Personal Finance Ece Yavuzbaş Gökçe Uz Tevfik Kumru Kemal Pınarbaşı 1

Outline  Definition  Benefits  Financial position  Adequate protection  Tax planning  Investment and accumulation goals  Retirement planning  Estate planning  Personal Budget  Software Programs 2

3  It’s not your salary that makes you rich, it’s your spending habits.  Charles A. Jeffe

Definition of Personal Finance Personal finance is defined as the way in which an individual or a family makes decisions in relation to their financial portfolio. Personal financial plan: a plan that specifies your financial goals and describes the spending, financing, and investing plans that are intended to achieve those goals 4

Benefits of Personal Finance Personal Financial Planning may not help you to earn more money, but it will help you to use your money more wisely. As part of your personal financial plan, think about what is important to you. What do you want to accomplish? 5

Benefits of Personal Finance Budgeting Savings Investment Risk Management Cash-flow management 6

Components Financial position Adequate protection Tax planning Investment and accumulation goals Retirement planning Estate planning 7

Financial Position  Financial planning needs to understand what his/her/their financial situation is.  Household assets  Household liabilities  Household cash flow 8

Financial Position  Develop and implement a budget  Calculate your net worth (wealth) using a balance sheet  Develop a personal income statement and use it to analyze your spending  Introduce budgeting software: Quicken, Mint.com and others 9

Adequate Protection  Protected in event of an emergency must also be in place  Natural disasters and death  Buying insurance for each of these areas  Risk Allocation 10

Tax Planning  Certainties: Taxes and Death  Income  Value of Assets  Single largest expense in a household  Tax deductions  Credits 11

12 Estate Planning Investing Budget Savings and Debt Retirement Planning Insurance Cash Management Goals Taxes Impacts of Taxes

Investment and accumulation goals  Planning how to accumulate enough money for large purchases  Major reasons to accumulate assets include purchasing a house or car, starting a business,paying for education expenses and saving for retirement  Major risk to the households, the rate of price increases over time or inflation

Investment and accumulation goals  Financial planners suggest regular savings in a variety of ınvestments  The investment portfolio has to get a higher rate of return  Investors risk attitudes vary from person to person  These types of financial goals require careful planning and secure investments.

Retirement planning  Personal finance involves planning for your or your families retirement  You need to know how much money do you need to be retired and how do you finance this retirement

Private pension Private Pension

Private pension  This is a long-term investment that are used by intermediaries instead of you  When you come retirement age, you obtain a sum of money  Payments are deposited to the Takasbank.They are under the control of government  You can see your fund fluctuations on web site.

Retirement companies

Advantages of the private pension  A small amount of contribution is paid each month  You can earn more money with less money  You can determine the degree of risk  You don’t need to pay an other fee when devolved into another company  Funds are conducted by professional portfolio managers  The allocation of funds can be changed six times a year  There is no loss of money

Disadvantages of the private pension  To be long-term investment  You have to pay operating expenses like 8%  Fund operating deductions are made  If you exit the system less than 10 years,10% is interrupted  When you evaluating the savings at exchange,you have to pay a tax for earning per tl to the government.however ıf you evaluate the saving at private pension companies, government don’t get a tax from you.

Estate Planning 21 Estate planning involves planning for what will happen when you die, and planning for the tax due to the government at that time. Estate planning typically attempts to eliminate uncertainties over the administration of a probate and maximize the value of the estate by reducing taxes and other expenses.

Personal Budget 22  A personal budget is a finance plan thatallocates futurepersonal income towards expenses, savings aa nd debt re- payment.

Cash Flow Trade Off’s 23 Key Cash Management tradeoffs: 1. The Risk-Return trade off 2. The Spending-Investment Risk trade off 3. The Time Expended-Return trade off

Softwares 24

Conclusion  How can people protect themselves against unforeseen personal events, as well as those in the external economy?  How can family assets best be transferred across generations (bequests and inheritance)?  How does tax policy (tax subsidies and/or penalties) affect personal financial decisions?  How does credit affect an individual's financial standing?  How can one plan for a secure financial future in an environment of economic instability? 25

Thank You For Your Attention  Do you have any question? 26