The document outlines the key steps in the financial planning process: 1. Define financial goals by setting specific, attainable targets with timeframes for short, intermediate, and long-term goals. 2. Develop financial plans and strategies to achieve the defined goals through decisions around assets, credit, insurance, investments, and retirement. 3. Implement the financial plans by taking actions and developing budgets to monitor progress towards goals. Evaluate results using financial statements and revise plans as needed based on changes in situations.

1. THE FINANCIAL PLANNING
PROCESS
Cameron
Howat

2. 1-2
The Rewards of
Sound Financial Planning
 Maintain and improve standard
of living.
 Control spending in order to live
well today and tomorrow!
 Accumulate wealth.

3. 1-3
Average Propensity to Consume:
The percentage of each dollar of
income that is spent, on average,
for current needs rather than saved.
 What is your average propensity to
consume?
Income spent on current needs
Total income

4. 1-4
The Personal Financial
Planning Process
 Taking conscientious and
systematic steps toward
fulfilling your financial goals.

5. 1-5
Steps in the Financial Planning Process:
1. Define financial goals.
2. Develop financial plans and strategies to
achieve goals.
3. Implement financial plans and strategies.
4. Develop budgets to monitor and control
progress toward goals.
5. Evaluate results by using financial
statements.
6. Revise goals as situations change.

6. 1-6
1. Define financial goals
2. Develop plans

7. 1-7
3. Implement plans
4. Develop budgets
1. Define financial goals
2. Develop plans
FINANCIAL ACTIONS
•Basic asset decisions
•Credit decisions
•Insurance decisions
•Investment decisions
•Retirement and
estate decisions

8. 1-8
3. Implement plans
4. Develop budgets
1. Define financial goals
2. Develop plans
5. Evaluate results
6. Revise plans
FINANCIAL ACTIONS
•Basic asset decisions
•Credit decisions
•Insurance decisions
•Investment decisions
•Retirement and
estate decisions
Prepare financial statements

9. 1-9
Money:
 Used as a medium of exchange.
 Financial goals are stated in dollar
amounts.
 Need to consider utility, or amount
of satisfaction derived from
purchases, as well as cost.
 May be closely linked to personal
psychological concepts.
 May play key role in personal
relationships.

10. 1-10
To attain your financial goals:
 Be specific in defining goals and focus
on results.
 Make goals realistically attainable.
 Involve family members and enlist their
cooperation.
 Prioritize goals and set a definite time
frame.

11. 1-11
Putting target dates
on financial goals:
 Short-term goals—to be
accomplished within the next year.
 Intermediate-term goals—to be
accomplished in the next 2-5 years.
 Long-term goals—to be accomplished
in time periods greater than 5 years.

12. 1-12
From Goals to Plans:
A Lifetime of Planning
 Early childhood
 High school and college
 Family formation
 Career development
 Pre-retirement
 Retirement

13. 1-13
Age
Income
10 20 30 40 50 60 70 80
Income Stream
Personal Financial Planning Lifecycle
Retirement/
Estate
Tax
Savings/
Investmen
t
Asset
Acquisition
Liability/Insurance
Benefits

14. 1-14
Benefit of planning:
 Your money works more
efficiently for you by...
 Utilizing the financial wonder—
The power of compounding
through time!

15. 1-15
Growth of $1,000 at 8 % interest:
21,725
10,063
4,661
2,159
$0
$10,000
$20,000
$30,000
$40,000
$50,000
0 10 20 30 40
Years

16. 1-16
Growth of $1000 at 10% interest:
17,449
6,727
2,594
$0
$10,000
$20,000
$30,000
$40,000
$50,000
0 10 20 30 40
Years
21,725
45,259

17. 1-17
Use the personal computer to:
 Prepare financial
statements
 Plan retirement
 Prepare and file
tax returns
 Track investments
 Analyze needs

18. 1-18
The Planning Environment
Financial planning is carried out in an
economic environment created by the
interactions of
 Government
 Business
 Consumers

19. 1-19
BUSINESS GOVERNMENT CONSUMERS
Money payments of wages, rents
interest, and profit
Money payments for goods
and services

20. 1-20
BUSINESS GOVERNMENT CONSUMERS
Money payments of wages, rents
interest, and profit
Money payments for goods
and services
Land, labor, and financial capital
Goods and services

21. 1-21
BUSINESS GOVERNMENT CONSUMERS
Money payments of wages, rents
interest, and profit
Money payments for goods
and services
Land, labor, and financial capital
Goods and services
Public goods &
services, regulations,
and revenues
Taxes

22. 1-22
Government policy decisions are used
to regulate the economy in an effort to:
 Provide economic stability
 Maintain acceptable employment
levels

23. 1-23
 Controls money supply
 Used to stimulate or contract
economic growth
Fiscal Policy
 Controls levels of taxation
 Sets levels of government spending
on various programs
Monetary Policy

24. 1-24
Policies seek to control:
 Economic Cycles
– Stages related to employment and
production levels
– Growth measured by changes in GDP
 Inflation
– Measured by changes in CPI
– Affects purchasing power and interest
rates
– Affects financial plans and goals

25. 1-25
Economic Cycles
Expansion Recessio
n
Depression Recovery
HIGH
LOW
Levels of Employment and Production

26. 1-26
What Determines Your
Personal Income?
 Age, marital status
 Education
 Where you live
 Career choice

27. THE END!