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Financial Planning: The Ties That Bind
The Role of Personal Financial Planning
 To manage income and expenses.
 To create an awareness of your current financia...
Why Do You Need a Personal Financial Plan?
 For most people it is
easier to spend than
save.
 To track your expenses,
so...
Why Should You Develop a Personal Financial
Plan?
 It helps you achieve your financial goals.
 It helps you achieve fina...
Why Isn’t Personal Financial Planning Easy?
 Some people are uncomfortable discussing financial matters, the
“fear of fin...
What Can You Accomplish As a Result of This
Course?
 Manage the unplanned.
 Accumulate wealth for special
expenses.
 Sa...
The Personal Financial Planning Process
 Step 1: Evaluate Your Financial Health
 Step 2: Define Your Financial Goals
 S...
Step 1: Evaluate Your Financial Health
 Evaluate your current
situation: income, spending,
wealth
 Assess your whole fin...
Step 2: Define Your Financial Goals
 Specifically define and write down your
financial goals to reflect your financial an...
What Are the Time Horizons for Financial Goals?
 Short-term goals can be accomplished within a 1-
year period .
 Interme...
Goals: The Cornerstone of a Financial Plan
 Goals keep the future in mind by reminding you of the rewards.
 Goals entice...
Step 3: Develop a Plan of Action
 Flexibility -- The ability for
your plan to change as your
situations or goals change.
...
Step 3: Develop a Plan (cont’d)
 Protection -- Your ability to meet the
unexpected large expenses without
destroying your...
Step 3: Develop a Plan (cont’d)
 Consider future needs:
- Create a budget
- Determine investment strategies
- Plan for bi...
Step 4: Implement Your Plan
 Use common sense and moderation; don’t force
yourself to track every penny.
 Remain positiv...
Step 5: Revise Your Plan
 Periodically review your progress to see if any
fine tuning needs to be done.
 Make sure that ...
The Life Cycle of Financial Planning
 Stage 1: The Early Years -- A Time of
Wealth Accumulation
 Stage 2: Approaching Re...
Stage 1: The Early Years -- A Time of Wealth
Accumulation
 Develop your savings plan.
 Set your initial goals of all
len...
Stage 2: Approaching Retirement -- The Golden
Years
 Realize intermediate-term
goals that were established
during Stage 1...
Stage 3: The Retirement Years
 Reduce investment risk
 Concentrate on
preservation rather than
growth of assets
 Plan f...
Managing Your Career
 Find a career path for the rest of your life
- Work that is enjoyable and satisfying
- Adequate fin...
Deciding On A Career
 Conduct a self-assessment
 Research academic and career
alternatives that match your skills and
in...
Getting A Job
 Start your job search in summer, before your
senior year
- Develop your resume before fall
- Starting earl...
Getting A Job (cont’d)
 Prepare for the interview
- Practice
- Learn about the company before the
interview
- Prepare: re...
Building Job Security
 Keep up, with education and new skills
 Do good work
 Match your image to that of the company
 ...
Your Income: What Determines It
 Earnings determine standard of living.
 Education is the key factor in determining
inco...
Education
 It may be the best single
investment you will ever
make!
The 15 Axioms of Personal Finance
Axiom 1: The Risk-
Return Tradeoff
Axiom 2: The Time
Value of Money
Axiom 3: Diversifica...
The 15 Axioms of Personal Finance (cont’d)
 Axiom 5: The Curse of Competitive Investment
Markets
 Axiom 6: Taxes Affect ...
The 15 Axioms of Personal Finance (cont’d)
 Axiom 8: Nothing Happens
Without a Plan
 Axiom 9: The Best
Protection is Kno...
The 15 Axioms of Personal Finance (cont’d)
 Axiom 11: The Time Dimension of Investing
 Axiom 12: The Agency Problem-- Be...
The 15 Axioms of Personal Finance (cont’d)
Axiom 13: Pay
Yourself First
Axiom 14: Money
Isn’t Everything
Axiom 15: Just Do...
Summary
 Build your financial future around this text and a financial
plan:
- Manage the unplanned -- financial planning ...
Summary (cont’d)
- “Cover your assets” -- financial planning includes
protecting your assets with insurance
- Invest intel...
