Basic financial vocabulary The goal of financial planning Tools for financial planning and budgeting Introduction to savings and investments Overview of lending products

2. Topic Outline Learning Guide
Plan with Purpose
Owned and Owed
Pocket money
Future interest
Smart credit
W h a t i s p e r s o n a l f i n a n c e m a n a g e m e n t ?
H o w m u c h i s y o u r n e t w o r t h ?
H o w t o c o n t r o l w h e r e y o u r m o n e y g o e s ?
H o w t o s a v e a n d i n v e s t f o r f u t u r e r e t u r n ?
W h a t t o k e e p i n m i n d w h e n t a k i n g a l o a n ?

3. What will you learn in this
course?
• Basic financial vocabulary
• The goal of financial planning
• Tools for financial planning and budgeting
• Introduction to savings and investments
• Overview of lending products

4. PLAN WITH
PURPOSE

5. What will you learn in
this chapter?
• What are basic financial terms mean?
• What is a financial plan?
• What are the guidelines to keep in mind
when starting to manage your financials?

6. MONEY IS A TERRIBLE
MASTER BUT AN
EXCELLENT SERVANT.
- P. T. Barnum
Words to Ponder

7. WHY SPEND TIME
ON FINANCIAL
PLANNING?
Make the most of
your money
Prepare for the
future
Avoid unnecessary
debt

8. Present You
FINANCIAL PLAN
Future You
A financial plan brings all parts of your financial life together in one
picture and bridges the gap between present you and future you.
• Setting up a budget
• Start saving
• Get into investments
• Getting a loan
• Settling debt

9. A financial plan is…
Personal
Changing with time
However there are…
Guides
Tools
Best Practices

10. ASSIGMENT
You have 20 Coins
to spend
First allocate your
Coins to the Basic
Categories
Fill out the after
assigment questionnaire

11. Housing
Live with relatives sharing cost of
utilities (no phone)
Share an apartment or house
with others, including basic
utilities (no phone)
Rent place of your own, including
basic utilities (no phone)
Food
Cook at home; dinner out once a
week
Frequent fast food lunches and
weekly dinner out; cook other
meals at home
All meals away from home
Transportation
Walk or bike
No cost
Ride bus or join a carpool
Buy fuel for family car
Buy used car and fuel
Buy new car and fuel
BASIC

12. Clothing
Wear present gardrobe
No cost
Use your sewing skills
Buy at a discount store,
thrift shop, or used clothing
store
Buy at a department store
Shop for designer clothes
Communications
No phone
No cost
Phone with limited call and
data plan
Phone with unlimited call and
data plan
High-speed Internet at home
Personal care
Basic products like soap,
shampoo, toothpaste, make-up,
etc.
Occasional professional
haircuts, basic personal care
products
Regular professional
hairstyling, name brand
personal care products
EXTRA

13. Recreation
Hiking, walking, visiting
friends or library
No cost
TV, snacks, picnics, driving
around
Video and music streaming
subscriptions
Books and other hobbies
Concerts, vacations &
spectator sports
Savings
Change in piggy bank
No cost
Five percent of income
Ten percent of income
Invest for retirement
Contribution to charities and
religious groups
Gifts
Make your own
Purchase cards or small gifts
occasionally
Purchase frequent gifts for
family and friends
EXTRA

14. Why did you choose the
items you did?
In what ways were you
influenced by your values?
In what ways were you
influenced by your goals?
In what ways were you
influenced by your previous
experiences?

15. ASSIGMENT
Your Coins been
reduced to 13
Make changes until you
only have 13 Coins on
your spending sheets
Fill out the after
assigment questionnaire

16. What kinds of items did you
choose to give up?
Why did you choose to give
up these items?
What did you learn about yourself and
money in this process?

