International Journal of Management (IJM)

Volume 12, Issue 3, March 2021, pp.60-69, Article ID: IJM_12_03_005

Available online at http://iaeme.com/Home/issue/IJM?Volume=12&Issue=3
ISSN Print: 0976-6502 and ISSN Online: 0976-6510
DOI: 10.34218/IJM.12.3.2021.005

© IAEME Publication Scopus Indexed

FINANCIAL FORECASTING: AN INDIVIDUAL

PERSPECTIVE
Mahboob Ullah*
Associate Professor, Khurasan University, Nangarhar, Afghanistan

Maria Shaikh
Associate Professor, IBA, University of Sindh Jamshoro, Pakistan

Paras Channar
Lecturer, IBA, University of Sindh Jamshoro, Pakistan

Samiuddin Shaikh
Assistant Professor, IBA, University of Sindh Jamshoro, Pakistan

*Corresponding Author

ABSTRACT
The financial goals of an individual represent a critical topic, one which has been
gaining a lot of traction recently. Everybody has different mind-sets, and thereby have
different financial goals. A lot of people fail to realize that the investments made by a
certain individual may not be the best fit for themselves, since they might have varying
financial goals in mind. The main aim of this paper is to conduct a study that highlights
the dependency of factors, including income, age, gender, marital status, retirement age
and dependent children, on an individual's financial goals. The study further elaborates
on the variance of these factors, calculated using statistical tools like Stata 16, so that
investors can make more informed investments suited to their goals. The sample space
is predicted to include people of all demographics, and a suitable analysis method is
used to express the impact of these factors.
Key words: Behavioral Finance, Decision Making, Risk Tolerance, Personal Finance,
Financial Goals
Cite this Article: Mahboob Ullah, Maria Shaikh, Paras Channar and Samiuddin Shaikh,
Financial Forecasting: An Individual Perspective, International Journal of Management
(IJM), 12(3), 2021, pp. 60-69.
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 Mahboob Ullah, Maria Shaikh, Paras Channar and Samiuddin Shaikh

1. INTRODUCTION
The investment decision process varies greatly from person to person. Different factors have
different degrees of impact on individuals. As is widely known, the higher the risk associated
with an investment, the higher the potential return. Some people have a higher risk-appetite
when compared to the others. They’re more inclined, thereby, to ride the wave. There are many
demographic factors that help distinguish investing behaviors – income, level of education
received, gender and age, to name a few.
One of the biggest problems faced by investors is constructing a portfolio that is bespoke to
them. Many people look at other’s investment choices and believe that they should follow their
footsteps. They fail to realize that the formula for success varies from individual to individual,
and there is no ‘one fits all’ combination. Prior research highlights that an improvement in one’s
financial education is directly linked to taking better financial decisions (Chen and Volpe,
1998). Thus, this paper attempts to illustrate how these factors affect the investment
requirements and hence investors psyches. It highlights how certain factors work in conjunction
with each other.

2. REVIEW OF LITERATURE
A number of demographic factors like age, gender, education, income, marital status as well as
psychological parameters that affect an individual’s behavior, subsequently affecting their
financial decisions help us to find out their investment preferences. Lifestyle of an individual
can greatly affect his/her financial goals. It has been proven that irrespective of the youth’s prior
financial knowledge, financial education allows them to further refine their financial literacy
levels (Ullah, 2020). Whether a person has his own house or lives in a rented apartment, the
type of vehicle that he owns and his/her spending power (Mishra and Mishra, 2016), are major
indicators of an individual’s lifestyle. It is also due to the lack of financial knowledge that an
individual is not able to optimize his/her investment in order to achieve their financial goals. A
person’s mind-set plays a crucial role in deciding the type of financial goals. It has been pointed
out that financial skills are seldom considered an essential skill set by the younger generation
(Khan, Khan, Ullah, Usman, Farhat, 2020). The type of investment that an individual makes,
for his goals, boils down to several factors.

