- Any income can be either saved for the future purpose or consumed for the current needs financial planning helps in guiding the person when to invest and when to consume.
- Financial planning helps a person to create a plan for the future by investing in assets and keeping the current income intact. There are many luxurious products like car, which, in long term may not give any returns; however, it provides convenience to the person. There is another asset like real estate which gives higher returns to the person by capital appreciation.
- Consumption includes spending money on the basic necessities like food, shelter, and clothing. It also includes buying luxury and semi-luxury products. Normally, the average propensity to consume decreases when the income increases. This results in increased saving and so, financial planning helps the person in chalking out the plans for the future.
We studied the various advantages of financial planning. The benefits are upgraded living, Money management, Consumption, Securing future and Building wealth among others. Financial planning is more than money management; it is all about managing the current needs and to be prepared for the future needs and the contingencies as well. An individual needs to do financial planning mainly for the reasons like – Real estate Planning, Credit management, Tax management, Managing cash and savings, Health and life insurance, Investing in equities and fixed income securities, Investment in mutual funds, Contingencies, Retirement planning, Marriage, Buying luxurious and domestic products. More, we discussed on the financial process and studied that the financial process starts with a clear picture of your goals and then gathering as much information as possible. Third step is to have appropriate advisors. The next step is adopting a good all-inclusive financial plan and then to actually execute that plan. Final step is to monitor and taking the corrective steps.
A future contract provides both a right and an obligation to buy or sell a standard amount of a commodity, security or currency on a specified future date at price agreed when the contract is entered into. A key element of any successful traded futures contact must be the characteristic of standardisation; it is this element which makes the agreement tradable. The only negotiable, changeable element must be the price agreed when entering into the contract.
Types:
- Commodity futures: Where the underlying is a commodity or physical asset such as wheel, cotton, butter, eggs, etc. such contracts began traded on Chicago Board of Trade in 1860‟s. India too futures on soybean, black pepper, spices have been trading for long.
- Financial futures: Where the underlying such as foreign exchange interest rates shares, treasury bill or stock index.
