6. Financial Decisions and Planning
Chapter 4

8. Financial Planning
Financial Planning - the process of developing and implementing a coordinated series of financial plans
Financial plan considers financial and personal goals along with steps and milestones for reaching them

9. Resources and Choices
Needs – things required for survival, such as food, clothing, shelter, and medical care
Wants - things people desire for reasons beyond survival and basic comfort

10. Resources and Choices
Financial resources – money or other items of value that are used to acquire goods and services
Disposable income
Discretionary income
Scarcity – the gap between limited resources and unlimited wants

11. Financial Statements

12. Income and Wealth Cash flow statement
Balance sheet/personal wealth statement/net worth
Liabilities
Assets

14. Income and Wealth Assets Monetary Tangible Investment Appreciation
Depreciation

16. Net Worth by Age

17. Financial Decision-Making
Resource allocation
Trade-offs
Opportunity costs – the value of the next best option given up

18. Financial Decision-Making
Define the need
List the options meeting the need
Compare the options
Make a decision
Take action
Reevaluate your choice

19. Financial Strategies Consider the future Consider opportunity cost
If in doubt – reconsider
Do not make snap decisions
Spend less than you earn
Be realistic
Read the fine print
Learn from others mistakes

20. Budgeting
Budget
Spend and save plan based on expected income and expenses
Assist making ends meet and achieving financial goals

21. Budgeting Estimate income Plan savings Estimate expenses
Pay yourself first
Plan for the unexpected
Estimate expenses
Fixed expenses
Variable expenses
Balance the budget

23. 8 Steps to Creating a Personal Budget
Keep it simple
Set a time period
Build an emergency fund into your budget
Don't worry about finding the perfect record keeping method
Make sure everyone involved is on the same page
Make adjustments along the way
Try adding on instead of only cutting back
Don't set yourself up for failure

25. Money Left Over at the End of the Month?
Carry the surplus forward.
Put into a revolving savings fund.
Build a cash reserve in a savings account.
Pay down credit card debt.
Put toward a mortgage or other loan.
Invest in a retirement account.
Spend like “mad money.”

26. Record Keeping
Why?
Manual records
Electronic records

27. Financial Planning
Financial Plan – a plan listing personal and financial goals along with steps and a timeline for reaching them
Gather information
Analyze information
Set goals
Timeline and benchmarks
Implementation/evaluation

29. Financial Advice Professional planners/advisors Self-study
Seminars and workshops

30. Protect Your Financial Resources
Strong passwords
Social Engineering
Phishing
Spearfishing
Identity theft

31. Questions?

32. Homework Complete budget worksheet Use your best estimate for income
Try to complete as many expenses as possible – add as many additional lines as you can think of