2.1 Income
Where financial goals and decisions are involved, income of an individual is the first factor that
comes into the picture. It is but natural to assume that an individual with a higher income will
have a higher risk tolerance. Khan, Ullah, Ashraf, Iqbal (2020) in their study, found that
employees with higher income were willing to take higher risks as compared to employees with
lower income. Gilliam, Zhu and Chatterjee (2010), argued that risk tolerance was proportional
to income and net worth. Their results prove that individuals who earned more than $200,000
had a significantly higher risk tolerance when compared to individuals who earned less than
$50,000.

2.2 Age
Age also plays a significant role in the individual’s investment choices. Individuals nearing
their retirement should be more risk averse since they may not be able to recover from such
investments and hence must invest in less volatile or steady sources of income. On the contrary,
young individuals who still have a long time left for investment can be less evasive when it
comes to taking risks since they will have enough time to recover from the losses. Their
portfolio may consist of more volatile sources of income like stocks or mutual funds. The

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 Financial Forecasting: An Individual Perspective

younger generation tends to live life a little more, with more holidays and personal experiences.
Thus, their financial goals have a tendency to not align with that of the older generations.

2.3 Gender
It is a trivial matter that women get less pay as compared to men across all the professional
fields. Hence, personal financial planning is a mammoth task for women, one which poses high
risks. Studies have shown that men are prone to take more risks as compared to women. Ullah
(2020) proved that women were less prone to investing in assets involving higher risk as
compared to men. These factors may be a driving force in differentiating the financial goals of
women to those of men.

2.4 Marital Status

Every individual, be it single or married, wants to fulfil his/her financial needs and also be
independent financially. Ullah (2020) argues that although every individual is treated equally,
their goals as well as needs differ. Marital status equally plays an essential role in affecting an
individual’s financial goals. For example, a person who is single can tolerate more risks since
he/she can take investment decisions independently. On the contrary, a married person has to
take into consideration the people who are dependent on him/her and hence might not be prone
to higher risks (Surekha Rana, Vibha, 2017). Married people also have to align their goals with
that of their family.

2.5 Previous Experiences

Roszkowski and Davey (2010), in their study concluded that individuals who had made wrong
investments in the past were more risk averse since they carry the feeling of regret. People who
have more experience with investments ultimately obtain greater financial knowledge, thus
optimizing their financial goals and find it much easier to accomplish their goals.

3. AIMS AND OBJECTIVES

• To identify the factors that impact the goals (financial) set by an individual.
• To understand the risk tolerance of different sets of individuals.
• To find the relationship between marital status and income bracket & gender.

4. RESEARCH METHODOLOGY
The study is designed to be a casual research which is going to be empirically tested. Adequate
care has been taken to make sure that the sample is not biased towards any one category. The
type of research being done is a quantitative analysis.
Sample: The sample size consists of 92 individuals. The target respondents are all people who
have even the basic idea of investing.
Data Collection: Primary data has been collected, via an online questionnaire.
Statistical Tools: Tools used are Stata (for statistical calculations like chi-square test and
ANOVA) and Microsoft Excel (for organizing data and creating tables).
Hypothesis:
Null Hypothesis – H0: Financial goals are dependent on marital status Alternate Hypothesis –
H1 : Financial goals are independent of marital status
H2 : An individual’s financial goals are independent of income H3: An individual’s financial
goals are independent of age
H4 : An individual’s financial goals are independent of gender

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 Mahboob Ullah, Maria Shaikh, Paras Channar and Samiuddin Shaikh

H5 : An individual’s financial goals are independent of retirement age H 6: An individual’s

financial goals are independent of dependent people

5. DATA ANALYSIS AND INTERPRETATION

5.1 Income of the Respondents
Graph 1 depicting the varied income of the sample population where 40.5% of the population
earns less than 5LPA, and the remaining 59.5% earn more than 5LPA.

