1. Unit 2 “Personal Financial Decisions”

2.   Personal Financial Planning is arranging to spend, save, and invest money to live comfortably, have financial security, and achieve goals.  Some benefits are:  Protecting your financial resources  Helping to avoid too much debt, bankruptcy, and dependence on others  A sense of freedom from financial worries Financial Decisions & Goals

3.   Make a list of items that relate to your finances  Savings  Monthly income  Job, allowance, gifts, interest on bank accounts  Monthly expenses  Money you spend – lunch, gas, movies, cell phone  Debts  Money you owe to others Step 1 - Determine Your Current Financial Situation

4.   What is your attitude toward money??  Is it more important to you to SPEND money now or SAVE for the future?  Job after high school or college?  Do your personal values affect your financial decisions?  Needs vs. Wants Step 2 – Develop Your Financial Goals

5.   It’s impossible to make a good decision unless you know ALL your options  Suppose that you save $50 a month—you could:  Continue the same course of action  Expand situation – increase the amount you save  Change the current situation – invest the money  Take a NEW course of action – use the money to pay off debt Step 3 – Identify Alternative Courses of Action

6.   Look at your situation in life  Consider the consequences and risks of each decision you make  Look at PROS and CONS to each decision  Check out the many sources of financial information available  Internet, banks, magazines, specialists  Evaluate ALL risk associated with handling money  Inflation, interest, income, personal, liquidity Step 4 – Evaluate Your Alternatives

7.   These are guided by your goals  Re-evaluate when necessary  This changes throughout your financial life Step 5 – Create and USE Your Financial Plan of Action

8.  Personal Financial Goals  Why do people have money problems?  The main reason is because they do not plan how they will use their money!

9.   Time Frame Goals  Short-term – 1 year or less  Intermediate – 2 to 5 years  Long-term – more than 5 years  Goals for Different Needs  Services – person or machine  Goods – consumable, durable and intangible Types of Financial Goals

10.   Your financial goals should be:  Realistic  Specific  Have a clear time frame  Should help you decide what type of action to take Guidelines

11.   Life situations  Personal Values  Economic factors and conditions  Market forces  Financial institutions  Global influences  Consumer prices  Consumer spending  Interest rates Influences on Personal Financial Planning

12.  1. Obtain – Obtain financial resources by working, investing, owning property 2. Plan – plan how you will spend your $$ 3. Spend Wisely – spend what you can afford 4. Save – have a savings plan right away 5. Borrow Wisely – don’t get into too much debt 6. Invest – choose a variety of different options 7. Manage Risk – you need insurance 8. Plan for Retirement – what age would you like to stop working and what kind of life do you want to lead? Achieving Your Financial Goals