What is financial management?

I. The term "wealth management" first appeared in the press in the early 1990s. With the expansion of China's stock and bond markets, commercial banks, the growing richness of retail business and the overall income of the public year by year, the concept of "financial management" gradually become more popular. Personal finance varieties can be broadly divided into personal asset varieties and personal liability varieties, *** with the fund, stocks, bonds, deposits and life insurance belongs to the personal asset varieties; and personal housing mortgage loans, personal consumer credit belongs to the personal liability varieties. Second, what is financial management General people talk about financial management, think of either investment, is to make money. In fact, the scope of financial management is very wide, financial management is the management of a lifetime of wealth, that is, the individual's lifetime cash flow and risk management. Includes the following meanings: ① financial management is the management of a lifetime of wealth, not just to solve the urgent problem of money. ② Money management is cash flow management. Every person needs to use money (cash outflow) and earn money to generate cash inflow as soon as he or she is born. Therefore, everyone needs to manage their money, whether they are rich or not. ③ Money management also covers risk management. Because of the uncertainty of more future flows, including personal risk, property risk, and market risk, all of which can affect cash inflows (income disruption risk) or cash outflows (incremental cost risk). Scope of personal finance ■ (a) Making money - income Lifetime income includes work income generated by the use of personal resources and financial income generated by the use of money resources; work income is to make money with people, financial income is to make money with money, which shows that the scope of financial management is broader than making money and investing. Includes: ① work income: including salaries, commissions, bonuses, self-employment income. ② financial income: including interest income, rent income, dividends, capital gains, etc.. The expenses of a lifetime include the living expenses of an individual and his/her family from birth to old age, as well as the financial expenses arising from investment and credit utilization. The main purpose of earning money is to meet personal and family expenses. Includes: Living expenses: including clothing, food, housing, transportation, education, music, medical and other family expenses. Financial expenses: including loan interest expenses, protection insurance premiums, investment fees and expenses. ■ (c) save money - assets When the income of the period exceeds the expenditure there will be savings generated, and each period of accumulated savings is an asset, that is, it can help you money rolling in money and generate investment returns on the principal. In old age, when human resources can not continue to work to generate income, we have to rely on the resources of money to generate financial income or liquidation of assets to meet the needs of old age. Include: ① Emergency reserve: keep a cash in case of unemployment or emergency. ② Investment: Investment tools that can be used to generate financial income. ③ Property purchase: Purchase of assets that provide value for use such as a house or car for your own use. ■ (d) Borrowing money - liabilities When cash receipts are unable to cover cash outlays, you need to borrow money. The reason for borrowing money may be a temporary shortfall in income, the purchase of real estate or automobiles and appliances that can be used for a long period of time, or an investment to extend credit. If you do not repay the loan immediately, it will become a debt and you will have to pay interest on the balance of the debt. Therefore, until the loan is repaid, you will have to pay not only for your living expenses, but also for the amortization of the principal and interest on the loan. Include: ① consumer liabilities: such as credit card revolving credit, cash card balance, installment payments, etc.. ② investment liabilities: such as financing margin, play financial leverage of borrowed money investment. ③ Self-use asset liabilities: such as the purchase of self-use assets required housing loans and auto loans. ■ (E) Save money - tax savings In modern society, not all the income is available to meet the expenses, have to pay income tax, the sale of property to pay property tax, property transfer to pay gift tax or inheritance tax, so how to legally save the income tax in cash flow planning, in the transfer of property planning how to legally save the gift tax or inheritance tax, has also become an important part of the financial management of the individual with a high income has become the first consideration of the financial management. It is also an important part of financial management, and for high-income individuals, it has become a primary consideration in financial management. Including: ① Income tax saving planning ② Property tax saving planning ③ Property transfer tax saving planning (this item is currently more commonly used outside the country) ■ (F) Protecting money - insurance and trust ■ (F) Protecting money focuses on risk management, in which it refers to making insurance or trust arrangements in advance, so that the human resources or the existing property can be protected or can be compensated for the loss by obtaining financial management in the case of a loss. The function of insurance is that when an accident occurs and the cash income of the family is unable to meet the expenses at that time or in the future, there will still be a sum of money or income to make up for the shortfall, so as to minimize the impact of unexpected imbalance of income and expenditure in the journey of life. In order to obtain life and property insurance to cover human or material losses, a certain percentage of premiums must be paid. In the event of an insurance incident, the financial income generated from the claim can replace the interrupted work income to meet the living expenses of the family or the survivors, or the claim can be used to pay off the debts to reduce the financial interest expenses. In addition, a trust arrangement can make the trust property independent of other private property and free from the recourse of creditors, which has the function of protecting the existing property from being lost. Life insurance: life, medical, accident and disability insurance. Property insurance: fire insurance, liability insurance. Trusts. Steps and core of financial planning Step 1: Review your assets. The first step is to review your asset position, including stock of assets and