17. Income
Money recieved for:
working
providing a service
providing a product
investing capital
gift
What is
what?

18. Expense
Money spent on:
products
services
What is
what?

19. Asset
Resource with economic
value
What is
what?

20. Liability
Money that is owed
What is
what?

21. Tax
Charge imposed by an
authority
There are taxes on:
what you EARN
what you BUY
what you OWN
What is
what?

22. When income is bigger than expenses
you have a positive cashflow
Over time you can accumulate your
surplus into assets
When expenses are bigger than income
you have negative cashflow
Over time you would need to support
your income with liabilities

23. 1. Financial success is primarily the result of setting long term goals and developing a plan to
achieve them.
2. The purpose of a budget is to increase awareness of how funds are spent and to help the
individual or household develop a plan to control spending more effectively and save for the
future.
3. Your take home pay will be less than your gross earnings because of taxes and benefits
provided through payroll deductions
4. Assets are income minus expenses.
5. Financial plans are the same for everyone that wants to achieve healthy financial
standing.

24. Set Your Goals
Key Process
Monitor and Review
Write Down Your Plan
Assess Where You Stand
Explore Alternatives

25. What short-term (0-6 months), mid-term (6-24 months) or
long-term (< 2 years) goals do you have?
How much money would you need to achieve them? Do
you have this money available now?

26. ASSIGMENT
What short-term (0-6 months),
mid-term (6-24 months) or long-
term (< 2 years) goals do you
have?
How much money
would you need
to achieve them?
Fill out the after
assigment questionnaire

27. A financial plan…
…is the road map to get you to achieve your
goals
…is usually created for at least a few years
…uses financial tools to get you to your goal
A budget…
…is a tool that helps you realize your
financial plan
…is set for a shorter period of time
… helps you understand your situation
and supports you in changing your
financial habits

28. OWNED AND
OWED

29. What will you learn in
this chapter?
• What assets and liabilities do you have?
• What is liquidity and why is it important?
• How much is your net worth and why is it
important?

30. AN ASSET IS SOMETHING
THAT PUTS MONEY IN MY
POCKET. A LIABILITY
IS SOMETHING THAT
TAKES MONEY OUT OF MY
POCKET.
- Robert Kiyosaki
Words to Ponder

31. Liquid assets
A liquid asset is easy to convert to money or
exchange for goods.
For example: cash, savings
Non-liquid assets
A non-liquid asset is hard to convert to
money, it takes time until you can freely
use.
For example: investments, property

32. Cash
PRO
Easy to spend on whatever
products or services you want
CON
Sometimes too easy to spend
and hard to control
What is
what?

33. Savings
PRO
Easy to access and is
accumulating interest
CON
Access is slightly harder than
cash and interest rate is
moderate
What is
what?

34. Investments
PRO
Strong interest returns on
investment
CON
Can take time to access and
return can be uncertain due to
volatility
What is
what?

35. Property
PRO
You can use and enjoy it
while you own it
CON
Can be hard to convert to
money
What is
what?

36. WHY IS LIQUIDITY
IMPORTANT?
It gives you
freedom of how
you want to spend
your money
However too much
liquidity could
mean you are
giving up long-
term returns
Important to find
the right balance
between liquid and
non-liquid assets

37. • Clothes
• Pocket money
• Laptop
• Investment
• Money on a current account
• Cash in foreign currency
• Savings
Liquid assets
Non-liquid assets

38. When is it due?
Key Process
How flexible are the terms?
Can you negotiate?
Is it due in installments or in full?
What are the consequences of not
meeting the terms of the loan?

39. What kind of assets do you have? (eg.: phone, laptop,
savings, etc…)
How much do you own?
What kind of liabilities do you have? (eg.: loan from your
friends or a bank, installment payments for your phone, etc… )
How much do you owe?

40. WHAT IS YOUR NET WORTH?
ASSET LIABILITY
NET
WORTH

41. Calculate your net worth!
Total assets – total liabilities = Net worth
Is it positive? Is it negative? What do you think about your
current net worth?

42. POCKET
MONEY

43. What will you learn in this
chapter?
• What is a budget and why is it important to have?
• What income sources can you consider?
• What expense categories can you plan with?
• How to manage your cashflow?

44. PLANNING IS BRINGING
THE FUTURE INTO THE
PRESENT SO THAT YOU
CAN DO SOMETHING
ABOUT IT NOW.
- Alan Lakein
Words to Ponder

45. How much income
do you get?
A budget is a spending plan for a month or a year.
How much do you spend?
The more your understand where your money comes from and goes to the more
control you have over it.
This way you can make smarter decisions each day!

