Download - Personal Finance
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Personal Finance Effort to manage your personal financial activities and ultimately accumulate wealth
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Financial Planning Process Define financial goalsDevelop financial plans and strategiesImplement plans Develop and implement budgetsEvaluate financial statementsRedefine goals
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Personal Financial Planning Life Cycle
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Financial Plans
Financial Actions Asset
decisions Credit decisionsInsurance decisions
Investment decisionsRetirement
decisions Estate decisions
Financial Results
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Obtaining Money and Wealth
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Earn wages from employment Save spend less than wages Grow investments
from savings Transfer personal wealth to
business Risk personal wealth for business
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What Determines Personal Income?1 Education 2 Career and drive 3 Relevance to the market 4 Location, demographics, age 5 Level of risk 6 Owner vs. employee
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Investments are specific financialinstruments we use to generate growth and income 1 Checking and savings acct. cash 2 Certificates of deposit 3 Bonds 4 Stocks 5 Mutual Funds 6 Real Estate
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Financial plans are road maps that show you the way and Personal financial statements let you know where you stand financially
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The Interlocking Network of Financial Plans and Statements
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Personal Balance Sheet How much are you worth today? A statement of financial position at a point in time Liabilities + Assets = Net Worth (equity)
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Personal Income and Expense Statement measures of financial performance over a given time period Total income–total expenses=cash surplus (or cash deficit)
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How the Budgeting Process Works Estimate income Estimate expenses Finalize income/expense budgets Deal with deficits
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Use Budgets to Maintain information to monitor
and control finances
Allocate income to reach
goals Implement disciplined spending Reduce needless spending Achieve
long-term financial goals
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In the Next Five Years… Develop financial goals Do income and expense budget Track your net worth to assess financial progress Use a personal finance system Be open and honest about money Save wealth
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21Obtaining a Loan Isn’t Easy
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Getting a loan is based on 1 credit reports 2 employment 3 earnings and 4 personal reputation
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How to Be a Millionaire
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Learn the power of compounding.
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The Snowball Effect
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The power of compounding is a
snowball effect where your earnings generate even more earnings through accumulated interest, dividends, and capital gains – and it will grow faster and faster with time.
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Invest in Roth IRA27
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Consider selling business in an initial public offering (IPO) – the stock market launch transforms the company from private to public to raise expansion capital.
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