Personal Finance

Personal Finance is the application of the principles of finance to the monetary decisions of an individual or family unit. It addresses the ways in which individuals or families obtain, budget, save, and spend monetary resources over time, taking into account various financial risks and future life events. Components of personal finance might include checking and savings accounts, credit cards and consumer loans, investments in the stock market, retirement plans, social security benefits, insurance policies, and income tax management.

The six key areas of personal financial planning, as suggested by the Financial Planning Standards Board, are:

1 - Financial Position: this area is concerned with understanding the personal resources available by examining net worth and household cash flow. Net worth is a person's balance sheet, calculated by adding up all assets under that person's control, minus all liabilities of the household, at one point in time. Household cash flow totals up all the expected sources of income within a year, minus all expected expenses within the same year. From this analysis, the financial planner can determine to what degree and in what time the personal goals can be accomplished.

2 - Adequate Protection: the analysis of how to protect a household from unforeseen risks. These risks can be divided into liability, property, death, disability, health and long term care. Some of these risks may be self-insurable, while most will require the purchase of an insurance contract. Determining how much insurance to get, at the most cost effective terms requires knowledge of the market for personal insurance. Business owners, professionals, athletes and entertainers require specialized insurance professionals to adequately protect themselves. Since insurance also enjoys some tax benefits, utilizing insurance investment products may be a critical piece of the overall investment planning.

3 - Tax Planning: typically the income tax is the single largest expense in a household. Managing taxes is not a question of if you will pay taxes, but when and how much. Government gives many incentives in the form of tax deductions and credits, which can be used to reduce the lifetime tax burden. Most modern governments use a progressive tax. Typically, as your income grows, you pay a higher marginal rate of tax. Understanding how to take advantage of the myriad tax breaks when planning your personal finances can make a significant impact upon your success.

4 - Investment and Accumulation Goals: planning how to accumulate enough money to acquire items with a high price is what most people consider to be financial planning. The major reasons to accumulate assets is for the following: a - purchasing a house b - purchasing a car c - starting a business d - paying for education expenses e - accumulating money for retirement, to generate a stream of income to cover lifestyle expenses.

Achieving these goals requires projecting what they will cost, and when you need to withdraw funds. A major risk to the household in achieving their accumulation goal is the rate of price increases over time, or inflation. Using net present value calculators, the financial planner will suggest a combination of asset earmarking and regular savings to be invested in a variety of investments. In order to overcome the rate of inflation, the investment portfolio has to get a higher rate of return, which typically will subject the portfolio to a number of risks. Managing these portfolio risks is most often accomplished using asset allocation, which seeks to diversify investment risk and opportunity. This asset allocation will prescribe a percentage allocation to be invested in stocks, bonds, cash and alternative investments. The allocation should also take into consideration the personal risk profile of every investor, since risk attitudes vary from person to person.

5 - Retirement Planning: retirement planning is the process of understanding how much it costs to live at retirement, and coming up with a plan to distribute assets to meet any income shortfall.

6 - Estate Planning: involves planning for the disposition of your asset when you die. Typically, there is a tax due to the state or federal government at your death. Avoiding these taxes means that more of your assets will be distributed to your heirs. You can leave your assets to family, friends or charitable groups.

From :   Wikipedia, the free encyclopedia
Source: http://en.wikipedia.org/wiki/Personal_finance
For:        Public Information, non profitable 

Investment Banker

Investment Banker Career Overview: Investment bankers raise funds for corporations by structuring the issuance of securities such as stocks and bonds. They also advise corporations that are contemplating mergers and acquisitions. Careers in investment banking require strong quantitative abilities combined with excellent sales skills, not to mention a large measure of self-confidence.

This is a fast-paced, pressure-packed field noted for long hours and extensive travel requirements. In particular, junior associates should expect to be on call virtually 24/7 for their first few years. The payoff for those who survive this grind is that compensation packages can be extremely generous, allowing a successful person to build a fortune within a relatively short period of time.

Investment Banking Industry Trends: Data from the Boston Consulting Group (BCG) and Thomson Reuters indicate that industry-wide investment banking revenues were down by over 75% in the third quarter of 2008 from the same period in 2007, while the dollar volume of activity (securities issues, loans and mergers & acquisitions) in the first nine months of 2008 was down by around 50% from 2007. 

Investment Banker Career Outlook: The view of senior investment bankers participating in the annual Wharton Finance Conference on November 7, 2008 was:

• Merger & acquisition work should be in demand, especially as corporate restructurings increase in number.
• Capital markets work (such as securities underwriting), by contrast, generally should be weak over the next few years.
• Distressed debt, however, will be one capital markets area with growth prospects.
• Emerging markets will be the other capital markets area worth looking into.
• Boutique firms report booming M&A business, and generally are much stronger than their larger rivals.

In sum, there is still hiring by investment banking firms, though not in the same numbers or at the same pay levels as in recent years. Especially for ambitious new MBAs seeking entry-level positions, it is a challenging environment, but with some opportunities still available.

From :     About.com
Source:   http://financecareers.about.com/od/investmentbanker/a/investbank.htm
For:          public Information, non profitable  
Author:  Mark Kolakowski,

Loan Officer

Loan Officer Career Overview: A loan officer assists prospective clients in applying for loans and in determining the type and amount of loan that is most suitable for their needs. A loan officer also assesses the creditworthiness of loan applicants, judging their suitability as borrowers and the precise terms (interest rate, repayment schedule, etc.) on which credit may be granted to them. Depending on the position, a loan officer may be expected to actively seek out clients, rather than passively wait for applicants to approach his or her financial institution (bank, credit union, etc.) for credit.

