1. Standard 8.02

2. Essential Questions  What are the steps in financial planning?  What are the benefits of financial planning?  What are the basic types of financial statements, and how is each used?  How do income and expense statements compare with spending plans?

3. Financial Planning  Used for planning ways to reach financial goals  A continual, cyclical process of tracking, then anticipating, income and expenses

4. Steps in the process of financial planning  Identify financial goals  Prepare a balance sheet showing what you own and what you owe  Track income and expenditures for a set time period, usually a month, and record in an income and expense statement  Analyze amount of money earned and how it was spent  Prepare a spending plan with anticipated income and expenses to meet financial goals during the next time period  At the end of the time period, revise financial goals, if needed, and use the actual income and expenses to again analyze income and how it was spent  Prepare your next spending plan

5. Benefits  Learn to live within one’s means  Helps avoid financial difficulties  Have resources for one’s desired standard of living  Reduces the need to use credit  Increases sense of security  Lessens anxiety about money matters  Stay in control of finances  Become financially independent

6. Financial Statements Balance SheetIncome & Expense Statement  Shows assets, liabilities, and net worth of an individual or family  Reason needed: need to know financial status in order to plan finances  Also known as cash flow statement  A list of all income and expenses for a specific time period  A historical type of record that serves as the basis for a spending plan  Shows whether individual/family was able to live within his/her/their means  Shows where income was spent  Shows when expenses exceed income and areas of excess expense  Shows if income was sufficient to meet expenditures

7. Financial Statements Spending Plan  Also known as a budget or financial plan  A tool used to plan income and expenses for a future time period  Used to track income and expenditures  Used to evaluate spending at the end of a time period

8. CriteriaIncome and expense statementSpending plan Time orientation Past---a historical record of what was earned and spent Future ---a projection of anticipated earnings and expenditures Basic useUsed as a foundation for planning one’s finances Used to estimate finances for a future time period Specific uses  Shows if living within means  Shows where money was spent  Shows when too much is being spent on a certain category of expenses  Shows if additional income is needed to meet necessary expenses  Helps one live within means  Helps plan where to spend money  Helps track income and expenditures  Reduces the likelihood of having to use credit and go into debt Where fits in financial planning Is used to develop a spending planBecomes the income and expense statement at end of specified time period