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Personal Finance

Personal Finance






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Personal Finance Personal Finance Presentation Transcript

  • Personal Finance Effort to manage your personal financial activities and ultimately accumulate wealth 1
  • Financial Planning Process Define financial goalsDevelop financial plans and strategiesImplement plans Develop and implement budgetsEvaluate financial statementsRedefine goals
  • Personal Financial Planning Life Cycle
  • 4 Financial Plans Financial Actions Asset decisions Credit decisions Insurance decisions Investment decisions Retirement decisions Estate decisions Financial Results
  • Obtaining Money and Wealth
  • Earn wages from employment Save spend less than wages Grow investments from savings Transfer personal wealth to business Risk personal wealth for business
  • What Determines Personal Income? 1 Education 2 Career and drive 3 Relevance to the market 4 Location, demographics, age 5 Level of risk 6 Owner vs. employee 7
  • 8
  • Investments are specific financial instruments we use to generate growth and income 1 Checking and savings acct. cash 2 Certificates of deposit 3 Bonds 4 Stocks 5 Mutual Funds 6 Real Estate
  • 10
  • 11 Financial plans are road maps that show you the way and Personal financial statements let you know where you stand financially
  • The Interlocking Network of Financial Plans and Statements 12
  • Personal Balance Sheet How much are you worth today? A statement of financial position at a point in time Liabilities + Assets = Net Worth (equity) 13
  • Personal Income and Expense Statement measures of financial performance over a given time period Total income–total expenses=cash surplus (or cash deficit) 14
  • 15
  • 16
  • How the Budgeting Process Works Estimate income Estimate expenses Finalize income/expense budgets Deal with deficits 17
  • Use Budgets to Maintain information to monitor and control finances Allocate income to reach goals Implement disciplined spending Reduce needless spending Achieve long- term financial goals 18
  • 19
  • In the Next Five Years… Develop financial goals  Do income and expense budget  Track your net worth to assess financial progress  Use a personal finance system  Be open and honest about money  Save wealth 20
  • 21 Obtaining a Loan Isn’t Easy
  • Getting a loan is based on 1 credit reports 2 employment 3 earnings and 4 personal reputation 22
  • How to Be a Millionaire 23
  • Learn the power of compounding. 24
  • 25 The Snowball Effect
  • The power of compounding is a snowball effect where your earnings generate even more earnings through accumulated interest, dividends, and capital gains – and it will grow faster and faster with time. 26
  • Invest in Roth IRA 27
  • Consider selling business in an initial public offering (IPO) – the stock market launch transforms the company from private to public to raise expansion capital. 28