Personal Financial Plan - Part II Essay Example | Topics and Well Written Essays - 250 words

Personal Financial Plan - Part II - Essay Example Personal financial planning requires economics since economic variables like regulations, economic policies, and taxation has to be considered. In addition the use of credit is of prime importance in financial planning. This paper describes the role of economics and credit in personal financial planning. Classic economists assert that people know and understand what is in their best interest and they act and make decisions on this knowledge (Gitman, Joehnk, & Billingsley, 2010). For people to take advantage of this knowledge in their financial plan, they need to understand the most important aspects of economics like taxation, regulation, and markets among others. According to Gitman, Joehnk, and Billingsley (2010), federal tax forms the largest part of tax a citizen pays. Tax planning as an economic variable thus becomes an important part of personal financial planning. Credit refers to the trust that allows one person to avail resources to another person whereby an immediate reimbursement is not required (Edwards, 2004). The major advantages of credit are that it allows a person to acquire resources immediately and repay it comfortably within an extended period of time. The main disadvantage of credit is that the debtor will have to pay more than the amount he borrowed in the long run. Additionally, credit is reliant on the creditworthiness of the borrower; this makes it uncertain to receive. The government plays a major role in determine the economic stability of a nation. The government ensures stability and growth through guiding the pace of economic activity. The government also comes with policies relating to price stability, full employment, redistribution of income and the balance of payments stability (Edwards, 2004). The government also levies taxes and determines the amount of taxes the people will pay. These