46. • Housing
• Transportation
• Food
• Utilities
• Medical & Healthcare
• Saving & Investing
• Debt Payments
• Personal Spending
• Recreation & Entertainment
• Miscellaneous
INCOME
EXPENSE
• Salary
• Comission
• Selling something you own
• Providing services or products
• Investment and interest
• Allowance
• Gifts
• Scholarships and Grants

47. As-is budget
Describes your current earning and spending
habits.
To-be budget
Prescribes how you want to change your
earning and spending habits in the future

48. Salary
Earned from a job. This is
based on worked hours.
Investment and
interest
Your assets earning
money for you.
Providing services
or products
Creating art to sell,
mowing the lawn, etc.
Scholarships and
Grants
Money you can get from
the goverment or your
school
Comission
Earned from a job. This is
based on results and not
hours worked
Allowance
Money you regularly get
from your family.
Selling something
you own
Selling your old clothes,
phone or laptop.
Gifts
Money you get for events
from your family.
INCOME
SOURCES

49. Disposable income
The amount of money you have after taxes
deducted.
Discretionary income
The amount of money you have after
taxes and essential expenses are
deducted.

50. List all income types you
get in a year!
Which of your incomes
come monthly, which
annually?
Is your income already after taxes?
How much disposable income do you have in a month?

51. > Housing
> Transportation
> Food
> Utilities
> Medical & Healthcare
> Saving & Investing
> Debt Payments
Personal spending <
Recreation & Entertainment <
Miscellaneous <
ESSENTIAL EXPENSES
NON-ESSENTIAL EXPENSES

52. WHAT IS THE
IDEAL SPLIT
FOR SPENDING
CATEGORIES?
Must have,
essential expenses
Savings and
investments
Personal wants,
non-essential
expenses
<50%
20%
30%

53. List all the
expense
categories that
you spend on!
How much do you
spend on each
category in a
month?
Do you have any
additional annual
expense? (e.g.:
gifts)

54. A monthly budget is an effective tool that will help you…
A: Spend a larger share of your earnings now.
B: Manage your spending and save for the future in order to accumulate wealth.
C: Keep your transportation costs low by purchasing a new car every few years.
D: Select stocks that are more likely to increase in value over the long run.
In which order should you allocate your budget to spending categories?
A: First the must have expenses, than the nice to have expenses, what is left is savings.
B: First put aside savings, then spend on anything.
C: First the must have expenses, then 10-20% in savings and last on enterntainment.
D: Select stocks that are more likely to increase in value over the long run.
How much should you spend on essential expenses?
A: As much as I need to.
B: Ideally less than 30% of disposable income.
C: Ideally 50% or less of discretionary income.
D: Ideally 50% or less of disposable income.

55. • Clothes
• Shampoo
• Grocery
• Take away food
• Cinema tickets
• Savings
• Public transport ticket
• Netflix subscription
• Taxi
• Vacation
Essential expenses
Non-essential expenses

56. WHAT IS YOUR CASHFLOW?
INCOME EXPENSE
CASH-
FLOW

57. How much do you
earn in a month?
How much do you
spend in a month?
What is your
cashflow? What do
you think about it?

58. Student loan
Illness
Becoming an
enterpreneur
Retirement
First job
Buying a car or a
home
Changing jobs
Having children
What do you think how these life events will change your cashflow?

59. > Always spend on necessities
first
> Spend on your wants only
after your needs are covered
> Treat savings as a necessity
> Aim to have at least 3-6
months of expenses in an
emergency fund
> Stick to your budget and
follow your plan
Impulse purchases
Spending more than you can
afford
Covering your expenses
regularly with credit products
Living paycheck to paycheck
Thinking credit cards and
loans are free money
BEST PRACTICES
BAD HABITS
<
<
<
<
<

60. Keep your cashflow positive!
Key Process
Aim to put 20% of your income towards
savings and investment!
Have a strong emergency fund, ideally 3-6
months of expenses!
Spend less than 50% of your
income on necessities!
Keep debt to income ratio under
30%!

61. ASSIGMENT
Create a monthly
to-be budget!
Consider first your income with
the following questionnaire!
Plan your expenses in
the following template!

