insight on building personal finance

1. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 16
SLIDE 1
Personal Financial Statements
Budgeting Techniques
Taxes in Your Life
Your Financial Future
PERSONAL FINANCE
Money Management
and Financial Planning

2. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 16
SLIDE 2
KEY TERMS
● money management- the daily financial
activities that meet the wants and needs of a
person with a limited income.
● personal assets- anything of financial value
● liabilities- debt- anything you owe
● net worth- personal assets minus personal
liabilities
● cash flow statement- the monthly inflow of
income versus the outflow of expenses

3. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 16
SLIDE 3
SUCCESSFUL MONEY
MANAGERS
● Set goals
● Make wise decisions
● Buy wisely
● Live within their income

4. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 16
SLIDE 4
PERSONAL BALANCE SHEET
● Assets
● Liabilities
● Net Worth

5. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 16
SLIDE 5
PERSONAL CASH FLOW
STATEMENT
● Cash inflows
● Cash outflows
● Compare inflows
and outflows

6. © 2012 Cengage Learning. All Rights Reserved.
SLIDE 6
Budgeting Techniques
Goal 1 Identify purposes of a budget.
Goal 2 Describe steps for preparing a
budget.
Goal 3 Describe characteristics of
successful budgeting.

7. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 16
SLIDE 7
THE BUDGET PROCESS
● Set financial goals
● Plan budget categories
● Maintain financial records
● Evaluate your budget
BUDGET CATEGORIES
● Savings
● Food
● Clothing
● Household
● Transportation
● Health and personal care
● Recreation and education
● Gifts and contributions

8. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 16
SLIDE 8
KEY TERMS
● fixed expenses- monthly expenses that do not
change from month to month
(example- rent or house payment)
● variable expenses- monthly expenses that
change from month to month
(example- electricity bill, grocery bills)
● allowance- the amount of money you plan to use
for a certain budget category
● budget variance- the changes from month to
month of income or expenses

9. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 16
SLIDE 9
SAMPLE FAMILY BUDGET
FOR ONE MONTH

10. © 2012 Cengage Learning. All Rights Reserved.
SLIDE 10
Taxes in Your Life
Goal 1 Identify the types of taxes paid by
consumers.
Goal 2 Describe the steps when filing a federal
income tax return.
Goal 3 Explain tax-assistance sources.
Goal 4 Identify common tax-planning strategies.

11. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 16
SLIDE 11
TAXES
● Taxes- a charge imposed by a
government to finance public services
4 AREAS OF TAXATION
● Taxes on purchases
● Taxes on property
● Taxes on wealth
● Taxes on earnings

12. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 16
SLIDE 12
PREPARING THE FEDERAL
INCOME TAX RETURN
Step 1: Determine gross income
Step 2: Calculate adjusted gross income
Step 3: Subtract deductions
Step 4: Determine exemptions
Step 5: Compute taxable income
Step 6: Taxes owed
Step 7: Make tax payments or ask for a
refund or credit

13. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 16
SLIDE 13
Income & Deductions
● Earned Income- Wages from a job
● Investment Income- Income from
investments such as stocks, bond, and
mutual funds.
● Tax Deductions- Items you can write off
from your taxes (example- child care)

14. © 2012 Cengage Learning. All Rights Reserved.
SLIDE 14
Your Financial Future
Goal 1 Describe the financial planning
process.
Goal 2 Explain actions for implementing a
financial plan.
Goal 3 Identify actions for reviewing a
financial plan.

15. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 16
SLIDE 15
KEY TERMS
● financial plan- a report that summarizes
your current financial condition while
preparing for future expenses.
● individual retirement account (IRA)- an
account set up for retirement that has tax
benefits (tax deferred or tax free earnings)

16. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 16
SLIDE 16
DEVOLPING A FINANCIAL
PLAN
● A financial plan is a report that
● Summarizes your current financial condition
● Acknowledges your financial needs
● Sets a direction for your future financial activities
● Financial planning includes
● Evaluating one’s financial position
● Setting financial goals
● Guiding activities and resources toward reaching
those goals

17. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 16
SLIDE 17
FINANCIAL PLANNING
PROCESS
1. Analyze your current financial condition
2. Develop financial goals that are
responsive to your vision
3. Create your financial plan
4. Implement the plan
5. Revise your financial plan

18. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 16
SLIDE 18
PERSONAL FINANCIAL
FILING SYSTEM

19. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 16
SLIDE 19
USING A FINANCIAL
PLANNER
● Questions to ask when choosing a
financial planner:
● What experience and training do you have?
● Are you willing to supply references from past
clients?
● How are your fees determined?

20. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 16
SLIDE 20
REVIEW YOUR FINANCIAL
PLAN
● Revise financial goals
● Review financial activities
● Remember to save and share