Analysis Of Risk In Financial Planning

One of the main objectives of all financial planning is the reduction of uncertainty associated with future income and expenses. There are, essentially, two main sources of income: manpower and dollar power. Manpower is the production of income or earnings through the labors of men. In short, it produces income in the form of wages, salaries, and commissions. Dollar power is the ability to earn income through the employment of capital in its various forms, such as land, machinery, cash, and securities. The income produced takes the form of rent, interest, and dividends. The primary source of income for the great majority of families in the United States is manpower, consisting of wages, salaries, and commissions. 

The interruption of income flow or the occurrence of unexpected extraordinary expenses can cause serious repercussions, both financial and psychological, to the family as an independent economic unit. The major cause of such financial calamities is the inability of the wage-earner (or wage-earners) to produce income because of his disability, retirement, unemployment, or death. Practically every family faces the risk of losing the income-producing ability of its major asset