62. What different source of income can you plan with?
How can you increase your current income?

63. Housing
Communications
Clothing
Other
Food
Personal care
Transportation
Entertainment
How much do you plan to spend on the categories below?
What do you spend on in each category?

64. FUTURE
INTEREST

65. What will you learn in this
chapter?
• What are the basic principles of saving money?
• What types of savings and investments can you
consider?

66. DO NOT SAVE WHAT IS
LEFT AFTER SPENDING.
SPEND WHAT IS LEFT
AFTER SAVING
- Warrent Buffet
Words to Ponder

67. When should you
start saving?
Start as soon as possible
• You can start a saving right now from you
allowance, gifts or part time job
• It is okay to start with 5-10%, developing the
habit of saving is the first step
• Once you get your first time job increase the
amount that you save to 20%

68. HOW TO
STRUCTURE
YOUR SAVINGS?
Emergency fund
(3-6 months of
expenses)
Retirement
(especially important
for enterpreneurs)
Long term goals
(This can increase if
your emergency fund
is in place)
5%
10%
5%

69. Risk
Risk is the chance that an
investment’s actual outcome
will be different from the
expected outcome.
What is
what?

70. Return
Money made or lost on an
investment.
It can be in the form of:
• price change
• Interest
• dividend
What is
what?

71. Price change
If an investment’s price
changes with time, the
change is realized as return
by the investor.
What is
what?

72. Interest
Interest is paid for tying up
your money in savings and
investments.
What is
what?

73. Dividend
The dividend is paid to the
eligible shareholders from a
corporate’s profits.
What is
what?

74. Pro
Money kept on a current account can
be easily accessed and exchanged
for goods or services.
Contra
It is hard to keep apart the money
you can spend and the money you
should save on a current account.
Current
account

75. Pro
Money kept on a savings account
can be easily accessed while
accumulating modest interest
A savings account helps keeping
money to be saved apart from money
to be spent.
Contra
It takes some effort to transfer
money from your savings account to
a current account before spending.
Savings account

76. Pro
Bonds provide medium range interest
rate at low risk.
Contra
A bond is usually has a fixed term of
a few years. Early access to your
money takes time and your
accumulated interest would be lost. .
Bonds

77. Pro
Stocks has high interest rate
potential.
Stocks of well known, established
companies are easy to sell anytime
and are considered liquid assets.
Contra
Stock markets can be volatile and
your interest rate is not guaranteed.
Stocks of less well known
companies may take time to sell and
could be condiered illiquid.
Stocks

78. Go to the link below and fill out the quiz!
LINK
How many points did you get?

79. SMART
CREDIT

80. What will you learn in this
chapter?
• What are the basic terms of loans?
• What loan types should you consider?
• What questions to ask before taking a loan?

81. TIMELY RETURN OF A
LOAN MAKES IT EASIER
TO BORROW A SECOND
TIME.
- Chinese proverb
Words to Ponder

82. Loan
A loan is present you
borrowing money from future
you.
What is
what?

83. Interest
In case of loans, interest is the
price to access money you
have not yet earned.
What is
what?

84. Principal
The amount of money
borrowed at the beginning,
that is the basis for calculating
the interest
What is
what?

85. Recurring loans
For example credit cards or overdrafts, where
you have a credit limit, the maximum you can
spend, but if you pay back the amount borrowed
you can again access your full limit.
Non-recurring loans
For example personal loans and mortgages,
where you have a principle, the full amount
of the money borrowed, that you access at
the beginning and pay back continously.

86. Pro
An overdraft facility means that the
bank allows your current account to go
into negative.
Using an overdaft is very easy, same
way you use your debit card.
Once you get money on your account
your loan is automatically paid back.
Contra
Access to overdraft facility has a fee
and a generally higher interest rate.
Banks may also charge high fee for
cash withdrawal.
Overdraft

87. Pro
Through a credit card you can
directly buy products or services.
Spending on credit cards can be
safe, because in case of fraud you
are more protected.
You have a grace period (30-45
days) when the borrowed amount is
interest free.
Contra
Credit cards are expensive, you
have to pay a high card fee and also
high interest rates.
Banks may also charge high fee for
cash withdrawal.
Easy to go into serious debt with this
credit product.
Credit
card

