1. FHF McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.

2. FHF Appendix D-2 Appendix B: The Legal and Regulatory Environment Appendix A: Guidelines for the Development of a Business Plan Appendix C: Personal Career Plan Appendix D: Personal Financial Planning

3. FHF Personal Financial Planning  The process of managing your finances so that you can achieve your financial goals Everyone benefits from financial planning Helps you focus on what is important Appendix D-3

4. FHF Evaluate Your Financial Health  Buy software, develop a spreadsheet, or use Internet financial planners to help you get organized  Two most important elements: 1. Personal net worth (assets minus debts and liabilities) o Negative net worth at a young age is not always bad 2. Personal cash flow (inflows and outflows) o The dollar amount moving from one party to another Appendix D-4

5. FHF Financial Goals  Short-Term Financial Goals Those that can be achieved in two years or less  Long-Term Financial Goals Those that take longer than two years to achieve (e.g. Retirement planning) Appendix D-5

6. FHF BudgetBudget  What you plan to do with your money in the future?  List out all your expenses (nondiscretionary and discretionary)  Do not forget to allocate some income to savings  Track your success adhering to the budget Appendix D-6

7. FHF Manage Credit  Minimize credit usage and reduce debt Credit cards are a cash flow management tool only Charges and interest can add up quickly  Borrow only when Assets will appreciate Borrowing has lower interest than what you make investing the money  Student loans can be helpful Make sure you do not borrow more than you can pay off Appendix D-7

8. FHF A Savings and Investment Plan  Set aside some savings every month  Start early Compounded interest will add up over time  Choose your level of investment risk The riskier the investment, the higher the potential return Long-term investments can usually be riskier than short-term ones Appendix D-8

9. FHF Investment Choices  Savings Accounts and Certificates of Deposit Low risk and low return  Bonds Longer term, but higher return  Stocks Can be risky, but rewards can be very high Appendix D-9

10. FHF Investment Choices  Mutual Funds Best for novices with small amount of money to invest  Purchase of Home Historically, a good investment Recent recession has many questioning the soundness of real estate investments Appendix D-10

11. FHF Planning for Retirement  No magic number on how much to save Assess your lifestyle and career plan to determine best amount and options  Employer Retirement Plans Defined benefit plans: Specific amount at retirement Defined contribution plans: A certain amount of money goes into your retirement account each pay period Appendix D-11

12. FHF Planning for Retirement  Individual Retirement Accounts (IRAs) Traditional and Roth IRAs  Social Security Federal-supported public pension plan Weight pros and cons of different requirement accounts Paid for by payroll taxes Sufficient funding in the future will be a problem Appendix D-12

13. FHF Retirement Savings Are you saving more money than you planned because you are concerned about Social Security? Appendix D-13

14. FHF InsuranceInsurance  Insurance policies are contracts between you and an insurance company wherein the insurer promises to pay money if a particular event occurs Automobile Insurance Homeowners/Renters Insurance Life Insurance Health Insurance Disability Insurance Appendix D-14

15. FHF Develop an Estate Plan  The essential components of an estate plan are: Your will Minimization of taxes on your estate Protection of estate assets  You should create a will if: you have a spouse and/or children, if you have substantial assets, or if you have assets that you would like to give to certain individuals  Estate tax law changes frequently, and a professional financial planner can help you minimize taxes your heirs must pay Appendix D-15

16. FHF Personal Financial Calculator  Many resources exist to help you assess your financial health and plan your financial future Some are even free  CNN offers a “Check your financial health” toolCheck your financial health Accounts for your age and position in life Provides you with a grade Advice on how to improve your score Appendix D-16

17. FHF Adjust Your Financial Plan to New Circumstances  Periodically re-evaluate your financial plan Adjust as your life changes Adjust as financial goals change  Professional accountants and tax-preparers may be able to help Appendix D-17