AFF 502 Chapter Notes - Chapter 6: Mutual Fund, Financial Intermediary, The Surplus
1 Jun 2017
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Early in your life, dependent on your family for financial support, and your parents do the financial planning for the family unit that includes you. Making a critical investment in your human capital during this dependent stage. Early in life, your consumption is likely to exceed your income at least some of the time. As you proceed, you start to earn more than you come: et ct > 0. As the children become independent and you pay your debts off, you find yourself with surplus income, or savings. Rate of savings increases every year and the total balance of savings increase. When you reach retirement, your earning power because low or zero. Start to consume accumulated savings balance, and the savings rate is negative. Essence of personal financial planning is arranging to meet the differences in earnings and consumption through borrowing and saving as appropriate.
