Managing Personal Finances Chapter 28 Managing Personal Finances

Warm Up Log on Open Microsoft Word Today, we will start Chapter 28 on Managing Personal Finances

Objectives Explain the steps involved in the financial planning process. Identify sources of financial information Discuss sources of risk. Discuss the consequences of choices.

Vocabulary Personal Financial Planning Income Fixed expenses Goals Opportunity Cost Money management Expense Budget Gross pay Deductions Net pay Income Fixed expenses Variable expenses Budget variance Surplus Deficit

Making Financial Decisions Personal finance refers to all the things in your __________ that involve money. Everyone has ___________ financial goals. The financial process has ______ steps.

Financial Planning Process Determining Your Financial Situation Developing Your Financial Goals Identify Possible Courses of Action Evaluate Your Alternatives Implement a Financial Plan of Action Review and Revise Your Plan

Step 1: Determining Your Financial Situation First, make a list of your ____________, monthly income, monthly expenses and __________. A good way to estimate your expenses is to keep a careful ___________ of every amount you spend for one month.

Step 2: Developing Your Financial Goals Think about your attitude towards __________. What are your __________ and needs?

Step 3: Identify Possible Courses of Action It is important to consider your options before making a decision.

Step 4: Evaluate Your Alternatives Look at where you are in your _______, your present financial situation, and your personal values. Consider the consequences and _______ of each decision you make.

Step 5: Implement a Financial Plan of Action A plan of action is a list of ________ to achieve your financial goals.

Step 6: Review and Revise Your Plan As you get _________, your finances and needs will change. You should reevaluate and revise it every year.

Sources of Financial Information The ____________ is a good place to get information on social and economic conditions. Magazines can also help.

Understanding Risk Inflation Risk Interest Rate Risk Income Risk A __________ increase in the cost of goods and services. Interest Rate Risk Interest rates ________ and fall. Income Risk Your __________ may rise or fall.

Understanding Risk Personal Risk Liquidity Risk Some choices ____________ risk. Liquidity Risk The ability to convert your financial resources into cash easily without a loss in value.

Understanding Risk An important part of financial planning is ________________ which risks you can afford to take and which ones you can’t. ________________ of your assets is another way to minimize risk.

Consequences of Choices Choosing between the _____________ involves more than just knowing what you forgo. It also involves knowing what you ________.

Section 28.1 Review Key Concepts What are some examples of long-range financial goals that consumers may have? List the steps of the financial planning process. Name some types of financial risk.

Warm Up Grab your binder Log on Open your Ch 28 Notes from yesterday.

Vocabulary Money management Income Expense Fixed expenses Budget Gross pay Deductions Net pay Income Fixed expenses Variable expenses Budget variance Surplus Deficit

The Importance of Budgeting Money ______________ is necessary for consumers, businesses and governments. Most people want more goods and services than they have _________ to buy. A budget helps them to set ______________ priorities.

The Importance of Budgeting A budget includes a record of your expected income, your planned expenses, and your planned savings over a certain period of __________. A good budget helps people set priorities for spending and saving and ___________ their money.

Preparing a Budget Planning a budget is a ______________-step process. Step 1: Set Your ___________ Goals A budget should help you decide which goals you can_____________________ with the amount of money you have.

Preparing a Budget Step 2: _____________ Your Income Start by recording your estimated income for the next ________________. Include all sources of income that you know you will ______________, such as take home pay and income on investments.

Preparing a Budget Step 3: Budget for Unexpected Expenses and Savings You have to plan for _____________ such as food, rent, and clothing to satisfy your basic needs. An expense is an amount of money used to _____________ or do something.

Preparing a Budget You must also plan for ____________ expenses, such as medical visits or accidents. Unexpected expenses could also include rises in __________ for items. When you develop your budget, make sure that the ____________ income figure is the same as the total for ________ expenses and savings.

Preparing a Budget Step 4: Budget for Fixed Expenses The amount of a fixed expense might sometimes change, but it is usually about the ___________ over long periods.

Preparing a Budget Step 5: Budget for Variable Expenses The amounts for these expenses usually _____________ from month to month.

Preparing a Budget Step 6: Record What You Spend To find out how ___________ your budget is, you will need to keep track of your expenses during one month and revise your budget if _______________.

Preparing a Budget Step 7: Review Spending and Saving Patterns Budgeting is a continual ______________. You need to review your budget each ________ and consider making __________.