1. PERSONAL FINANCE MAKING PERSONAL FINANCIAL DECISIONS

2. FINANCIAL DECISIONS What is personal finance?  It is everything in your life that involves money!!!  PERSONAL FINANCIAL PLANNING MEANS SPENDING, SAVING, AND INVESTING YOUR MONEY SO YOU CAN HAVE THE KID OF LIFE YOU WANT AS WELL AS FINANCIAL SECURITY. (Planning your personal finances is impt. Because it will help you reach your goals, no matter what they are***)

3. CONT… EVERYONE HAS DIFFERENT FINANCIAL GOALS! GOALS: ARE THE THINGS YOU WANT TO ACCOMPLISH.  EX. GETTING A COLLEGE EDUCATION, BUYING A CAR, OR STARTING A BUSINESS ARE JUST A FEW OR SOME EXAMPLES

4. FINANCIL PLAN It is up to you to make a financial plan and to follow it! There are many benefits from planning. They are as follows:  You have more money, know how to use money to achieve your goals, and are financially secure  You have less chance of going in to debt you can’t handle  You can help your spouse and support your children

5. 6 steps to the financial planning process. STEP 1  DETERMINE YOUR CURRENT FINANCIAL SITUATION  HOW TO DETERMINE YOUR CURRENT SITUATION: MAKE A LIST OF YOUR SAVINGS, MONTHLY INCOME ( MONEY YOU RECEIVE, SUCH AS JOB EARNING ALLOWANCE, GIFTS, AND INTEREST ON BANK ACCOUNTS), MONTHLY EXPENSES ( MONEY YOU SPEND), AND DEBTS (MONEY YOU OWE TO OTHERS). ALWAYS KEEP A CAREFUL RECORD OF EVERYTHING YOU SPEND YOUR MONEY ON FOR ONE MONTH. ONCE YOU HAVE DETERMINED YOUR FINANCIAL SITUATION YOU MAY BEGIN PLANNING

6. STEP 2 DEVELOP YOUR FINANCIAL GOALS  To do this you need to think of your attitude toward money*** What is important to you? Do you spend now and save later? Save now and spend later? Would you rather get a job right after high school or continue your education? What role do your personal values play in your financial decisions?  VALUES- THE BELIEFS AND PRINCIPLES YOU CONSIDER IMPORTANT, CORRECT, AND DESIRABLE. DIFFERENT PEOPLE HAVE DIFFERENT VALUES.

7. Step 2 cont….. Always be able to distinguish between your needs and your wants. A need?  Something you must have to survive, such as food, shelter, and clothing.

8. Step 2 cont… A want?  Something you desire or would like to have or do. For example, if you live in an area where the winter is cold, you need a coat. You may want a leather jacket, but other types of coats could also keep you warm. Only you can decide what goals to pursue, and it’s important to make them as specific as possible. ***for example*** you may decide to save $50 per month or 10% of your paycheck.***

9. STEP 3 IDENTIFY ALTERNATIVE COURSES OF ACTION It is IMPOSSIBLE to make a good decision unless you know all your options. Generally, you will have several course of action. Your options could include some of the following:

10. Step 3, cont… Expand the current situation. You may decide to save $60 instead of $50! Change your current situation. You could invest instead of putting your money into savings Start something new-save to pay off debts Continue the same course of action. You may choose not to change anything.  In each case, however, be aware that the costs of your decision may outweigh the benefits.

11. STEP 4 EVALUATE YOU ALTERNATIVES When you evaluate you alternatives, use many sources of financial information that are available. Look at where you are in your life, your present financial situation, and your personal values. Be sure to consider the consequences and risks of each decision you make.

12. Step 4, Cont….. Sources of Financial Information  Always keep up to date on all social and economic conditions. (a company that develops the trendiest clothes or newest technology may be a good investment)  However, if a company is being sued or has other financial or social problems you may not need to invest in them! You need to know how to keep track of them- you can do so by: Financial specialist Computer software and the internet The media Financial institutions High school and college courses

13. Step 4 cont… Always know that with any decision, you understand the consequences of choices and understand the risk! Opportunity cost- what you give up when you make one choice vs. another RISKS- understand your risk and know exactly what they are! INFLATION RISK, INTEREST RATE RISK, INCOME RISK, PERSONAL RISK, AND LIQUIDITY RISK. LIQUIDITY- the ability to easily convert you financial resources into cash without a loss in value.

14. STEP 5 CREATE AND USE YOUR FINANCIAL PLAN OF ACTION A plan of action is a list of ways to achieve your financial goals. Ex. If your plan is to save more you need to cut your spending.

15. STEP 6 REVIEW AND REVISE YOUR PLAN Financial planning doesn’t end when you start to follow your plan. As you get older, your finances and needs will change. That means that your financial plan will have to change, too!