Personal Finance Phase Test

Question 1:

Disagree. In my opinion, people who have formal education earn different incomes. Knowledge, skills and abilities are the qualifications and personal attributes that are important in corporate world. Personal income will vary from each individual based on their performances, capabilities and skills possessed. Other than the knowledge you have gained from formal education, the ability to apply knowledge to work activities are the crucial. For example, presentation skills are because you may need to demonstrate certain project or task to the department or even the entire organization. Individual who understands the basics of presentation skills and knows how to put it into proper application is a good indication of a potential company asset. It is not easy to be speaking before a group of professionals. This also explains why presentation skill is important and it will definitely affect individual’s incomes based on their ability to make a company efficiently operate to gain more profit. Besides that, interpersonal skills are the life skills that we use every day to communicate and interact with other people, both individually and in groups. Employers often prefer staff with strong interpersonal skills because they want people who will work well in a team and be able to communicate effectively with colleagues, customers and clients. Hence, I strongly believe that people who possessed excellent fundamental skills which an industry acquired will definitely receive higher income regardless of all people have equivalent formal education previously.

Question 2:

Firstly, benefit of using personal financial planning techniques to manage finances is we often have more freedom to do things that we want to do. The dream of visiting foreign countries, splurging on the latest, expensive piece of technology, buying big price items and etc., all take time and good personal finance planning. Besides, financial planning grants us freedom on a smaller scale, too, for an instance, we will be able to spend money during out an outing with friends or take small weekend trips without having to wonder whether or not they will bust the bank. It is because we can include them in our financial plans and keep to our budget. Secondly, we are more likely to stay out of debt. Sometimes, the urge to spend is overwhelming. However, debt can cause a lot of stress and daily drama that we simply do not need. People who opt to engage in personal finance planning have a better idea of how much they can spend, what their future needs are and are less likely in general to fall into debt. Moreover, it could help improving our cash flow for a better balance between income and expenses and also accumulate funds for special goals, like higher education for children in future. Furthermore, with financial planning, we can estimate our insurance needs and look after our dependents in case of death or disability.  Lastly, financial planning can help to determining a proper investment allocation is critical. An outgrowth of our financial plan should be a plan for the allocation of our investment assets across all of our accounts. The allocation should reflect the goals we are trying to attain as well as our tolerance for investment risk.