Loan Officer vs. Credit Counselor: The Bureau of Labor Statistics considers a credit counselor to be a subcategory of loan officer, with similar skill sets and levels of compensation.

Loan Officer Specialization: A loan officer tends to specialize in one of three major types of lending: commercial, consumer or mortgage. Commercial lending is the extension of credit to businesses. Consumer lending includes personal loans, education loans, home equity loans and auto loans, among others. Mortgage lending includes loans for the purchase of real estate by individuals (a business normally would be served by a commercial loan officer, even for real estate purchases) or the refinancing of existing mortgages.

Loan Officer Education: A Bachelor's Degree is expected for a loan officer. Coursework in finance, accounting and/or economics is helpful, though not required. Strong quantitative and analytic skills are vital. An MBA can give you a leg up in the hiring process, depending on the firm.

Loan Officer Certification: Most loan officer positions do not require any special certification or licensing. A notable exception, however, is mortgage lending. Most states regulate this field, especially regarding loan officer positions in mortgage banks or mortgage brokerages, rather than in traditional banks or credit unions.

Loan Officer Duties and Responsibilities: The majority of loan officer positions combine sales responsibilities with analytic requirements: selling loans while determining who are appropriate clients, and on what terms. Some loan officer positions are focused largely on the analytics, with no sales dimension and limited client contact. People in these types of jobs are sometimes called loan underwriters. Other loan officer positions specialize in dealing with clients who are having problems meeting their payments. One example is a loan collection officer, who tries to work out agreements with troubled borrowers that adjust the repayment terms.

Loan Officer Typical Schedule: The majority of people in loan officer jobs tend to work a standard 40 hour week. A consumer loan officer is most likely to work set hours from a fixed location, such as a bank branch or office. A commercial or mortgage loan officer often has to work variable hours to confer with clients at the latter's places of work or residence, and thus spend significant time out of the office and on the road.

What's to Like About Being a Loan Officer: Depending on the firm and its policies, a loan officer can have a large degree of professional autonomy, more akin to being an independent entrepreneur than a corporate employee. If the compensation scheme is largely commission-based, there is a close correlation between performance and reward, with high earnings potential. Also, doing your job well can make a discernible, positive impact on your clients' lives.

What's Not to Like About Being a Loan Officer: Rejecting loan applicants who do not meet your institution's lending criteria can be an unpleasant process, as can dealing with clients who have run into financial difficulties and cannot repay their loans as agreed. Also, loan officers who are expected to prospect for new clients can be under heavy pressure to perform, the downside of the greater earning potential that such a position offers.

Loan Officer Salary Range: Per the Bureau of Labor Statistics, median annual compensation was about $52,000 as of May 2006, with the top 10% earning over $107,000. Compensation schemes vary by employer, with varying mixtures of salary and commission. Where commissions are paid, they normally reflect the number and/or value of loans originated. The highest pay packages for a loan officer tend to be commission-based and at large institutions.

From :      About.com
Source:   http://financecareers.about.com/od/banker/a/loanofficer.htm
For:           public Information, non profitable 
Author:  Mark Kolakowski,

Public Finance

Public finance is a field of economics concerned with paying for collective or governmental activities, and with the administration and design of those activities. The field is often divided into questions of what the government or collective organizations should do or are doing, and questions of how to pay for those activities. The broader term, public economics, and the narrower term, government finance, are also often used.

The purview of public finance is considered to be threefold: governmental effects on (1) efficient allocation of resources, (2) distribution of income, and (3) macroeconomic stabilization.

Overview 

The proper role of government provides a starting point for the analysis of public finance. In theory, under certain circumstances private markets will allocate goods and services among individuals efficiently (in the sense that no waste occurs and that individual tastes are matching with the economy's productive abilities). If private markets were able to provide efficient outcomes and if the distribution of income were socially acceptable, then there would be little or no scope for government. In many cases, however, conditions for private market efficiency are violated. For example, if many people can enjoy the same good at the same time (non-rival, non-excludable consumption), then private markets may supply too little of that good. National defense is one example of non-rival consumption, or of a public good.

"Market failure" occurs when private markets do not allocate goods or services efficiently. The existence of market failure provides an efficiency-based rationale for collective or governmental provision of goods and services. Externalities, public goods, informational advantages, strong economies of scale, and network effects can cause market failures. Public provision via a government or a voluntary association, however, is subject to other inefficiencies, termed "government failure."

Under broad assumptions, government decisions about the efficient scope and level of activities can be efficiently separated from decisions about the design of taxation systems (Diamond-Mirlees separation). In this view, public sector programs should be designed to maximize social benefits minus costs (cost-benefit analysis), and then revenues needed to pay for those expenditures should be raised through a taxation system that creates the fewest efficiency losses caused by distortion of economic activity as possible. In practice, government budgeting or public budgeting is substantially more complicated and often results in inefficient practices.

Government can pay for spending by borrowing (for example, with government bonds), although borrowing is a method of distributing tax burdens through time rather than a replacement for taxes. A deficit is the difference between government spending and revenues. The accumulation of deficits over time is the total public debt. Deficit finance allows governments to smooth tax burdens over time, and gives governments an important fiscal policy tool. Deficits can also narrow the options of successor governments.

Public finance is closely connected to issues of income distribution and social equity. Governments can reallocate income through transfer payments or by designing tax systems that treat high-income and low-income households differently.

The Public Choice approach to public finance seeks to explain how self-interested voters, politicians, and bureaucrats actually operate, rather than how they should operate.

From :   Wikipedia, the free encyclopedia
Source: http://en.wikipedia.org/wiki/Public_finance
For:         Public Information, non profitable