Introduction to Business© Thomson South-Western

ChapterChapterChapterChapter

Money Management and Financial Planning

16-116-1 Personal Financial Statements

16-216-2 Budgeting Techniques

16-316-3 Your Financial Future

1616

Introduction to Business© Thomson South-Western

Chapter 16

Slide 2

LESSON 16-1

Personal Financial Statements

Goals Explain the basics of money

management. Create a personal balance sheet. Develop a personal cash flow

statement.

Introduction to Business© Thomson South-Western

Chapter 16

Slide 3

Key Terms

money management personal assets net worth cash flow statement

Introduction to Business© Thomson South-Western

Chapter 16

Slide 4

MONEY MANAGEMENT BASICS Refers to the day-to-day financial activities

associated with using limited income to satisfy your unlimited needs and wants

Involves getting the most for your money through careful planning, saving, and spending

Involves making and using a plan for spending

Introduction to Business© Thomson South-Western

Chapter 16

Slide 5

SUCCESSFUL MONEY MANAGERS Set goals Make wise decisions Buy wisely Live within their income

Introduction to Business© Thomson South-Western

Chapter 16

Slide 6

>> C H E C K P O I N T

What are some characteristics of a wise money manager?

Introduction to Business© Thomson South-Western

Chapter 16

Slide 7

PERSONAL BALANCE SHEET Assets Liabilities Net Worth

Introduction to Business© Thomson South-Western

Chapter 16

Slide 8

SAMPLE PERSONAL BALANCE SHEET

Introduction to Business© Thomson South-Western

Chapter 16

Slide 9

>> C H E C K P O I N T

What are three main categories of a personal balance sheet?

Introduction to Business© Thomson South-Western

Chapter 16

Slide 10

PERSONAL CASH FLOW STATEMENT Cash inflows Cash outflows Compare inflows and outflows

Introduction to Business© Thomson South-Western

Chapter 16

Slide 11

SAMPLE PERSONAL CASH FLOW STATEMENT

Introduction to Business© Thomson South-Western

Chapter 16

Slide 12

>> C H E C K P O I N T

What do cash outflows represent?

Introduction to Business© Thomson South-Western

Chapter 16

Slide 13

LESSON 16-2

Budgeting Techniques

Goals Identify purposes of a budget. Describe steps for preparing a budget. Describe characteristics of successful

budgeting.

Introduction to Business© Thomson South-Western

Chapter 16

Slide 14

Key Terms

fixed expenses variable expenses allowance budget variance

Introduction to Business© Thomson South-Western

Chapter 16

Slide 15

BUDGET ACTIVITIES

Live within your income Achieve your financial goals Buy wisely Avoid credit problems Plan for financial emergencies Develop good money management skills

Introduction to Business© Thomson South-Western

Chapter 16

Slide 16

>> C H E C K P O I N T

What are the main purposes of a budget?

Introduction to Business© Thomson South-Western

Chapter 16

Slide 17

THE BUDGET PROCESS Set financial goals Plan budget categories

BUDGET CATEGORIES Savings Food Clothing Household Transportation Health and

personal care Recreation

and education Gifts and contributions

Maintain financial records Evaluate your budget

Introduction to Business© Thomson South-Western

Chapter 16

Slide 18

SAMPLE FAMILY BUDGET

Introduction to Business© Thomson South-Western

Chapter 16

Slide 19

>> C H E C K P O I N T

What are eight commonly used budget categories?

Introduction to Business© Thomson South-Western

Chapter 16

Slide 20

CHARACTERISTICS OF AN EFFECTIVE BUDGET Must be realistic Should be flexible Should be evaluated regularly Must be well planned and clearly

communicated Should have a simple format

Introduction to Business© Thomson South-Western

Chapter 16

Slide 21

BUDGETING FORMATS

Software program Handwritten Checkbook Unwritten

Introduction to Business© Thomson South-Western

Chapter 16

Slide 22

SAMPLE INCOME AND EXPENSE RECORD

Introduction to Business© Thomson South-Western

Chapter 16

Slide 23

>> C H E C K P O I N T

What are five characteristics of an effective budget?

Introduction to Business© Thomson South-Western

Chapter 16

Slide 24

LESSON 16-3

Your Financial Future

Goals Describe the financial planning process. Explain actions for implementing a

financial plan. Identify actions for reviewing a financial

plan.

Introduction to Business© Thomson South-Western

Chapter 16

Slide 25

Key Terms

financial plan individual retirement account (IRA) estate planning

Introduction to Business© Thomson South-Western

Chapter 16

Slide 26

ADVANTAGES OF FINANCIAL PLANNING Your financial uncertainties will be reduced. You will gain more control of your financial

activities. Your family and household members will

know more in case they need to assume control of your finances.

Earning, spending, protecting, and saving your resources will be more systematic.

Introduction to Business© Thomson South-Western

Chapter 16

Slide 27

FINANCIAL PLANNING PROCESS1.1. Analyze your current financial condition

2.2. Develop financial goals that are responsive to your vision

3.3. Create your financial plan

4.4. Implement the plan

5.5. Revise your financial plan

Introduction to Business© Thomson South-Western

Chapter 16

Slide 28

FINANCIAL INVENTORY

Careful review of your finances Personal balance sheet Personal cash flow statement Information about current financial position

Income Savings Investments Property

Living expenses Insurance Money owed

Introduction to Business© Thomson South-Western

Chapter 16

Slide 29

PERSONAL FINANCIAL FILING SYSTEM Personal records Housing records Consumer purchase records Insurance records Money management records Tax records Financial services and credit records Investment, retirement, and estate records

Introduction to Business© Thomson South-Western

Chapter 16

Slide 30

FINANCIAL LIFE CYCLE

Teen years Twenties Later Retirement

Introduction to Business© Thomson South-Western

Chapter 16

Slide 31

USING A FINANCIAL PLANNER Questions you might 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?

Introduction to Business© Thomson South-Western

Chapter 16

Slide 32

>> C H E C K P O I N T

List five recommended steps for financial planning.

Introduction to Business© Thomson South-Western

Chapter 16

Slide 33

IMPLEMENT A FINANCIAL PLAN Insure current income

Disability income insurance Unemployment insurance

Plan for future income Social Security Pensions Retirement accounts Annuities

Introduction to Business© Thomson South-Western

Chapter 16

Slide 34

>> C H E C K P O I N T

What are common sources of income during retirement?

Introduction to Business© Thomson South-Western

Chapter 16

Slide 35

REVIEW YOUR FINANCIAL PLAN Revise financial goals Review financial activities Remember to save

Introduction to Business© Thomson South-Western

Chapter 16

Slide 36

>> C H E C K P O I N T

What common activities are needed when reviewing a financial plan?