Financial planning

No this is not a post about financial planning scandals….

A primary theme of my research is personal financial decision making.  I’m very interested in the how, the why and the what of these decisions, particularly given the low levels of financial literacy exhibited by many individuals.

Some of this research relates to heavily mathematical elements of optimal decision making, which I talked a little bit about in this post.  Following on from that post I have recently submitted the paper in this area on an alternative way of defining the stochastic (i.e. random) assumptions (e.g. investment returns, salary inflation, transition between health levels, etc.) that can bring about improvements in the efficiency of the process.  This is important in allowing the models to be detailed enough to solve problems of real interest.  In particular, I’m hoping that my future research might be used to assist in designing default investment strategies for those who don’t wish to be engaged in their financial affairs (in much the same way as I don’t particularly desire to be involved in affairs relating to car maintenance).

However, I am also interested in how people engage in the financial planning process and how financial information can be presented to people in such a way to entertain, engage and inform them.  I am currently involved in a project that has recently released a draft financial planning calculator, which can be found at https://draftfinplancalc.com/.  A screenshot from the calculator can be seen below.

16 08 12 Image

Whilst it may look somewhat similar to other calculators you might have seen already, it does a number of very novel things, in particular allowing you to incorporate detailed information on your own personal circumstances and future plans, including home ownership, children and planned future work profile.  It also provides information on future life insurance needs for you (and your partner).

Additionally to this, the calculator also seeks to educate and collect data from users on their attitude to risk, by showing users the impact of taking on more risk.  Traditionally calculators have just taken an “expectation” approach, meaning that the result of taking on more risk is reflected by a simple increase in the expectation of future wealth.  We aim to demonstrate the risks (both downside and upside) in addition to the expectations, to allow people to make better decisions.

We are seeking people to use the calculator and provide feedback to us that will help us refine the calculator and apply for future funding.  Please feel free to have a look and give us yours!

Adam Butt.

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3 thoughts on “Financial planning

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