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Itb Chap 16

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Itb Chap 16

  1. 1. Money Management and Financial Planning 16-1 Personal Financial Statements 16-2 Budgeting Techniques 16-3 Your Financial Future 16
  2. 2. LESSON 16-1 Personal Financial Statements <ul><li>Goals </li></ul><ul><li>Explain the basics of money management. </li></ul><ul><li>Create a personal balance sheet. </li></ul><ul><li>Develop a personal cash flow statement. </li></ul>
  3. 3. Key Terms <ul><li>money management </li></ul><ul><li>personal assets </li></ul><ul><li>net worth </li></ul><ul><li>cash flow statement </li></ul>
  4. 4. MONEY MANAGEMENT BASICS <ul><li>Refers to the day-to-day financial activities associated with using limited income to satisfy your unlimited needs and wants </li></ul><ul><li>Involves getting the most for your money through careful planning, saving, and spending </li></ul><ul><li>Involves making and using a plan for spending </li></ul>
  5. 5. SUCCESSFUL MONEY MANAGERS <ul><li>Set goals </li></ul><ul><li>Make wise decisions </li></ul><ul><li>Buy wisely </li></ul><ul><li>Live within their income </li></ul>
  6. 6. >> C H E C K P O I N T <ul><li>What are some characteristics of a wise money manager? </li></ul>
  7. 7. PERSONAL BALANCE SHEET <ul><li>Assets </li></ul><ul><li>Liabilities </li></ul><ul><li>Net Worth </li></ul>
  8. 8. SAMPLE PERSONAL BALANCE SHEET
  9. 9. >> C H E C K P O I N T <ul><li>What are three main categories of a personal balance sheet? </li></ul>
  10. 10. PERSONAL CASH FLOW STATEMENT <ul><li>Cash inflows </li></ul><ul><li>Cash outflows </li></ul><ul><li>Compare inflows and outflows </li></ul>
  11. 11. SAMPLE PERSONAL CASH FLOW STATEMENT
  12. 12. >> C H E C K P O I N T <ul><li>What do cash outflows represent? </li></ul>
  13. 13. LESSON 16-2 Budgeting Techniques <ul><li>Goals </li></ul><ul><li>Identify purposes of a budget. </li></ul><ul><li>Describe steps for preparing a budget. </li></ul><ul><li>Describe characteristics of successful budgeting. </li></ul>
  14. 14. Key Terms <ul><li>fixed expenses </li></ul><ul><li>variable expenses </li></ul><ul><li>allowance </li></ul><ul><li>budget variance </li></ul>
  15. 15. BUDGET ACTIVITIES <ul><li>Live within your income </li></ul><ul><li>Achieve your financial goals </li></ul><ul><li>Buy wisely </li></ul><ul><li>Avoid credit problems </li></ul><ul><li>Plan for financial emergencies </li></ul><ul><li>Develop good money management skills </li></ul>
  16. 16. >> C H E C K P O I N T <ul><li>What are the main purposes of a budget? </li></ul>
  17. 17. THE BUDGET PROCESS <ul><li>Set financial goals </li></ul><ul><li>Plan budget categories </li></ul><ul><li>BUDGET CATEGORIES </li></ul><ul><li>Savings </li></ul><ul><li>Food </li></ul><ul><li>Clothing </li></ul><ul><li>Household </li></ul><ul><li>Transportation </li></ul><ul><li>Health and personal care </li></ul><ul><li>Recreation and education </li></ul><ul><li>Gifts and contributions </li></ul><ul><li>Maintain financial records </li></ul><ul><li>Evaluate your budget </li></ul>
  18. 18. SAMPLE FAMILY BUDGET
  19. 19. >> C H E C K P O I N T <ul><li>What are eight commonly used budget categories? </li></ul>
  20. 20. CHARACTERISTICS OF AN EFFECTIVE BUDGET <ul><li>Must be realistic </li></ul><ul><li>Should be flexible </li></ul><ul><li>Should be evaluated regularly </li></ul><ul><li>Must be well planned and clearly communicated </li></ul><ul><li>Should have a simple format </li></ul>
