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?

1. PLAN WITH
PURPOSE

2. 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?

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

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

5. 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

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

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

8. 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

9. 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

10. 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

11. 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?

12. 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

13. 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?

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

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

16. Asset
Resource with economic
value
What is
what?

17. Liability
Money that is owed
What is
what?

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

19. 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

20. 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.

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

22. 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?

23. 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

24. 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