1. 1 - 1 COPYRIGHT © 2008 by Nelson, a division of Thomson Canada Ltd Chapter 1– Understanding the Financial Planning Process

2. 1 - 2 Chapter 1 – Understanding the Financial Planning Process Chapter 1 - Learning Goals LG 1-Identify the benefits of using personal financial planning techniques to manage your finances. LG 2-Describe the personal financial planning process and define your financial goals. LG 3-Explain why personal financial plans should be flexible and responsive to your life situation. LG 4-Examine the external factors that can influence personal financial planning. LG 5-Evaluate the impact of age, marital state, education and geographic location on personal income. LG 6-Understand the importance of career choices and their relationship to personal financial planning. Learning Goals

3. 1 - 3 Chapter 1 – Understanding the Financial Planning Process Internet Links and On-line Resources Online Price Canada Price Grabber Investors Group Polls Insurance Canada Canadian Life Health Insurance AssociationCanadian Life Health Insurance Association Forbes Best on the WebForbes Best on the Web Stockhouse Globeinvestor Canoe Money Office of the Superintendent of Bankruptcy CanadaOffice of the Superintendent of Bankruptcy Canada Statistics Canada Inflation calendar Online calculator Kiersey temperament test

4. 1 - 4 Chapter 1 – Understanding the Financial Planning Process Key Chapter Terms and Definitions Standard of living Average propensity to consume Average propensity to consume Wealth Financial assets Tangible assets Personal Financial Planning Personal Financial Planning Financial Goals Money Utility Expansion Recession Depression Recovery Gross Domestic Product Gross Domestic Product Inflation Terms

5. 1 - 5 Chapter 1 – Understanding the Financial Planning Process Definitions Standard of Living The necessities, comforts and luxuries enjoyed or desired by an individual or group. Also known as quality of life. Terms

6. 1 - 6 Chapter 1 – Understanding the Financial Planning Process Definitions Average propensity to consume The percentage of each dollar of income, on average, that a person spends for current consumption. Terms

7. 1 - 7 Chapter 1 – Understanding the Financial Planning Process Definitions Wealth The total value of all items owned by an individual, such as savings accounts, stocks, bonds, home and automobiles. Terms

8. 1 - 8 Chapter 1 – Understanding the Financial Planning Process Definitions Financial assets Intangible assets, such as savings accounts and securities, that are acquired for some promised future return. Terms

9. 1 - 9 Chapter 1 – Understanding the Financial Planning Process Definitions Tangible assets Physical assets, such as real estate and automobiles, that can be held for either consumption or investment purposes. Terms

10. 1 - 10 Chapter 1 – Understanding the Financial Planning Process Definitions Personal Financial Planning Planning the covers the important elements of an individual’s financial affairs and is aimed at fulfilling his or her financial goals. Terms

11. 1 - 11 Chapter 1 – Understanding the Financial Planning Process Definitions Financial goals Short-, intermediate-, and long-term results that an individuals wants to attain, such as controlling living expenses, managing taxes, establishing savings and investment programs, and meeting retirement needs. Terms

12. 1 - 12 Chapter 1 – Understanding the Financial Planning Process Definitions Money The medium of exchange used as a measure of value in financial transactions. Terms

13. 1 - 13 Chapter 1 – Understanding the Financial Planning Process Definitions Utility The amount of satisfaction an individual receives from purchasing certain types or quantities of goods and services. Terms

14. 1 - 14 Chapter 1 – Understanding the Financial Planning Process Definitions Economic Expansion The phase of the economic cycle during which the level of employment and growth of economic activity are both high: generally accompanied by rising prices for goods and services. Terms

15. 1 - 15 Chapter 1 – Understanding the Financial Planning Process Definitions Economic Recession The phase of the economic cycle during which the level of employment falls and growth in economic activity slows. Terms

16. 1 - 16 Chapter 1 – Understanding the Financial Planning Process Definitions Economic Depression The phase of the economic cycle during which the employment level is low and economic growth is at a virtual standstill. Terms

17. 1 - 17 Chapter 1 – Understanding the Financial Planning Process Definitions Economic Recovery The phase of the economic cycle during which the employment level is improving and the economy is experiencing increased activity and growth. Terms

18. 1 - 18 Chapter 1 – Understanding the Financial Planning Process Definitions Gross Domestic Product (GDP) The total of all goods and services produced by workers located within a country; used to monitor economic growth. Terms

19. 1 - 19 Chapter 1 – Understanding the Financial Planning Process Definitions Inflation A state of the economy in which the general price level is rising due to excessive demand or rapidly rising production costs; usually occurs during the recovery and expansion phases of the economic cycle. Terms

20. 1 - 20 Chapter 1 – Understanding the Financial Planning Process In Summary you have Learned that… Financial planning can make a significant improvement in the standard of living of people from all walks of life. The financial planning process starts with identifying financial goals. There are six steps in the financial planning process. Tools such as knowledge, the time value of money and the computer, can be applied to personal financial problems. Financial planning takes place in a changing economic environment. Personal income is determined through factors such as: age, marital status, education, location, career. Summary

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