1. Integrating The Components of A Financial Plan
Chapter 21
Integrating The Components of A Financial Plan
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2. Chapter Objectives Review the components of a financial plan
Illustrate how a financial plan’s components are integrated
Provide an example of a financial plan
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3. Integration of Components Within a Financial Plan
Budgeting
Allows you to forecast how much money you will have at the end of the month so you can anticipate cash shortages or surpluses
Budgeting tradeoff
A tradeoff between spending today and allocating funds for the future
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4. Integration of Components Within a Financial Plan
Managing Liquidity
Ensuring that you have enough liquid assets to cover any budget deficits
Checking account, savings account, money market, or short-term financing
Liquidity tradeoff
A tradeoff between have liquid assets which earn low interest rates and non-liquid assets which earn higher interest rates
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5. Integration of Components Within a Financial Plan
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6. Integration of Components Within a Financial Plan
Personal financing
Allows you to make purchases without having the full amount of cash
Useful for large purchases like a car or a home
Personal financing tradeoff
Tradeoff between tax advantages of mortgage loans with potential budgeting problems
Tradeoff between longer maturities with lower payments and more interest and shorter maturities with higher payments and less interest
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7. Integration of Components Within a Financial Plan
Protecting your assets and income
By purchasing insurance
Insurance protects against events that could reduce your income or your wealth
Managing investments
Making investment choices that meet your financial needs and your risk tolerance
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8. Integration of Components Within a Financial Plan
Investment tradeoff
Tradeoff between low risk, low interest investments and high risk, high interest investments
Tradeoff between high risk, single investments and lower risk, diversified investments
Tradeoff between using money now and investing it for the future
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9. Integration of Components Within a Financial Plan
Retirement planning
Ensures sufficient funds at the time you retire
Retirement account tradeoff
Saving for retirement limits current spending
Maintaining your financial documents
You should store all financial documents in one place, either a safe at home or a safety deposit box at a bank
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10. Integration of Components Within a Financial Plan
Exhibit 21.2: Documents Used for Financial Planning
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11. Integration of Components Within a Financial Plan
Exhibit 21.2: Documents Used for Financial Planning
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12. Financial Planning Online: Insight about Financial Planning Concepts
Go to:
This Web site provides useful information about financial planning that can help you complete and refine your financial plan.
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13. Financial Planning Online: A Synthesized Financial Plan
Go to:
This Web site provides a synthesized financial planning assessment for you, including tax planning, money management, insuring your assets, and investing.
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14. Integrating Key Concepts
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15. Integrating Key Concepts
Part 1: Financial Planning Tools
Part 2: Liquidity Management
Part 3: Financing
Part 4: Protecting Your Assets and Income
Part 5: Investing
Part 6: Retirement and Estate Planning
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