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Personal Finance Mexico


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Education for all age finally arrives to Mexico

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Personal Finance Mexico

  1. 1. Personal Finance Course Overview MBA. Juan José Salas M. México 2009
  2. 2. Course Overview <ul><li>Give you the skills to responsibly manage your money </li></ul><ul><ul><li>Today, personal bankruptcies are out of control </li></ul></ul><ul><ul><li>Personal Debt is at an all-time high </li></ul></ul><ul><li>Give you perspective on how money and work should affect your life </li></ul><ul><ul><li>People are more than just their jobs and possessions </li></ul></ul>
  3. 3. Course Overview <ul><li>Main Topics </li></ul><ul><ul><li>Your Goals in Life </li></ul></ul><ul><ul><li>Setting Financial Goals </li></ul></ul><ul><ul><li>Maximizing Income </li></ul></ul><ul><ul><li>Minimizing Expenses </li></ul></ul><ul><ul><li>Maximizing Assets </li></ul></ul><ul><ul><li>Minimizing Liabilities </li></ul></ul><ul><ul><li>A Planning Approach </li></ul></ul><ul><ul><li>Determining Net Worth </li></ul></ul><ul><ul><li>Reflecting on what it all means </li></ul></ul>
  4. 4. Your Goals in Life <ul><li>Nonfinancial goals </li></ul><ul><ul><li>Family, children, education, religious, social, etc. </li></ul></ul><ul><ul><li>Finances can affect your ability to attain these goals. </li></ul></ul><ul><li>Financial goals </li></ul><ul><ul><li>Financial independence is an important goal for many people. Financial independence is defined as having enough income or resources to be self-reliant. </li></ul></ul><ul><ul><li>One of the financial choices that we make is between consumption today versus consumption in the future. </li></ul></ul>
  5. 5. Your Goals in Life <ul><ul><li>Researchers have found that most people, regardless of their income level, feel that they need 20% more wealth than they currently have. </li></ul></ul>
  6. 6. Setting Financial Goals <ul><li>If you don’t know where your going, it doesn’t matter which way you go </li></ul><ul><ul><li>Cheshire Cat from Alice In Wonderland </li></ul></ul><ul><li>Set up a process now to set goals </li></ul><ul><li>Then review them at least annually to see if you are where you want to be </li></ul>
  7. 7. Maximizing Income <ul><li>“ You only have so much time on earth, you should make the most of every moment. </li></ul><ul><li>However, you need to balance your needs against the needs of others </li></ul><ul><li>Your retirement age and income depend on how well you do </li></ul>
  8. 8. Minimizing Expenses <ul><li>If you spend more than you make, then you will end up in debt. </li></ul><ul><li>This seems so simple </li></ul><ul><li>So why are so many Americans on the verge of bankruptcy? </li></ul><ul><li>We have to learn how to control our spending </li></ul>
  9. 9. Maximizing Assets <ul><li>In today’s world you have to be able to take care of your own investments </li></ul><ul><li>Very few people will receive pensions where their employers make all their investment decisions for them </li></ul><ul><li>You will probably have to make your own investment decisions </li></ul>
  10. 10. Minimizing Liabilities <ul><li>There is good debt and bad debt </li></ul><ul><ul><li>Taking out loans to buy things that increase in value (like a house) or will let you earn more income (like an education loan) creates good debt </li></ul></ul><ul><ul><li>Taking out a loan to pay for vacations or stereos creates bad debt </li></ul></ul><ul><ul><li>You also need to know the basics of insurance so unexpected events do not drive you into bankruptcy </li></ul></ul>
  11. 11. Major Financial Planning Areas <ul><li>Consumption and Savings Planning </li></ul><ul><li>Debt Planning </li></ul><ul><li>Insurance Planning </li></ul><ul><li>Investment Planning </li></ul><ul><li>Retirement Planning </li></ul><ul><li>Estate Planning </li></ul><ul><li>Income Tax Planning </li></ul><ul><li>Career Planning </li></ul>
  12. 12. A planning approach <ul><li>Step 1. Determine concrete goals. </li></ul><ul><ul><ul><ul><li>First state your broad goal such as the purchase of a home. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Determine the specific pieces to achieve that goal such as the cost of the house, the down payment amount, etc. </li></ul></ul></ul></ul><ul><li>Step 2. Create an action plan. </li></ul><ul><ul><ul><ul><li>How will you achieve the goals stated in step 1? How much will you save each month and where will the money be invested? </li></ul></ul></ul></ul>
  13. 13. A planning approach <ul><li>Step 3. Evaluate performance. </li></ul><ul><ul><ul><ul><li>At least annually, evaluate steps 1 and 2 to determine if any adjustments should be made in the action plan or goals. </li></ul></ul></ul></ul><ul><li>Step 4. Decide on a future course of action. </li></ul><ul><ul><ul><ul><li>Is your goal realistic or should it be reevaluated? </li></ul></ul></ul></ul>
  14. 14. Life-Cycle Financial Planning (assumes children/marriage) Life-Cycle Phases Financial Planning Areas Young adult (18 – 25) Consumption and savings; career Family formation (26 – 35) Consumption and savings; career; debt; insurance; income taxes Family development (36 – 49) Investment; retirement; income taxes Family maturity (50 – 60) Investment; retirement; estate Retirement (60 – ?) Estate; income taxes
  15. 15. Determining Net Worth <ul><li>Net Worth = Assets – Liabilities </li></ul><ul><ul><li>If you have more assets than liabilities, then you have a positive net worth </li></ul></ul><ul><ul><li>If you have more liabilities than assets, then you are in debt </li></ul></ul><ul><li>When your income is greater than your expenses you add to your net worth </li></ul><ul><ul><li>Vice versa when your expenses exceed your income </li></ul></ul><ul><li>We need to remind ourselves that financial net worth is not the same as your actual net worth </li></ul>
  16. 16. Reflecting on what it all means <ul><li>We should never lose track of the fact that personal finance is just a means to an end </li></ul><ul><li>Who we are as a person is not measured by our income or our balance sheet </li></ul>
  17. 17. Discussion Questions <ul><li>What are some of the benefits of personal financial planning? </li></ul><ul><li>How do economic cycles affect the personal financial planning process? </li></ul><ul><li>What is meant by life-cycle financial planning? </li></ul><ul><li>Explain marginal analysis and its importance to financial decision making. </li></ul><ul><li>Opportunity cost is a very important concept in financial decision making. Can you think of an example of opportunity cost in your financial planning? </li></ul>
  18. 18. Please contact: <ul><li>MBA. Juan José Salas M. </li></ul><ul><li>[email_address] </li></ul>