2. Chapter 1 Personal Financial Planning

3. Financial Goals and Decisions Section 1.1

4. Personal Financial Planning Benefits: More money and security Less chance of going into debt Support family Achieve goals* Goals should be in line with values* Goals—the things you want to accomplish Values—the beliefs and principles you consider important, correct, and desirable

5. Types of Financial Goals Short-term (ex. Less than 1 year) Intermediate-term (ex. 1-5 years) Long-term (ex. Over 5 years)

6. Goals for Different Needs Goods* Consumable goods—purchases you make often and use up quickly Durable goods—expensive items that you do not purchase often Services* Intangible Items—cannot be touched but are important to your well-being Good—a physical item that is produced and can be weighed or measured Service—a task that a person or machine performs for you

7. Goals for Different Needs Consumable GoodsDurable Goods ServicesIntangible Items

8. 3 Influences on Personal Financial Planning What influences your decisions? 1. Life situations Ex. Go to college, start a new career, get married, have children, move to a new city 2. Personal Values Ex. Independence, personal freedom, traveling the world 3. Economic Factors

9. 3. Economic* Factors Market Forces—Supply* and Demand* Economics—the study of decisions that go into making, distributing, and using goods and services Economy—the ways in which people make, distribute, and use their goods and services Supply—the amount of goods and services available for sale Demand—the amount of goods and services people are willing and able to buy

10. 3. Economic Factors SupplyDemand Price S DP DP S

11. 3. Economic Factors Financial Institutions—banks and “The Fed”* Global Influences—the economies of other countries Federal Reserve System—aka the Fed; the central banking organization of the US

12. 3. Economic Factors Economic Conditions Consumer Prices (inflation*) Consumer* Spending Interest* Rates Inflation—the rise in the level of prices for goods and services Consumer—a person who purchases and uses goods and services Interest—the price that is paid for the use of another’s money

13. Money Rules #53

14. Opportunity Costs and Strategies Section 1.2

15. Opportunity Costs* Personal—choices about your health, knowledge, skills, and time Financial—choices about how you spend your money Consider the time value of money* Opportunity Cost—a trade-off; what is given up when making one choice instead of another Time Value of Money—the increase of an amount of money due to earned interest or dividends

16. Calculating Interest Calculate the time value of your money using the following info: Principal* Annual interest rate (as a %) Length of investment (time) Ex: $1,000 in a savings account for 1 year with a 3% annual interest rate Principal—the original amount of money on deposit

17. Future Value Future Value* of a Single Deposit Future Value of a Series of Deposits (Annuity*) Future Value—the amount your original deposit will be worth in the future based on earning a specific interest rate over a specific period of time Annuity—a series of equal regular deposits

18. Present Value Present Value* of a Single Deposit Present Value of Series of Deposits (Annuity) Present Value—the amount of money you would need to deposit now in order to have a desired amount in the future

19. Present and Future Value Worksheet

20. Money Rules #13