Summary (cont’d)
 Develop a personal financial plan
- Evaluate -- know where you are today
- Define -- know where you wan...
Summary (cont’d)
 Don’t overlook the financial life cycle
- The Early Years
- Approaching Retirement
- The Retirement Yea...
Summary (cont’d)
 Manage your career to ensure personal and financial
success
 Remember the 15 axioms, but most importan...
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Personal Financial planning the ties that bind

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Do you have clear financial goals? Do you know if you have enough money to buy a car or house, if you can afford to take a cut in pay in order to go back to school, if you will have enough money to retire? Do you know how much tax you will be expected to pay this year and next, or what you might be able to do right now that will lower your tax long into the future? Do you have enough insurance? Have you developed a household budget and are you sticking to it?

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Personal Financial planning the ties that bind

  1. 1. Financial Planning: The Ties That Bind
  2. 2. The Role of Personal Financial Planning  To manage income and expenses.  To create an awareness of your current financial status.  To plan for the future by developing goals and devising ways to achieve those goals.  To provide a system of evaluation and revision for your financial progress.
  3. 3. Why Do You Need a Personal Financial Plan?  For most people it is easier to spend than save.  To track your expenses, so you don’t spend more than you think you’re spending.  To retire someday.
  4. 4. Why Should You Develop a Personal Financial Plan?  It helps you achieve your financial goals.  It helps you achieve financial independence.  It helps you understand where all your money is spent.  It may even help you support those that have supported you.
  5. 5. Why Isn’t Personal Financial Planning Easy?  Some people are uncomfortable discussing financial matters, the “fear of finance.”  Motivation and time is required to complete an accurate plan.  Good record keeping is necessary both before and during the planning period.
  6. 6. What Can You Accomplish As a Result of This Course?  Manage the unplanned.  Accumulate wealth for special expenses.  Save for retirement.  “Cover your assets.”  Invest intelligently.  Minimize your payments to Uncle Sam.
  7. 7. The Personal Financial Planning Process  Step 1: Evaluate Your Financial Health  Step 2: Define Your Financial Goals  Step 3: Develop a Plan of Action - Flexibility, Liquidity, Protection, Minimization of Taxes - Consider Your Goals  Step 4: Implement Your Plan  Step 5: Review Your Progress, Reevaluate, and Revise Your Plan
  8. 8. Step 1: Evaluate Your Financial Health  Evaluate your current situation: income, spending, wealth  Assess your whole financial picture
  9. 9. Step 2: Define Your Financial Goals  Specifically define and write down your financial goals to reflect your financial and life situation.  Attach a cost to each goal.  Set a date for when the money is needed to accomplish the goal.
  10. 10. What Are the Time Horizons for Financial Goals?  Short-term goals can be accomplished within a 1- year period .  Intermediate-term goals take 1-10 years to accomplish.  Long-term goals take more than 10 years to achieve.
  11. 11. Goals: The Cornerstone of a Financial Plan  Goals keep the future in mind by reminding you of the rewards.  Goals entice you to keep the plan in effect.  Goals provide tangibility for the question, “Why?”
  12. 12. Step 3: Develop a Plan of Action  Flexibility -- The ability for your plan to change as your situations or goals change.  Liquidity -- Your ability to convert noncash assets into cash with relative ease and speed.
  13. 13. Step 3: Develop a Plan (cont’d)  Protection -- Your ability to meet the unexpected large expenses without destroying your plan.  Minimization of Taxes -- Your ability to pay as little as possible to Uncle Sam.
  14. 14. Step 3: Develop a Plan (cont’d)  Consider future needs: - Create a budget - Determine investment strategies - Plan for big-ticket purchases - Plan for managing debt - Plan for insurance - Plan for the expense of children - and college - Plan for retirement - Plan for estate transfer
  15. 15. Step 4: Implement Your Plan  Use common sense and moderation; don’t force yourself to track every penny.  Remain positive about your plan; use it as a roadmap.  Stay on track after the detours; rewards await you.
