The Life Cycle Of Financial Theory In The Personal Financial Services Application

Personal financial planning is the process of meeting the life goals through theproper management of you finance. The key of the planning is achieve the customers'aims and wants according theirs financial situation and risk preference. Which willlower the anxiety about theirs financial condition. The personal financial planningincludes: traditional bank services,investment planning,insurance planning,retirement planning,education planning,tax planning and so on. Life-cycle finance theory is the basic of personal financial planning. Itsuggested that the customer would allocate the consumption and saving of each lifecycle according to his whole life's income and outcome, which would gave him themaximized efficiency.Just like Bodie mentioned in his paper: "Life-cycle finance, especially savingand investing for retirement, is today a matter of intense concern to millions, perhapsbillions, of people around the world." Today the Life-cycle finance has been gone topeople's economic life. No matter it is corporate finance or it is personal finance, thefinancial planning is according to the life-cycle of the corporate or personal. Theusing of Life-cycle finance theory has been became needed gradually, because theincreasing of wealth creations and accumulations has brought forward more and morehigher requirement to the developing of personal finance. In abroad, especially in America, the theory has been widely used, which hasdone much contribution to the development of personal financial service. Above all,the education planning and retirement planning has became important parts of thepersonal finance in America. At the end of this year, the door of financial market willtotally open to the foreign banks, the abundance successes experience will be theirsbig advantage to occupy the personal financial market in China. How to deal with thissituation has been the problem to be resolved urgently. So we have to review thedevelopment of the Life-cycle finance theory. Master the newly productions of thistheory and link them with the practice, which will help we do well in the personalfinancial planning. At other side, there are over 1500 billion savings, which arelooking for using;the afraid of retirement caused by aging problem, and so on, allthese are calling for consultation and advices to the households on personal financeaccording to theirs personal conditions. Over the past three decades many respected finance theorists and behavioralscientists have studied how people should and actually do make such decisions.Theorists have produced optimization models that capture important features of reality,such as changing investment opportunities, unpredictable labor income, habitformation, and transaction costs. And at the same time, scientific studies of actualfinancial behavior have revealed that people consistently make certain mistakesbecause of lack of knowledge, faulty logic, cognitive dissonance, and biased statistics.This paper reviewed the Life-cycle finance theory, tidy up its study productionsand dates, made a general conclusion of the study of this theory, introduced thedeveloping of the theory and the guidance to the practice. Now the theory isdeveloping to the direction of dynamic and modeling, the guidance to the practicebecome more and more important and realism.This paper analyzed the status and problems of personal financial service in ourcommercial, introduced and summarized the development of Western commercialbanks in personal financial service, according these to offer some efficient revelationsfor our commercial banks. Among the analyze of those problems, this paper point outthat the main problem is the financial institutions didn't known well about theLife-cycle finance theory and didn't make good use of this theory in theirs products.There are four parts in this paper:The first part is a summarizing of the Life-cycle finance theory;introduce thedefinition and the developing history of the theory, and some conclusion of the theory.The second part is a description of the development of the personal financialservice in China, analyzed the market and the problems existed, pointed out the mainreason that causing such problems.The third part is an introduction the Life-cycle finance theory in practice,introduced how the theory guide the practice and make big contribution to thepractice.The fourth part is a prospect of the develop of the personal finance, at last thispaper suggested that we should make good use of the Life-cycle finance theory inguiding the development of commercial bank's personal financial service.