Money Management and Financial Planning 16 Money Management and Financial Planning 16-1 Personal Financial Statements 16-2 Budgeting Techniques 16-3 Your Financial Future

LESSON 16-1 Personal Financial Statements Goals Explain the basics of money management. Create a personal balance sheet. Develop a personal cash flow statement. Chapter 16

Key Terms money management personal assets net worth cash flow statement Chapter 16

MONEY MANAGEMENT BASICS Refers to the day-to-day financial activities associated with using limited income to satisfy your unlimited needs and wants Involves getting the most for your money through careful planning, saving, and spending Involves making and using a plan for spending Chapter 16

SUCCESSFUL MONEY MANAGERS Set goals Make wise decisions Buy wisely Live within their income Chapter 16

>> C H E C K P O I N T What are some characteristics of a wise money manager? Chapter 16

PERSONAL BALANCE SHEET Assets Liabilities Net Worth Chapter 16

SAMPLE PERSONAL BALANCE SHEET Chapter 16

>> C H E C K P O I N T What are three main categories of a personal balance sheet? Chapter 16

PERSONAL CASH FLOW STATEMENT Cash inflows Cash outflows Compare inflows and outflows Chapter 16

SAMPLE PERSONAL CASH FLOW STATEMENT Chapter 16

>> C H E C K P O I N T What do cash outflows represent? Chapter 16

LESSON 16-2 Budgeting Techniques CHAPTER 16 4/25/2017 LESSON 16-2 Budgeting Techniques Goals Identify purposes of a budget. Describe steps for preparing a budget. Describe characteristics of successful budgeting. Chapter 16

Key Terms fixed expenses variable expenses allowance budget variance Chapter 16

BUDGET ACTIVITIES Live within your income Achieve your financial goals Buy wisely Avoid credit problems Plan for financial emergencies Develop good money management skills Chapter 16

>> C H E C K P O I N T What are the main purposes of a budget? Chapter 16

THE BUDGET PROCESS Set financial goals Plan budget categories Savings Food Clothing Household Transportation Health and personal care Recreation and education Gifts and contributions Maintain financial records Evaluate your budget Chapter 16

SAMPLE FAMILY BUDGET Chapter 16

>> C H E C K P O I N T What are eight commonly used budget categories? Chapter 16

CHARACTERISTICS OF AN EFFECTIVE BUDGET Must be realistic Should be flexible Should be evaluated regularly Must be well planned and clearly communicated Should have a simple format Chapter 16

BUDGETING FORMATS Software program Handwritten Checkbook Unwritten Chapter 16

SAMPLE INCOME AND EXPENSE RECORD Chapter 16

>> C H E C K P O I N T What are five characteristics of an effective budget? Chapter 16

LESSON 16-3 Your Financial Future Goals Describe the financial planning process. Explain actions for implementing a financial plan. Identify actions for reviewing a financial plan. Chapter 16

Key Terms financial plan individual retirement account (IRA) estate planning Chapter 16

ADVANTAGES OF FINANCIAL PLANNING Your financial uncertainties will be reduced. You will gain more control of your financial activities. Your family and household members will know more in case they need to assume control of your finances. Earning, spending, protecting, and saving your resources will be more systematic. Chapter 16

FINANCIAL PLANNING PROCESS 1. Analyze your current financial condition 2. Develop financial goals that are responsive to your vision 3. Create your financial plan 4. Implement the plan 5. Revise your financial plan Chapter 16

FINANCIAL INVENTORY Careful review of your finances Personal balance sheet Personal cash flow statement Information about current financial position Income Savings Investments Property Living expenses Insurance Money owed Chapter 16

PERSONAL FINANCIAL FILING SYSTEM Personal records Housing records Consumer purchase records Insurance records Money management records Tax records Financial services and credit records Investment, retirement, and estate records Chapter 16

FINANCIAL LIFE CYCLE Teen years Twenties Later Retirement Chapter 16

USING A FINANCIAL PLANNER Questions you might ask when choosing a financial planner What experience and training do you have? Are you willing to supply references from past clients? How are your fees determined? Chapter 16

>> C H E C K P O I N T List five recommended steps for financial planning. Chapter 16

IMPLEMENT A FINANCIAL PLAN Insure current income Disability income insurance Unemployment insurance Plan for future income Social Security Pensions Retirement accounts Annuities Chapter 16

>> C H E C K P O I N T What are common sources of income during retirement? Chapter 16

REVIEW YOUR FINANCIAL PLAN Revise financial goals Review financial activities Remember to save Chapter 16

>> C H E C K P O I N T What common activities are needed when reviewing a financial plan? Chapter 16