future income expectations, and to know how much money you can manage, which is the basic premise. The second step is to set financial goals. Need to qualitatively and quantitatively clarify the financial goals from the specific time, amount and description of the goal. The third step is to find out what type of risk appetite is. Don't make assumptions about risk appetite that don't take into account any objective circumstances. For example, many clients put all their money in the stock market without considering their parents, children, or family responsibilities, and at this point in time his risk appetite deviates from what he can afford. The fourth step is to make strategic asset allocation. Do asset allocation in all assets, followed by the choice of investment varieties and investment timing. The core of financial planning is the process of matching assets and liabilities. Assets are the previous stock of assets and the ability to earn income, i.e. future assets. Liabilities are the family responsibilities, to support parents, to support children, for his schooling. The second is the goal, the goal also becomes our liabilities, to have a high quality of life, so that your assets and liabilities for a dynamic match, this is the most central concept of personal finance. Financial investment hot spots Financial investment can be described as many hot spots, summarized in eight areas: ■ Gold speculation: Since the Bank of China launched in Shanghai specifically for individual investors "Gold Treasure" business, speculation in gold has been a hot spot in the personal finance market, highly regarded by investors and favored. Especially in the past two years, the international gold prices continue to rise. It can be predicted that with the gradual opening of the domestic gold investment field, the future growth potential of gold demand is huge. Especially after 2004, the domestic gold jewelry price tag will gradually change from price and fee to price and fee separation, gold jewelry 5% consumption tax is also expected to be canceled, these will greatly promote the enhancement of the amount of gold investment, speculation in the gold business is also bound to become a major bright spot in the field of personal financial management, the real step into the golden period of investment and financial management. ■ Fund: Since 1997, the first closed-end funds successfully issued to date, the fund has been highly respected by domestic individual investors, last year, the fund has been significantly more than the deposit, become the investment management of many points of view in the top priority. According to relevant information, this year, the net value of domestic funds has nearly 200 billion yuan, accounting for more than 10% of the level of A-share stock circulation. Many investors are still very optimistic about the fund's stable returns, less risk and other advantages and features, hoping to be able to invest in the fund in order to obtain the desired returns. Coupled with the China Securities Regulatory Commission (CSRC) has put forward more stringent requirements on the calculation of the performance of listed companies, the amount of financing, etc., to strengthen the regulation of the stock market, which will give investors the opportunity to win. But no matter what, the biggest characteristic of the stock market is uncertainty, and opportunities and risks go hand in hand. Therefore, investors should continue to maintain a cautious attitude, see the right time to invest again. ■ Treasury bonds: 2005 is a year of innovation in the Treasury bond market, not only increased the variety of treasury bonds, so that the majority of investors can have more choices. New attempts and reforms have also been made to the issuance of treasury bonds to further improve the market-oriented level of treasury bond issuance to minimize the interference of non-market-oriented factors. In addition, the secondary market for treasury bonds will also become the focus of development next year. It can be seen that this series of innovations in treasury bonds, will certainly bring more investment options and greater profitability for investors. ■ savings: over the years, savings as a traditional way of financial management, has long been ingrained in people's mindsets. The majority of residents are still saving as the first choice of financial management. On the one hand, because the momentum of foreign capital inflows into China is still relatively strong, China's base money supply increased; on the other hand, the government in order to moderately control the price index and the rise in inflation, to take the means to raise interest rates, coupled with interest rates to further expand the floating range. The rise in interest rates will certainly stimulate the increase in the amount of savings. ■ Bonds: In recent years, the bond market has been unexpectedly hot. All indications are that the issuance of corporate bonds is still likely to pick up speed in 2005, and corporate convertible bonds, floating-rate bonds, and bank subordinated bonds will likely become good investment varieties for people. Coupled with the CBRC will be subordinated to the subordinate term debt capital, in order to supplement the capital structure of commercial banks, so that the bank issued debt call, will be for the bond market again, play a role in fueling the fire. ■ foreign exchange: the dollar exchange rate in recent years continued to fall, so that more and more people through personal foreign exchange trading, gained a lot of money, but also make the foreign exchange market once unusually hot. Various foreign exchange financial management varieties have also been launched, such as the commercial banks of the exchange market, the Bank of China and Agricultural Bank of China's foreign exchange treasure, the construction bank's quick exchange pass, etc., for investors to choose. Next year, our government will continue to adhere to the principle of RMB stability, take measures such as pegging the RMB to foreign exchange and increasing the foreign exchange autonomy of enterprises in order to promote the healthy development of the exchange market. Therefore, the relevant experts analyze, next year in the currency market to invest in the profit space will be greater, the opportunity will be more. ■ Insurance: Compared with other lukewarm insurance market, income insurance, once launched, will be highly sought after. Income type of insurance is generally more varieties, it not only has the most basic insurance protection function, but also can bring investors a lot of income, can be said to protect and invest in a win-win situation. Therefore, the purchase of income insurance is expected to become a new investment hotspot for individuals.