Graph 1 Showing Income of the Respondents

Source: Primary Data

5.2 Age of the Respondents

The bar graph 2 shows that 41% of the population falls under 25 years of age, 34% fall in the
age group of 25-45 years while the remaining 25% falls over 45 years of age.

Graph 2 Showing Age of the Respondents

Source: Primary Data

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 Financial Forecasting: An Individual Perspective

5.3 Gender of the Respondents

This pie chart 3 depicts the gender of the sample population where 63% of the investors’
population is male while the remaining population 37% consists of females.

Graph 3 Showing Gender of the Respondents

Source: Primary Data

5.4 Marital Status of the Respondents

The chart 4 is a depiction of the marital status of the sample population where it is seen that
52% of the sample population is married, while the remaining 48% are unmarried.

Graph 4 Showing Marital Status of the Respondents

Source: Primary Data

5.5 Retirement Age of the Respondents

The above distribution shows us the various ages the investors plan on retiring. In chart 5 It is
seen that 48% of the investors want to retire before they’re 60, whereas the remaining 52% of
the investors want to retire after they turn 60.

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 Mahboob Ullah, Maria Shaikh, Paras Channar and Samiuddin Shaikh

Graph 5 Showing Retirement Age of the Respondents

Source: Primary Data

5.6 Number of Children Dependent on the Respondents

The graph clearly 6 shows that 28.2%, 32.6%, 34.7%, 1.2% and 3.3% of the individuals have
no dependent children, have a single dependent child, have 2 dependent children, have 3
dependent children and 4 dependent children respectively.

Graph 6 Showing Number of Children Dependent on the Respondents

Source: Primary Data

5.7 Short Term Goals of the Respondents

The chart 7 is a depiction of the short term goals of the sample population. It is seen that 32%
of the population wants a new car, 56% of investors want a family holiday, 10% want a new
bike and 25% investors have would buy electronics.

Graph 7 Showing Short Term Goals of the Respondents

Source: Primary Data

5.8 Long Term Goals of the Respondents

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 Financial Forecasting: An Individual Perspective

The chart 8 depicts the various long term goals of the investors where it is seen that 50% of the
population would go for a world tour, 32% want to save up for their child’s marriage, 41% have
retirement plans, 40% of the population wants to have their dream home, 28% of investors want
to save up for their child’s education and 20% investors are looking to own a luxurious car.

Graph 8 Showing Long Term Goals of the Respondents

Source: Primary Data

5.9 Analysis of Chi Square Test for Hypothesis H1

From Table 1, it has been found that financial goals are independent of the individual’s marital
status. The alternate hypothesis is accepted, and H0 is rejected.

Table 1 Showing Result Analysis of Chi Square Test for Hypothesis H1

Marital Children’s
World Tour Luxurious Car Retirement Dream Home Row Totals
Status Education
Married 20 (22.50) [0.28] 3 (9.00) [4.00] 27 (19.00) [3.37] 22 (13.50) [5.35] 10 (18.00) [3.56] 82
Single 25 (22.50) [0.28] 15 (9.00) [4.00] 11 (19.00) [3.37] 5 (13.50) [5.35] 26 (18.00) [3.56] 82
Column 164 (Grand
45 18 38 27 36
Totals Total)
Chi-Square Value =
Degrees of Freedom = 4 P value = 0.000001135603 α = 0.05
33.107212475634

X2 (4, N = 164) = 33.107, p = .000001 significant

5.10 Analysis of Chi Square Test for Hypothesis H2

It has been found from table 2 that financial goals are dependent on the individual’s income.

