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The Management Of Individual Finances

Decent Essays
Personal Financial Planning
The management of individual finances indicates the beginning of financial planning. Financial planning refers to the process of developing a strategy that aids an individual to manage and control their spending and investments to suit their current, as well as future needs. Financial planning is an essential aspect of individuals’ as well as organizations’ continuity.
Part A
(1)
Allison’s cash flow statement Cash Flow Statement
Cash Inflow 3000
Expenses
Rent 750
Student loan repayment 200
Utilities 150
Food 300
Recreation 600
Car expenses 200
Clothing 150
Total cash outflow 2350
Less total cash outflow 2350
Net cash flow for the month 650

(2)
Judy’s Cash flow statement Cash Flow Statement
Cash inflow 3000
Less Total Cash outflow 4000
Net cash flow (1,000)

Judy can either use a cash-based system or a credit card system to meet her financial obligations. In the cash system, there will be a direct reduction of liabilities because an individual can settle accruing liabilities and bills. The cash based system also increases the assets in case the person acquires an asset. The cash in hand falls under current assets. The use of credit cards increases the liabilities of an individual. Since money spent on a credit card must be paid back to the creditor (bank), it amounts to a liability. Further charges attached to the facility such as interest, as well as service charges, increase the user 's liabilities. The use of credit
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