Many financial analysts share the opinion that a "Personal Finance Scorecard" holds the same importance for an employee what "Balance Sheet" holds for an organization
This is to say that the financial collections of an individual can be both summed up and assessed using such a scorecard. Preparing such a document promotes "pro- activeness" in the acts as one gets to know about the "monetary scarcity" well before time, thereby ensuring financial well-being and independence in coming times.
This study covers various types of planning ranging from "looking after emergency funds" to "real estate investments" to "retirement plans" to "credit card position".
"Emergency funds" comprises the sources that can be converted to cash with minimal lapse of time. This is to keep a check on the immediacy of availability of money. Further, the inflows and outflows on Credit Cards should also be looked after. The outstanding balance on the cards should be within the permissible limits to escape falling in "legal traps". Some individuals own a bunch of such credit cards, which complicates the whole process of managing these. In such instances, developing a Personal Finance Scorecard becomes all the more important.
Also, there are various loan schemes people subscribe to, for having access to the otherwise un-affordable luxuries and necessities. The recurrent payments that need to be done within a given time frame should be carried out, without missing to avoid flouting of laws in any sense.
Individuals are increasingly opting for this way of "self- assessment and improvement" as it helps them control their finances and put those to best use. This analytical approach enables them in striking a better balance between the "uses" and "sources" of funds. Consequently, savings and investments too, can be done in a more wise and thoughtful manner.
Such papers are demanded by lenders to have an insight into the financial history of the concerned person. The volume and other terms of borrowing can get significantly influenced by the "picture" presented through these papers.
This process of preparing the personal finance scorecard can be successfully done and tracked using a measurable approach called BSC i.e. Balanced Scorecard. This is a 1990s concept by Norton and Kaplan that is based on the fact that "using only the financial aspect to judge an organization is a lame thought as this is like trying to stretch the lagging indicators without paying deserving attention to the leading counterpart".
The indicators that can help in this regard are- "number of emergency funds", "average outstanding balances on credit card", "retirement plans index" and "number of insurance schemes that have been subscribed to" to judge the Structural Perspective. Credit and savings perspective can be measured using the parameters such as "Household Expenses: Gross salary ratio", "Credit History Report Frequency", "Savings: Gross Salary" and "Savings Improvement". Financial History of the individual can be had with indicators like "Credit History being questioned index", "Instances of non-fulfilment of schemes Ratio", "Instances of Tax rules non- compliance" and "Credit position improvement". Lastly, the Benefits and Transparency perspective can be obtained with metrics such as "Cost Savings on Credit card Index", "Time Savings", "Transparency Level" and "increase in o ptions for loans".
Summarizing the significant factors in terms of indicators will offer an opportunity to increase the transparency in the credit position of the individual.