Table 2 Showing Result Analysis of Chi Square Test for Hypothesis H2

Children’s
Income World Tour Luxurious Car Retirement Dream Home Row Totals
Education
< 1,00,000 6 (3.59) [1.62] 2 (1.44) [0.22] 2 (3.03) [0.35] 1 (2.15) [0.62] 2 (2.79) [0.22] 13
1,00,000 – 5,00,000 10 (12.15) [0.38] 2 (4.86) [1.68] 12 (10.26) [0.30] 8 (7.29) [0.07] 12 (9.45) [0.69] 44
5,00,000 –
10,00,000 11 (9.94) [0.11] 3 (3.98) [0.24] 8 (8.39) [0.02] 6 (5.96) [0.00] 8 (7.73) [0.01] 36
> 10,00,000 18 (19.33) [0.09] 11 (7.73) [1.38] 16 (16.32) [0.01] 12 (11.60) [0.01] 13 (15.03) [0.27] 70
Column Totals 45 18 38 27 35 163 (Grand Total)
Chi-Square Value = 8.300364241254 Degrees of Freedom = 12 P value = 0.761239506068 α = 0.05

X2 (12, N = 163) = 8.300, p = .761 → not significant

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 Mahboob Ullah, Maria Shaikh, Paras Channar and Samiuddin Shaikh

5.11 Analysis of Chi Square Test for Hypothesis H3

In Table 3, it has been found that financial goals are dependent on the individual’s age.

Table 3 Showing Result Analysis of Chi Square Test for Hypothesis H3

Age Family Holiday Electronics New Car New Bike Row Totals
< 25 18 (21.59) [0.60] 12 (8.89) [1.09] 13 (12.28) [0.04] 4 (4.23) [0.01] 47
25 – 45 17 (18.38) [0.10] 8 (7.57) [0.02] 10 (10.45) [0.02] 5 (3.60) [0.54] 40
> 45 16 (11.03) [2.24] 1 (4.54) [2.76] 6 (6.27) [0.01] 1 (2.16) [0.62] 24
Column Totals 51 21 29 10 111 (Grand Total)
Chi-Square Value = 8.068441771426 Degrees of Freedom = 6 P value = 0.233131860861 α = 0.05

X2 (6, N = 111) = 8.068, p = .233 → not significant

5.12 Analysis of Chi Square Test for Hypothesis H4

The analysis has been shown in table 4, it has been found that financial goals are dependent on
the individual’s gender.

Table 4 Showing Result Analysis of Chi Square Test for Hypothesis H4

Gender Family Holiday Electronics New Car New Bike Row Totals
Female 20 (16.69) [0.66] 7 (6.87) [0.00] 8 (9.49) [0.23] 1 (2.95) [1.28] 36
Male 31 (34.31) [0.32] 14 (14.13) [0.00] 21 (19.51) [0.11] 8 (6.05) [0.63] 74
Column Totals 51 21 29 9 110 (Grand Total)
Chi-Square Value = 3.236931996229 Degrees of Freedom = 3 P value = 0.356517434244 α = 0.05

X2 (3, N = 110) = 3.237, p = .357 → not significant

5.13 Analysis of Chi Square Test for Hypothesis H5

In table 5 it has been found that financial goals are dependent on the individual’s retirement
age.

Table 5 Showing Result Analysis of Chi Square Test for Hypothesis H5

Children’s
Retirement Age World Tour Luxurious Car Retirement Education Dream Home Row Totals
< 60 20 (23.47) [0.51] 9 (9.39) [0.02] 18 (19.82) [0.17] 15 (13.56) [0.15] 23 (18.77) [0.95] 85
> 60 25 (21.53) [0.56] 9 (8.61) [0.02] 20 (18.18) [0.18] 11 (12.44) [0.17] 13 (17.23) [1.04] 78
Column Totals 45 18 38 26 36 163 (Grand Total)
Chi-Square Value = 3.760302564917 Degrees of Freedom = 4 P value = 0.439416107809 α = 0.05

X2 (4, N = 163) = 3.760, p = .440 → not significant

5.14 Analysis of Chi Square Test for Hypothesis H6

The analysis has been shown in table 5. it has been found that financial goals are dependent on
the number of children dependent on the individual.

