Scribd
Upload
2 views

Topic 02

The document outlines the components and key features of financial planning, emphasizing its goal-oriented, comprehensive, and continuous nature. It details the four phases of financial planning: financial independence, accumulation, protection, and distribution, along with various factors that influence financial planning decisions. Additionally, it highlights essential components such as budgeting, cash flow management, risk assessment, and estate planning.

Uploaded by

thabiti mohamedi
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
2 views

Topic 02

The document outlines the components and key features of financial planning, emphasizing its goal-oriented, comprehensive, and continuous nature. It details the four phases of financial planning: financial independence, accumulation, protection, and distribution, along with various factors that influence financial planning decisions. Additionally, it highlights essential components such as budgeting, cash flow management, risk assessment, and estate planning.

Uploaded by

thabiti mohamedi
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 4

Course Title: Islamic Wealth Management

Course Code: DIBF 06206

Topic: Components of a Total Financial Planning


2.1 Financial independence
2.2 Accumulation
2.3 Protection, and
2.4 Distribution

What is Financial Planning?


Financial planning is the process of setting financial goals, analyzing available financial
resources, and developing a structured plan to achieve those goals. It involves managing
income, expenses, savings, investments, and risk to ensure long-term financial stability and
security.

Key Features of Financial Planning


1. Goal-Oriented: Focuses on short-term, medium-term, and long-term financial
objectives.
2. Comprehensive: Covers budgeting, saving, investing, tax planning, retirement, and
estate planning.
3. Continuous Process: Requires periodic review and adjustments based on changes in
income, expenses, and goals.
4. Risk Management: Incorporates insurance and diversification strategies to mitigate
financial risks.
5. Wealth Growth and Preservation: Helps in accumulating wealth and ensuring its
sustainability for future generations.

Key components of financial planning:


1. Financial Goals: One of the most significant components is to clearly define objectives
that an organization wants to achieve.

Lecture Series; By Mr Thabiti Page 1


2. Budgeting: The next is to come up with a comprehensive plan that outlines income,
expenses, and savings to effectively manage finances.
3. Cash Flow Management: What follows is to monitor and optimize the inflow and
outflow of cash to ensure liquidity and meet financial obligations.
4. Risk Assessment: The next component is to identify and track potential financial risks
and work on strategies to mitigate them, such as insurance coverage or
diversification.
5. Investment Planning: The next aspect of the planning is to develop a strategy to
allocate funds into investment vehicles to generate returns and achieve long-term
financial growth.
6. Retirement Planning: The next significant stage is to set aside some amount of money
and create a plan to ensure a financially secure retirement.
7. Tax Planning: The next level is to strategically organize financial affairs to optimize tax
efficiency and minimize income tax liabilities.
8. Debt Management: This is another important component. The idea is to develop
strategies to manage and reduce debt effectively, such as debt consolidation or
repayment plans.
9. Estate Planning: The next stage demands that you prepare for the transfer of assets
and wealth to intended beneficiaries while minimizing tax implications and ensuring
the desired distribution.
10.Regular Monitoring and Review: This is the final yet one of the most critical
components. You must continuously evaluate financial plans, track progress, and
adjust as needed to stay on track and meet financial objectives.

Four Phase Framework (Components) Of Financial Planning


A. Financial independence
Financial Independence means the ability to sustain your desired lifestyle without relying
on active employment income.
 Involves achieving sufficient passive income (investments, rental income,
dividends, etc.). This relates to cash flow management, investment planning, and
retirement planning.
Lecture Series; By Mr Thabiti Page 2
B. Accumulation Phase
This is the phase where you actively build wealth. Includes saving, investing, and maximizing
returns while managing risks. This Related to investment planning, tax planning, and
education planning.
C. Protection Phase
Protecting of wealth from unforeseen risks like illness, disability, lawsuits, and market
downturns. Involves insurance (life, health, disability, liability), estate planning, and risk
management. It ensures financial security for you and your dependents.
D. Distribution Phase
Strategically withdrawing and using assets in retirement or transferring wealth to heirs. It
Covers retirement incomes planning, estate planning, and tax-efficient withdrawal
strategies.
Factors affecting financial planning
Several factors affect financial planning, and understanding these factors allow individuals
and organizations to make informed decisions, anticipate challenges, and seize
opportunities.
1. Economic conditions: interest rates, inflation, and market conditions, can significantly
impact a financial plan.
2. Regulatory environment: Compliance with laws and regulations related to finance
and accounting is crucial in shaping planning strategies.
3. Organizational goals and objectives: The goals of an organization influence the
direction and priorities of any planning efforts.
4. Risk tolerance: Every organization has its own capacity and willingness to take on
financial risks. This risk-taking capacity affects the decisions made in the process.
5. Market dynamics: Competition, customer behavior, and industry trends influence
financial planning strategies.
6. Internal factors: Internal factors such as resources, capabilities, and the
organization’s financial position impact the scope and feasibility of the planning
process.

Lecture Series; By Mr Thabiti Page 3


7. Technological advancements: How an organization uses technology and automation
can influence how you create a good financial plan. It also helps to improve accuracy.
8. Stakeholder expectations: The expectations and requirements of stakeholders, such
as investors, lenders, and shareholders, shape the financial planning goals.
9. Tax considerations: Understanding and planning for tax implications is essential in
optimizing financial outcomes.
10.Human resources: The availability of skilled financial professionals and their expertise
play a vital role when creating an effective financial plan.

THE END

Lecture Series; By Mr Thabiti Page 4

You might also like

pFad - Phonifier reborn

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.

Note: This service is not intended for secure transactions such as banking, social media, email, or purchasing. Use at your own risk. We assume no liability whatsoever for broken pages.


Alternative Proxies:

Alternative Proxy

pFad Proxy

pFad v3 Proxy

pFad v4 Proxy