Personal Financial Planning: A Comprehensive Guide, Slides of Management Fundamentals

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Chapter

Financial

Planning:

The

Ties

That

Bind

The Role of Personal Financial Planning

To manage income and expenses. - To create an awareness of your current financial status. - To plan for the future by developing goals and devising ways to achieve those goals. - To provide a system of evaluation and revision for your financial progress.

Why Do You Need a Personal Financial Plan?

For most people it is easier to spend than save. - To track your expenses, so you don’t spend more than you think you’re spending. - To retire someday.

Why Should You Develop a Personal Financial Plan?

It helps you achieve your financial goals. - It helps you achieve financial independence. - It helps you understand where all your money is spent. - It may even help you support those that have supported you.

Why Isn’t Personal Financial Planning Easy?

Some people are uncomfortable discussing financial matters, the “fear of finance.” - Motivation and time is required to complete an accurate plan. - Good record keeping is necessary both before and during the planning period.

What Can You Accomplish As a Result of This Course?

Manage the unplanned. - Accumulate wealth for special expenses. - Save for retirement. - “Cover your assets.” - Invest intelligently. - Minimize your payments to Uncle Sam.

The Personal Financial Planning Process

Step 1: Evaluate Your Financial Health - Step 2: Define Your Financial Goals - Step 3: Develop a Plan of Action - Flexibility, Liquidity, Protection, Minimization of Taxes - Consider Your Goals - Step 4: Implement Your Plan - Step 5: Review Your Progress, Reevaluate, and Revise Your Plan

Step 1: Evaluate Your Financial Health

Evaluate your current situation: income, spending, wealth - Assess your whole financial picture

Step 2: Define Your Financial Goals

Specifically define and write down your financial goals to reflect your financial and life situation. - Attach a cost to each goal. - Set a date for when the money is needed to accomplish the goal.

What Are the Time Horizons for Financial Goals?

Short

‐

term goals can be accomplished within a

‐

year period

.

•

Intermediate

‐

term goals take

‐

years to accomplish.

Long

‐

term goals take more than

years to achieve.