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 Financial Forecasting: An Individual Perspective

Table 5 Showing Result Analysis of Chi Square Test for Hypothesis H6

Dependent Children’s
Children World Tour Luxurious Car Retirement Education Dream Home Row Totals
0 13 (11.75) [0.13] 4 (5.00) [0.20] 10 (9.75) [0.01] 3 (7.00) [2.29] 13 (9.50) [1.29] 43
1 11 (13.66) [0.52] 6 (5.81) [0.01] 13 (11.34) [0.24] 9 (8.14) [0.09] 11 (11.05) [0.00] 50
2 19 (17.76) [0.09] 8 (7.56) [0.03] 14 (14.74) [0.04] 14 (10.58) [1.10] 10 (14.36) [1.32] 65
3 2 (1.64) [0.08] 1 (0.70) [0.13] 1 (1.36) [0.10] 1 (0.98) [0.00] 1 (1.33) [0.08] 6
4 2 (2.19) [0.02] 1 (0.93) [0.01] 1 (1.81) [0.37] 1 (1.30) [0.07] 3 (1.77) [0.86] 8
Column Totals 47 20 39 28 38 172 (Grand Total)
Chi-Square Value = 9.054511069103 Degrees of Freedom = 16 P value = 0.911151697212 α = 0.05

X2 (16, N = 172) = 9.055, p = .911 → not significant

Since the alternate hypothesis H1 has been accepted, we reject the null hypothesis H 0. It is
but natural to assume that a married person and an unmarried person will have different
financial goals. However, the result tells us that this is not the case. It can be interpreted in this
way – Humans are social animals, and have an innate instinct to further their bloodline. They
plan for the future, and that includes the assumption that they will have a family and kids to
look after.

5.15 Testing significant relationship between Marital Status and Income Bracket
Analysis has been shown in table 6, We found a statistically-significant difference in the
number of financial goals set by investors by the income bracket they belong to ( ( )
). No significant difference was imparted by the marital status of the
investors ( ( ) ). The interaction between these terms was not significant.

Table 6 2-Way ANOVA Test, testing significant relationship between Marital Status and Income
Bracket
Source SS df MS F P
Rows 7.76 3 2.59 1.37 0.2571
Columns 9.22 1 9.22 4.88 0.0297
rxc 9.76 3 3.25 1.72 0.1686
Error 168.23 89 1.89
Total 194.97 96
Rows – Marital Status (Single, Married) Columns – Income Bracket (<1LPA, 1-5LPA, 5-
10LPA, 10LPA)

5.16 Testing significant relationship between Marital Status and Gender

In table 7 we found a statistically-significant difference that was provided by the gender of the
investors (()). However, no significant difference was imparted by the marital status of the
investors (()). The interaction between these terms was not significant.

Table 7 2-Way ANOVA Test, testing significant relationship between Marital Status and Gender
Source SS df MS F P
Rows 5.6 1 5.6 2.92 0.091
Columns 10.93 1 10.93 5.7 0.0191

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 Mahboob Ullah, Maria Shaikh, Paras Channar and Samiuddin Shaikh

rxc 1.49 1 1.49 0.78 0.3795

Error 168.s89 88 1.92
Total 186.91 91

Rows – Marital Status (Single, Married) Columns – Gender (Male, Female)

6. CONCLUSION
This study has helped uncover certain factors that play a key role in influencing an investor’s
financial goals. It has highlighted the differences in the thought process of an individual when
certain events occur in one’s life. Thus, it can safely be concluded that an investors’ financial
goals are dependent on his/her income, age, gender, preferred age of retirement and the number
of children dependent on the individual, whereas the person’s marital status has no effect on
the person’s financial goals. It can also be inferred that risk -tolerance drives these shifts in one’s
mind-set. An individual’s appetite for risk continuously changes based on the environment that
he finds himself in. Thus, people are urged to assess their environment thoroughly before
adopting a certain portfolio. As is clear from the ANOVA tests, no significant relationship has
been uncovered between marital status & income bracket and marital status & gender with
respect to the number of financial goals set by the respondents.

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