This document discusses key concepts in personal financial planning including short and long term goals, anticipated and unanticipated income and expenses, calculating net worth, creating personal budgets, and how government and economic factors can influence financial planning. Short term goals are for needs above the regular budget like emergencies while long term goals require extensive saving like buying a home. Net worth is calculated by subtracting total liabilities from total assets to understand one's financial position. Government policies on taxes and economic conditions like inflation and unemployment can impact personal financial planning.

1. 17 Personal Financial Planning
17 demonstrate knowledge of personal
financial planning

2. 17a Short Term & Long Term Financial
Goals
• Financial planning calls for both short-term and
long-term goals

3. What is a short-term financial goal?
• To have funds to buy things that require money
above what is normally allowed by a budget
• Examples:
▫ Emergencies
▫ Vacations
▫ Social events
▫ Automobile and home repairs
▫ gifts

4. What is a long-term financial goal?
• Anticipated major purchases that require
extensive saving
• Examples:
▫ Home ownership
▫ Education
▫ Retirement
▫ investments

5. 17b Anticipated & Unanticipated
Income & Expenses
• Some sources of income are anticipated, while
others are unanticipated
• Some expenses are anticipated, while others
are unanticipated.

6. What are some examples of anticipated
and unanticipated income?
Anticipated Income: Unanticipated Income:
• Salary • Gifts
• Allowance • Bonuses
• Wages • Inheritances
• Educational grants or
scholarships

7. What are some examples of anticipated
and unanticipated expenses?
Anticipated Expenses: Unanticipated Expenses:
• Fixed costs, which remain the • Car repairs
same each month (ex. rent, car • Medical bills
payment) • Losses from natural disaster or
• Variable costs (ex. restaurant theft
meals)

8. 17c Personal Net Worth Statement
• A networth statement shows one’s financial
position

9. What is a net worth statement?
• The total value of a person’s financial holdings

10. How is net worth calculated?
• Deducting liabilities (ex. debts) from assets (ex.
property)
• Examples of Assets:
▫ Savings account balances, car value, personal
property value
• Examples of Liabilities:
▫ Balances on car loans, bank loans, mortgage loans
and credit cards

11. What are the purposes of a net worth
statement?
• Useful as an analytical tool for individuals
• Provides valuable insight to
creditors, investors, lenders and financial advisors

12. What is a personal inventory?
• A personal inventory is a list of all of one’s
personal property.
• This is useful in cases of fire, theft, and property
damage.
• This inventory can be supplemented with
photographs.
• It is important to keep the record in a safe place
away from the primary residence.

13. 17d Personal Budget
• A budget is an important tool for managing one’s
money to achieve short- and long-term goals

14. What does a budget include?
• Developing a budget includes the following:
▫ Writing a statement of long-term and short-term goals
▫ Presenting a plan for managing one’s money over a
short-term period
▫ Outlining a long-term plan for managing money
• A budget should allow for discretionary income and
take into account the impact of inflation
• A budget should also include funds set aside to use
in the event of an emergency

15. 17e Effects of Gov’t & Economy on
Personal Financial Planning
• Government actions, such as changes in
taxes, affect personal financial planning.
• Economic conditions affect personal financial
planning

16. How can government actions
affect one’s financial planning?
• Government tax policies, including what
expenses are tax-deductible, influence financial
planning. These tax policies may shift over time.
• Monetary and fiscal policy actions can affect
personal financial planning.

17. How can economic conditions
affect one’s financial planning?
• Economic conditions such as inflation and
deflation affect financial planning.
• Planning should anticipate the possibility of
inflation or deflation in the future by including
safeguards against both.

18. 17f Economic Influence on Personal
Financial Plan
• Economic understanding and economic
conditions affect a personal financial plan

19. How can understanding of economics
concepts affect a personal financial plan?
Key economics principles that influence personal financial planning
include the following:
• People must make choices due to scarcity.
• Every choice incurs an opportunity cost.
• All choices have consequences.
• Secondary effects of choices are important.
• Decisions are made based on marginal analysis.
Applying these key principles to financial planning means the following:
• A budget details how one plans to use limited income to satisfy wants.
• There is a tradeoff between spending now and saving.
• People make decisions about which financial products to consume based
on several factors, including expected return and the associated risk of
the product.
• Financial plans and financial products should take into account the
goals of the individual

20. How can economic conditions affect a
personal financial plan?
Changing economic conditions can influence a personal financial plan in
the following ways:
• Inflation can negatively impact savings by eroding the purchasing power
of savings over time.
• Unemployment can affect financial plans by making it more difficult for
individuals to budget, save, and meet financial obligations.
• Deflation can reduce the value of assets one might own.
• Slow economic growth can lead to a rise in unemployment rates.
Fiscal policy actions can affect an individual’s current and future income.
For example, actions of the Federal Reserve System affect interest rates
and the availability of credit; thus it is important to be aware of what the
Fed is doing and to understand what it means to one’s financial assets.