  21. 21. BUDGETING FORMATS <ul><li>Software program </li></ul><ul><li>Handwritten </li></ul><ul><li>Checkbook </li></ul><ul><li>Unwritten </li></ul>
  22. 22. SAMPLE INCOME AND EXPENSE RECORD
  23. 23. >> C H E C K P O I N T <ul><li>What are five characteristics of an effective budget? </li></ul>
  24. 24. LESSON 16-3 Your Financial Future <ul><li>Goals </li></ul><ul><li>Describe the financial planning process. </li></ul><ul><li>Explain actions for implementing a financial plan. </li></ul><ul><li>Identify actions for reviewing a financial plan. </li></ul>
  25. 25. Key Terms <ul><li>financial plan </li></ul><ul><li>individual retirement account (IRA) </li></ul><ul><li>estate planning </li></ul>
  26. 26. ADVANTAGES OF FINANCIAL PLANNING <ul><li>Your financial uncertainties will be reduced. </li></ul><ul><li>You will gain more control of your financial activities. </li></ul><ul><li>Your family and household members will know more in case they need to assume control of your finances. </li></ul><ul><li>Earning, spending, protecting, and saving your resources will be more systematic. </li></ul>
  27. 27. FINANCIAL PLANNING PROCESS <ul><li>1. Analyze your current financial condition </li></ul><ul><li>2. Develop financial goals that are responsive to your vision </li></ul><ul><li>3. Create your financial plan </li></ul><ul><li>4. Implement the plan </li></ul><ul><li>5. Revise your financial plan </li></ul>
  28. 28. FINANCIAL INVENTORY <ul><li>Careful review of your finances </li></ul><ul><li>Personal balance sheet </li></ul><ul><li>Personal cash flow statement </li></ul><ul><li>Information about current financial position </li></ul><ul><li>Income </li></ul><ul><li>Savings </li></ul><ul><li>Investments </li></ul><ul><li>Property </li></ul><ul><li>Living expenses </li></ul><ul><li>Insurance </li></ul><ul><li>Money owed </li></ul>
  29. 29. PERSONAL FINANCIAL FILING SYSTEM <ul><li>Personal records </li></ul><ul><li>Housing records </li></ul><ul><li>Consumer purchase records </li></ul><ul><li>Insurance records </li></ul><ul><li>Money management records </li></ul><ul><li>Tax records </li></ul><ul><li>Financial services and credit records </li></ul><ul><li>Investment, retirement, and estate records </li></ul>
  30. 30. FINANCIAL LIFE CYCLE <ul><li>Teen years </li></ul><ul><li>Twenties </li></ul><ul><li>Later </li></ul><ul><li>Retirement </li></ul>
  31. 31. USING A FINANCIAL PLANNER <ul><li>Questions you might ask when choosing a financial planner </li></ul><ul><ul><li>What experience and training do you have? </li></ul></ul><ul><ul><li>Are you willing to supply references from past clients? </li></ul></ul><ul><ul><li>How are your fees determined? </li></ul></ul>
  32. 32. >> C H E C K P O I N T <ul><li>List five recommended steps for financial planning. </li></ul>
  33. 33. IMPLEMENT A FINANCIAL PLAN <ul><li>Insure current income </li></ul><ul><ul><li>Disability income insurance </li></ul></ul><ul><ul><li>Unemployment insurance </li></ul></ul><ul><li>Plan for future income </li></ul><ul><ul><li>Social Security </li></ul></ul><ul><ul><li>Pensions </li></ul></ul><ul><ul><li>Retirement accounts </li></ul></ul><ul><ul><li>Annuities </li></ul></ul>
  34. 34. >> C H E C K P O I N T <ul><li>What are common sources of income during retirement? </li></ul>
  35. 35. REVIEW YOUR FINANCIAL PLAN <ul><li>Revise financial goals </li></ul><ul><li>Review financial activities </li></ul><ul><li>Remember to save </li></ul>
  36. 36. >> C H E C K P O I N T <ul><li>What common activities are needed when reviewing a financial plan? </li></ul>

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