like Advantages and limitations of a mutual fund, Exchange Traded Funds (ETF), Investment objectives, Fund running expenses and some of the others.
  2. Fund Structure and Constituents: In this, you need to learn the things about the Structure of MF in India and related regulations, Role of the sponsor and Role of other fund constituents and related regulations.
  3. Legal and Regulatory Environment: Know the Role and functions of SEBI (Securities and Exchange Board of India) in regulating MF and take a look on investment restrictions and related regulations.

There are some other important sections in this module as: Offer Document, Fund Distribution and Sales Practices, Accounting, Valuation and Taxation, Investor Services, Risk, Return and Performance of Funds, Scheme Selection, Selecting the Right Investment products for Investors, Helping Investors with Financial Planning and Recommending Model Portfolios and Financial Plans.

Before attempting NISM Series V A Certification exam, you should have knowledge of above listed things. Now collect relevant information from your books or try to find out the things online. In modern age, it’s very easy to find out any of the informations online easily and quickly. You may also collect some information from the site of NISM.

So learning all of the above listed things will help you in clearing NISM-Series-V A: M. F. D. Certification Examination easily with high marks.

Other thing, you can find out the model paper of NISM series-V-A online for preparation. Take a mock test or practice test online for the module of NISM Series V A: Mutual Fund Distributors Certification Exam. Now you can also test yourself by giving NISM series V A mock test online.

financial planning

Annuity or 529 Plan Financial Planning

Being in the financial industry for about a decade and a half now I have from time to time come across a number of these self proclaimed “gurus” who tout annuities as a vehicle for college tuition saving in lieu of a 529 plan. This concept is marketed to insurance agents as a sales tool to increase business with a flock of new clients and promises commissions beyond their wildest dreams. Now, let’s take a moment to look at this premise and the pros and cons. An annuity basically is a financial contract designed to accept and grow funds from an individual and pay out a series of payments at a later date. There are a variety of different annuity products out there depending on what your particular needs are that can be very accommodating, but in the interest of time we’ll look at the basic concepts and comparison of annuities, 529 plans and Education Savings Accounts.

Annuities grow on a tax deferred basis however there is a surrender charge, which is a ten percent fee if there is a withdrawal made early. Typically the surrender charge decreases each year over a specified number of years. There are “no surrender annuities” which allow you to withdraw your interest earnings or up to 15% per year without a penalty although any withdrawal from an annuity may be subject to taxes. At fifty nine and a half you may take withdrawals with out a ten percent surrender charge and those withdrawals are taxed as ordinary income. If you withdraw prior to fifty nine and a half, one worst case scenario could be over 40% of your earnings going back to the federal government.

A 529 college savings plan could allow for contributions over $300k depending on the plan however contributions are gifts, so the $13k annual gift limit should be observed. Qualified distributions can be taken without federal income tax or penalty for tuition, books, fees, supplies, room and board, etc…Withdrawals used for expenses other than qualified education costs may be subject to federal and state taxes plus a ten percent penalty. Anyone who plans to attend an eligible postsecondary educational institution can be the beneficiary of a 529 plan. Investments into a 529 savings plan enjoy tax deferred compounding and there are no limitations on the age or income of the owner or beneficiary.

Finally, Education Savings Accounts or ESA’s can be used to pay qualified education expenses for a student in an accredited primary, secondary or post secondary vocational school. 529 assets can only be used to cover qualified higher education expenses. You can contribute $2,000.00 per year in all ESA’s for one beneficiary, however ESA’s offer a wider choice of investments than a 529 plan. ESA and 529 assets are treated as the owners therefor these assets have minimal impact on federal financial aid if the parent is the owner. However, if the child is the owner, the assets are included in the federal financial aid calculation.

An annuity is not likely to be a strong choice for most parents however there’s a small percentage of parents out there that may want to give it a second glanse. Parents who will be over the age of fifty nine and a half by the time their child starts college and who also expect to be in a moderately low tax bracket during the college years may want to put some thought into it. Comparing apples to apples, a 529 plan or an ESA is most likely your best bet to prepare for your child’s educational costs rather than an annuity. If you have a child or grandchild who is planning to attend college, I would recommend you sit down with a qualified financial planner to determine which financial choice is best for you.

financial planning