Summary
Summary FIN 2602: PERSONAL FINANCIAL MANAGEMENT (PFM)
- Course
- FIN 2602 (FIN2602)
- Institution
- University Of South Africa (Unisa)
FIN 2602: PERSONAL FINANCIAL MANAGEMENT (PFM)
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Department of Finance, Risk Management and BankingCONTENTS
Page
THE IMPORTANCE OF PERSONAL FINANCIAL MANAGEMENT (PFM) v
PURPOSE OF THE COURSE v
PRINCIPLES UNDERLYING THIS STUDY GUIDE v
LAYOUT OF THE LEARNING MATERIAL xii
TOPIC 1 PERSONAL FINANCIAL PLANNING 1
Study unit 1: Personal financial planning 2
Study unit 2: Measurement and assessment of personal financial performance 10
Study unit 3: The time value of money 28
Study unit 4: Credit planning 38
TOPIC 2 CAREER PLANNING 47
Study unit 5: Career planning 48
Study unit 6: Income tax planning 57
Study unit 7: Starting a business: entrepreneurship 63
Study unit 8: Buying a business 70
Study unit 9: Buying a franchise 75
TOPIC 3 ESTATE PLANNING 81
Study unit 10: Estate planning 82
TOPIC 4 INVESTMENT PLANNING 89
Study unit 11: Investment planning 90
Study unit 12: Buying a dwelling 96
Study unit 13: Buying fixed property 105
Study unit 14: Offshore investments 112
Study unit 15: Protection planning 119
TOPIC 5 RETIREMENT PLANNING 127
Study unit 16: Healthcare planning 128
Study unit 17: Retirement planning 134
Study unit 18: Emigration planning 142
age
,Meaning of words 147
Bibliography 172
THE IMPORTANCE OF PERSONAL
FINANCIAL MANAGEMENT (PFM)
• PFM is a field of study that affects all people.
• Only one out of every ten people is able to retire financially independent, mainly due
to a lack of knowledge of PFM.
• Personal financial life skills are probably the most important life skills one can have.
• People with knowledge of basic money matters can take responsibility for their own
financial future.
• People with this knowledge and skills can also transfer these to their children and thus
ensure that their children will have a positive financial future.
• Many job opportunities are available to people with this knowledge, be it as an em-
ployee or as a successful entrepreneur and business person.
• Business success is increased by acquiring knowledge of PFM.
PURPOSE OF THE COURSE
The purpose of the course is to equip students with a detailed knowledge base in the
theory and practice of personal financial management. The course further aims to develop
the analytical and problem-solving abilities of students through the identification of key
personal financial issues, the selection of appropriate support methods and techniques
for resolution of these issues, and the application of the developed knowledge and abili-
ties in the student’s personal life and in a business context.
PRINCIPLES UNDERLYING THIS STUDY GUIDE
This study guide was developed according to the principles of outcomes-based education.
The first step was to create a need for you to know more about the specific topic. We
have therefore explained why it is necessary for you to learn about the topic of PFM.
The second step was to put the topic in a real-life context (refer to the prescribed books)
to afford you the opportunity of experiencing a real-life situation.
To make this approach more practical, you are challenged to become involved in ana-
lysing relevant problems and issues. These challenges are provided in the activities and
assignments that form part of the performance tasks of this module.
In the third step, a solid foundational theoretical knowledge base is provided to sub-
stantiate your analysis of the context.
Fourthly, we want you to ask yourself the question: What can I do with what I have learnt
in these steps in order to improve myself, others, my organisation, the community and
,the environment? Finding the answer to this question entails continuous reflection on
your part.
The last step involves evaluation with the dual purpose of academic and self-evaluation.
The strategy that is followed in the evaluation step is based on four outcomes. This means
that in answering questions, be it the activities, the self-assessment task, assignments or
the examination, you must prove that you
• can explain why (knowledge)
• can do something (skills)
• want to make a positive difference (values)
• want to do it well (attitude)
Applied competence entails applying your knowledge, skills, values and attitudes in
three ways:
• practical competence – demonstrated ability to consider a range of options/pos-
sibilities and make decisions about practice
• foundational competence – demonstrated understanding of what we are doing
and why
• reflexive competence – demonstrated ability to connect our understanding to our
performance in such a way that we will learn from our actions and are able to adapt
to changes and unforeseen circumstances
Throughout the various study units, you will encounter a number of activities and self-
assessment tasks. The purpose of these is to afford you the opportunity to apply the
above competencies on all levels. It should be clear that we are not only interested in
your reproduction of the given theory, but also in your abilities to apply the theory in a
given situation.
We trust that you will find this module in personal financial management meaningful
and personally enriching, and that it will be of practical value to you in your personal life
and work situation.
You are now ready to start with topic 1, which is an introduction to the concept of per-
sonal financial planning.
Good luck, and may you take up the challenge to make the most of this learning
experience!
(vi)
, ICONS USED IN STUDY GUIDES
Learning outcomes. The learning outcomes indicate what aspects
of the particular topic or study unit you have to master (that is, have
to know and understand).
Assessment criteria. The assessment criteria indicate what aspect
of the particular topic or study unit you will be tested/examined on
and demonstrate that you have mastered the study material (that
is, competence).
Key concepts. Attention is drawn to certain keywords or concepts
that you will come across in the topic or study unit.
Overview. The overview provides the background to a particular
topic or study unit.
Activity. These self-assessment activities should be performed to
develop a deeper understanding of the learning material.
Feedback. Feedback is provided on the self-assessment activities.
Read. This icon will direct you to read certain sections of the pre-
scribed book for background information.
Study. The “study” icon indicates which sections of the prescribed
book you need to study (that is, learn, understand and practise).
Assessment. When you see the “assessment” icon you will be re-
quired to test your knowledge, understanding, and application of
the material you have studied.
(vii) FIN2602/1
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