2. Developing Your Financial Statements and Plans.
mr mr mr mr mr mr
3. Preparing Your Taxes.
mr mr mr
Part II: MANAGING BASIC ASSETS.
mr mr mr mr
4. Managing Your Cash and Savings.
mr mr mr mr mr
5. Making Automobile and Housing Decisions.
mr mr mr mr mr
Part III: MANAGING CREDIT.
mr mr mr
6. Using Credit.
mr mr
7. Using Consumer Loans.
mr mr mr
Part IV: MANAGING INSURANCE NEEDS.
mr mr mr mr
8. Insuring Your Life.
mr mr mr
9. Insuring Your Health.
mr mr mr
10. Protecting Your Property.
mr mr mr
Part V: MANAGING INVESTMENTS.
mr mr mr
11. Investment Planning.
mr mr
12. Investing in Stocks and Bonds.
mr mr mr mr mr
13. Investing in Mutual Funds and Real Estate.
mr mr mr mr mr mr mr
Part VI: RETIREMENT AND ESTATE PLANNING.
mr mr mr mr mr
14. Planning for Retirement.
mr mr mr
15. Preserving Your Estate.
mr mr mr
Understanding the Financial Planning Pro mr mrmr mr m
r
cess Chapter 1 mr mr
How Will This Affect Me?
mr mr mr mr
The heart of financial planning is making sure your values line up with how you spend and save.
mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr
That means knowing where you are financially and planning on how to get where you want to be
mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr
in the future no matter what life throws at you. For example, how should your plan handle the p
mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr
rojection that Social Security costs may exceed revenues by 2035? And what if the government d
mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr
ecides to raise tax rates to help cover the federal deficit? An informed financial plan should refle
mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr
ct such uncertainties and more.
mr mr mr mr
This chapter overviews the financial planning process and explains its context. Topics include
mr mr mr mr mr mr mr mr mr mr mr mr mr
how financial plans change to accommodate your current stage in life and the role that financial
mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr
planners can play in helping you achieve your objectives. After reading this chapter you will
mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr
have a good perspective on how to organize your overall personal financial plan.
mr mr mr mr mr mr mr mr mr mr mr mr
LEARNING GOALS mr
LG1 Identify the benefits of using personal financial planning techniques to manage your f
mr mr mr mr mr mr mr mr mr mr mr mr mr
,inances.
Key concept in this section is the planning model as displayed in Exhibit 1.1. Your standard of
mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr
living is greatly impacted by your spending habits and your commitment to saving. Your spen
mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr
ding is measured by your propensity to consume. Wealth is the total value of all property yo
mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr
u own less the amount that you owe to others.
mr mr mr mr mr mr mr mr mr
ACTIVITY: Ask the students to assume that they have just inherited $100,000. What will you
m r mr mr mr mr mr mr mr mr mr mr mr mr mr mr
do with the money? Write down three ways you will spend or use the money.
mr mr mr mr mr mr mr mr mr mr mr mr mr mr
, Ask the students to share one item with the class and record what they say so that the entire class
mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr
can reflect on the answers. Hopefully, at least a few will mention investing even if only $10,00
mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr
0 of the amount. Use their answers to discuss taking care of current needs versus future needs.
mr mr mr m r mr mr mr mr mr mr mr mr mr mr mr mr
Focus on their propensity to consume and its impact on accumulating wealth. Point out the Finan
mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr
cial Planning Tip, ―Be SMART in Planning Your Financial Goals.‖
mr mr mr mr mr mr mr mr mr
Use Exhibit 1.2 to show how the average person earns and spends their money and Exhibit 1.6 to
mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr
help the student identify where they are now.
mr mr mr mr mr mr mr
LG2 Describe the personal financial planning process and define your goals.
mr mr mr mr mr mr mr mr mr mr
Dwight Eisenhower, army general and president, is quoted as saying ―Plans are useless; Planning
mr mr mr mr mr mr mr mr mr mr mr mr mr mr
is priceless‖. The process of planning allows you to focus on the issues that are most important
mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr m
and to be ready when things change.
r mr mr mr mr mr mr
Exhibit 1.3 lists the Six Step Financial Planning Process. The first and most important is defini
mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr
ng your financial goals. Exhibit 1.6 lists goals by age to demonstrate how goals change over ti
mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr
me. Use the examples in Exhibit 1.5 to ask students if the assumptions are realistic. Yes, the ans
mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr
wer is in the exhibit, but many will not have read chapter at this point. For your use, the assump
mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr
tions are: mr
Assumption 1: Saving a few thousand dollars a year should provide enough to fund my child‘
mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr
s college Education.
mr mr
Assumption 2: An emergency fund lasting 3 months should be adequate. mr mr mr mr mr mr mr mr mr mr
Assumption 3: I will be able to retire at 65 and should have plenty to live on in retirement
mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr
. Assumption 4: I‘m relying on the rule of thumb that I will need only 70 percent of my pr
mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr
e- retirement income to manage nicely in retirement.
mr mr mr mr mr mr mr
There are several worksheets in the book. Worksheet 1.1 gives the student a format to write do
mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr
wn their Personal Financial Goals. There is power in writing down goals [and most any other pla
mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr
n]. Recording the goal and then reviewing three months later will help you to keep focus on th
mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr
e goal.
mr
LG3 Explain the life cycle of financial plans, their role in achieving your financial goals
mr mr mr mr mr mr mr mr mr mr mr mr mr mr
, how to deal with special planning concerns, and the use of professional financial planne
mr mr mr mr mr mr mr mr mr mr mr mr mr mr
rs.
Exhibit 1.7 can help focus the attention on how goals differ between the various stages of life.
mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr
Section 1-3b lists various decisions that you will have to make over your life. The section 1-
mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr
3c addresses Special Planning Concerns. Worksheet 1.2 focuses on the financial benefit to the
mr mr mr mr mr mr mr mr mr mr mr mr mr mr
family of the second income. If the second income is from a minimum wage job, it may not be
mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr
a good financial decision. Of course having a job, even a minimum wage job, may give the pers
mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr
on psychic income that will override the financial impact.
mr mr mr mr mr mr mr mr
While perhaps off topic, I recall a high school science teacher who was a smoker. He walked t
mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr mr
hrough the amount of money he spent on purchasing tobacco products. That computation had a
mr mr mr mr mr mr mr mr mr mr m r mr mr mr
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller GeniusSolutions. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $20.49. You're not tied to anything after your purchase.