  16. 16. Step 5: Revise Your Plan  Periodically review your progress to see if any fine tuning needs to be done.  Make sure that your plan still matches your goals.  Be prepared to start over if your plan no longer meets your needs.
  17. 17. The Life Cycle of Financial Planning  Stage 1: The Early Years -- A Time of Wealth Accumulation  Stage 2: Approaching Retirement -- The Golden Years  Stage 3: The Retirement Years
  18. 18. Stage 1: The Early Years -- A Time of Wealth Accumulation  Develop your savings plan.  Set your initial goals of all lengths.  Establish your long-range investment strategy.
  19. 19. Stage 2: Approaching Retirement -- The Golden Years  Realize intermediate-term goals that were established during Stage 1.  Re-evaluate the plan to match current goals.  Plan for retirement.
  20. 20. Stage 3: The Retirement Years  Reduce investment risk  Concentrate on preservation rather than growth of assets  Plan for the transfer of your estate
  21. 21. Managing Your Career  Find a career path for the rest of your life - Work that is enjoyable and satisfying - Adequate financial support - Balance between work and personal life
  22. 22. Deciding On A Career  Conduct a self-assessment  Research academic and career alternatives that match your skills and interests  Talk to people in the career field  Make a decision and start work on your future
  23. 23. Getting A Job  Start your job search in summer, before your senior year - Develop your resume before fall - Starting early tells employers you are serious and organized - Recruiting cycles often start in fall
  24. 24. Getting A Job (cont’d)  Prepare for the interview - Practice - Learn about the company before the interview - Prepare: rest, dress, arrive early, make a good impression - Thank the interviewer at the close; follow- up with a letter
  25. 25. Building Job Security  Keep up, with education and new skills  Do good work  Match your image to that of the company  Know and use the power structure  Take new assignments and make others aware of your work  Be loyal and supportive of your boss  Learn to network, in case you need another job
  26. 26. Your Income: What Determines It  Earnings determine standard of living.  Education is the key factor in determining income level.  70% of wealthy householders finished college.
  27. 27. Education  It may be the best single investment you will ever make!
  28. 28. The 15 Axioms of Personal Finance Axiom 1: The Risk- Return Tradeoff Axiom 2: The Time Value of Money Axiom 3: Diversification Reduces Risk Axiom 4: All Risk Is Not Equal
  29. 29. The 15 Axioms of Personal Finance (cont’d)  Axiom 5: The Curse of Competitive Investment Markets  Axiom 6: Taxes Affect Personal Finance Decisions  Axiom 7: Stuff Happens, or The Importance of Liquidity
  30. 30. The 15 Axioms of Personal Finance (cont’d)  Axiom 8: Nothing Happens Without a Plan  Axiom 9: The Best Protection is Knowledge  Axiom 10: Protect Yourself Against Major Catastrophes
  31. 31. The 15 Axioms of Personal Finance (cont’d)  Axiom 11: The Time Dimension of Investing  Axiom 12: The Agency Problem-- Beware of the Sales Pitch
  32. 32. The 15 Axioms of Personal Finance (cont’d) Axiom 13: Pay Yourself First Axiom 14: Money Isn’t Everything Axiom 15: Just Do It!
  33. 33. Summary  Build your financial future around this text and a financial plan: - Manage the unplanned -- financial planning withstands minor setbacks - Accumulate wealth -- financial planning maps out strategies for meeting your goals - Save for retirement -- financial planning helps you determine the costs of retirement
  34. 34. Summary (cont’d) - “Cover your assets” -- financial planning includes protecting your assets with insurance - Invest intelligently -- financial planning helps you understand the principles of investing - Minimize taxes -- financial planning helps you keep your assets where they should be, in your own pocket
  35. 35. Summary (cont’d)  Develop a personal financial plan - Evaluate -- know where you are today - Define -- know where you want to go - Develop a plan -- draw the map - Implement -- follow the plan with action - Review progress-- check the map to ensure you are on course
  36. 36. Summary (cont’d)  Don’t overlook the financial life cycle - The Early Years - Approaching Retirement - The Retirement Years
  37. 37. Summary (cont’d)  Manage your career to ensure personal and financial success  Remember the 15 axioms, but most importantly remember the 15th -- Just Do It!

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