88. Pro
A personal loan can be freely used to
whatever purposes you want (e.g.:
travel, electronics, house renovation)
It has a lower interest rate than credit
cards or overdrafts.
Contra
You have to make regular payments
every month.
Personal
loan

89. Pro
Mortgage has usually the lowest
interest rate from the typical loan types.
It also has the highest principal and the
longest repayment period.
Contra
Mortgage can usually used only for
buing property, especially houses or
land.
It usually requires collateral, an
asset that you loose if you are not
able to pay back the loan.
Mortgage

90. How much do you need?
Establish how much money do you actually need, don’t take more
loan just because they offer it to you!
Key Process
How much does it cost?
Compare Annual Percentage Rates (APR) which
are the full yearly price of the loan!
What are the terms?
Read the terms and conditions!
• How much are the monthly
repayments?
• Does the loan require collateral?

91. HOW TO CHOOSE
YOUR LENDOR?
Well established financial
institutions offer
reliable lending products
Ask friends and family that
has a banking relationship or
loan with the bank to share
their experience
Always read the terms and
conditions! Don’t skip it,
take your time and understand
what you will be hold
accountable for!

92. Key Process
Bank account
Proof of ownership of
collateral for mortgages
Bank statements for the last 3 months
Proof of employment
Down payment for mortgages

93. What w ould you do in the following situations?
1. You want to get a new TV, but don’t have enough money on your bank account.
A: Apply for a credit card and pay for the TV with it.
B: Apply for a personal loan and pay for the TV with it.
C: Delay buying the TV, until you have the money for it.
2. Your car broke down, you need it to get to work every day, but you don’t have a
big enough emergency fund yet.
A: Go into overdraft and pay for the car repair.
B: Put the cost of car repair on your credit card.
C: Get quotes for personal loans and apply for the best offer to cover the
car repair cost.

94. 3. You want to buy a house. Where do you start?
A: I start looking at houses and when I find the right one I go to my bank
for a mortgage.
B: I ask a few banks for mortgage quotes to understand how much money I
could borrow, then start looking at houses in the right price range.
C: You start looking at houses, you pick one of them and take up a personal
loan to make a down payment. After you go to your bank for a mortgage to
cover the rest of the price.
4. Your laptop is old and stopped working and you need a new one quickly for school.
You have nearly enough saved for it, and next month you could pay for it.
A: Go into overdraft and pay for the laptop.
B: Put the cost of a new laptop on your credit card, and pay it back
next month fully in your grace period
C: Apply for a personal loan to pay for the laptop.

95.  https://www.coursera.org/learn/personal-finance-introduction/home/welcome
 https://learning.edx.org/course/course-v1:BerkeleyX+Fin101x+3T2019/home
 https://www.investopedia.com/
 https://www.collinsdictionary.com
 https://taxfoundation.org/the-three-basic-tax-types/
 https://www.thebalance.com/financial-planning-basics-personal-finance-101-1289798
 https://www.doughroller.net/personal-finance/13-things-every-high-school-student-should-know-about-money/
 https://www.usfinancialcapability.org/submit_quiz.php
 https://www.usfinancialcapability.org/quiz-literacy.php
 https://www.extension.iastate.edu/4h/files/page/files/bean_game.pdf
 https://www.sofi.com/learn/content/creating-a-financial-
plan/?utm_source=coursera&utm_campaign=personal_finance_specialization&utm_medium=referral
 https://www.imb.com.au/themoneytree/earning-an-income/types-of-income.html
 https://www.sofi.com/learn/content/what-is-disposable-
income/?utm_source=coursera&utm_campaign=personal_finance_specialization&utm_medium=referral
 https://www.sofi.com/learn/content/financial-life-
events/?utm_source=coursera&utm_campaign=personal_finance_specialization&utm_medium=referral
 https://www.usfinancialcapability.org/quiz-literacy.php
 https://www.elearnmarkets.com/blog/7-bad-financial-habits-to-avoid/
 https://www.moneycrashers.com/bad-financial-habits-break/
 https://www.proprofs.com/quiz-school/story.php?title=personal-finance-final
 https://www.canva.com/
Resources