3. What Factors Affect Financial Plan?


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Hannah Barton Profile
Hannah Barton answered
A strong financial plan should be broken down into three focused sections. These sections should be titled;

• Balance sheet
• Income statement
• Cashflow statement

Within these sections a financial plan should be specific and focus on the matter of that particular section.

• Balance sheet
Within the balance sheet section, you should give an overview of your current financial situation, current income, current expenditure and how the finances look at this particular moment in time. This will be a good lead into the financial plan as it will give the reader a good grasp of why you have formulated the financial plan. This balance sheet should also contain projected figures for the next few years as well as your actual figures for the last few years, if you have any. These figures should come from both the income and cashflow sections.

This balance sheet section should be looked at as a mixture of a summary of the plan and also the introduction where you introduce the potential that you will consider in more detail in the other two sections. Some people find that the balance sheet is the last part of the financial plan to be finished, even if it is the first section to be started.

• Income statement
The income statement should include all income, profits, investments, savings and how these will be utilized. This will explain how profitable the business is and also, if you are expecting investments or loans, how much you are expecting and how much will be needed to have the desired effect. There should also be projected figures within this section for the next three to five years.

• Cashflow statement
In the cashflow statement, all of the outgoings should be identified. This should show what you intend to spend overall and should also show projected figures for the next few years.

Ensure that your figures do add up. A document with incorrect figures does not make a viable financial plan.
Anonymous Profile
Anonymous answered
This answer by pattabhiramreddy:
Once your financial plan is prepared, it is important it is reviewed regularly. Life changes rapidly, and these adjustments can affect your personal and financial circumstances in a blink of an eye. Some factors you have some control over and others you don’t. Let’s look at some events that can affect your financial plan:

  Personal Factors  

    * a wedding
    * the birth of a child
    * a divorce
    * a redundancy
    * the eldest child is starting school
    * a promotion and pay rise at work

External Factors

    * ammendments to superannuation law
    * changes in taxation legislation
    * fluctuating interest rates
    * rising inflation and unemployment
    * economic cycles
    * oscillating investment returns

As we all lead busy lives, most of us don’t have the time or expertise to stay ahead of our changing environment and how it can impact on our financial goals. This is where a financial planner and a regular review will prove valuable.

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