Business and Personal Finance

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					        Business and
      Personal Finance
         Chapter 1
Personal Financial Planning

        Section 1.1
   Decisions and Goals
   in Personal Finance
            Decisions and Goals
            in Personal Finance

In This Section . . .
  What is personal financial planning?
  It means spending, saving, and investing     your
    money so you can have the kind of life you
    want as well as financial security.
  This section discusses:
     Making Personal Financial Decisions
     Developing Personal Financial Goals
     Influences on Personal Financial Planning
           Decisions and Goals
           in Personal Finance

What You’ll Learn
   How to create a financial plan
   How to develop your financial goals
   How to evaluate the economic factors
    that will affect your financial decisions
           Decisions and Goals
           in Personal Finance

Why It’s Important
  Learning the steps in the financial
   planning process will give you a solid
   foundation for making all your financial
   decisions, big and small, now and in the
   future.
         Decisions and Goals
         in Personal Finance

Video Clip: Why Have a Financial Plan?
          Decisions and Goals
          in Personal Finance

Why Plan?
 Some of the benefits of planning are:
    You have more money, know how to use
     money to achieve your goals, and are
     financially secure;
    You have less chance of going into debt you
     can’t handle;
    You can help your partner and support
     your children.
             Decisions and Goals
             in Personal Finance

Create a Financial Plan
  The financial planning process has six steps:
    Step 1   Determine your current financial
             situation
    Step 2   Develop your financial goals
    Step 3   Identify alternative courses of action
    Step 4   Evaluate your alternatives
    Step 5   Create and use your financial plan
             of action
    Step 6   Review and revise your plan
            Decisions and Goals
            in Personal Finance

Common Cents
 Pay Yourself First
List your income (from
  your allowance or a
  part-time job). Set an
  amount to put aside
  every month and
  calculate how much you
  will save up in a year.
           Decisions and Goals
           in Personal Finance

Types of Goals
  Goals can be defined by the time it takes
  to achieve them:
     Short-term goals are those that you’ll reach in
      one year or less (saving to buy a computer).
     Intermediate goals take two to five years to
      reach (saving for a down payment on a house).
     Long-term goals take more than five years to
      reach (planning for retirement).
            Decisions and Goals
            in Personal Finance

Guidelines for Setting Goals
  Your financial goals should:
     be realistic
     be specific
     have a clear time frame
     help you decide what type of action to take
           Decisions and Goals
           in Personal Finance

Write it Down
  Studies show that people who write down
   their goals are three times more likely to
   achieve them.
     S-M-A-R-T GOAL CRITERIA
            Specific
            Measurable
            Attainable
            Realistic
            Time-bound

-G
      SMART Goals
                       “Pay for lodging, transportation, meals
      Specific………      for a 5-day trip to Washington, D.C.”


      Measurable……     “$300 through fundraising, $50 from
                       birthday money, save $25 a week.”

      Attainable…...   “If I stick to my plan, I’ll have the money
                       when I need it.”

                       “I’ll save $60 a month from my
      Realistic…….     paycheck for the next six months.”

                       “I’ll save all the money by March 1st.”
      Time-bound…

1-H
           Decisions and Goals
           in Personal Finance

Influences on Personal Financial
  Planning
  Many influences affect your day-to-day
   decisions. The three most important are:

     Life situations
     Personal values
     Economic factors
  Decisions and Goals
  in Personal Finance
Financial Goals and Activities
  for Various Life Situations
Decisions and Goals
in Personal Finance
Economic Conditions and
   Financial Planning
            Decisions and Goals
            in Personal Finance

Check Your Understanding
  1) Name the six steps used to create a financial
     plan.
  2) What is the relationship between the timing
     of your goals and the type of good or service
     that you seek?
  3) Describe two economic factors that affect
     financial decisions. How might these factors
     influence your financial planning?
           Decisions and Goals
           in Personal Finance

Think Critically
  Why is it important to distinguish between
    your needs and your wants?
Decisions and Goals
in Personal Finance



End of Section 1.1

				
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posted:4/20/2011
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