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Personal Financial Plan & Management – Financial Management

These financial management chapters detail personal finance, personal financial goal and personal financial plan & management.

What does budgeting balance?

Income and spending

What does liquidity deal with?

Cash excesses or shortages

How can you benefit from understanding P’snl FINN?

Make your own financial decisions
Every spending decision has an opp cost
Judge financial advisor’s advice
Many career opp available

Components of a Financial Plan

1. Budgeting and tax planning
2. Managing your liquidity
3. Financing your large purchases
4. Protecting your assets and income (insurance)
5. Investing your money
6. Planning your retirement & estate


Access to funds to cover any short-term cash deficiencies

Money Management

Decisions regarding how much money to retain in a liquid form
and how to allocate the funds among short-term investment instruments

Credit Management

Decisions regarding how much credit to obtain to support your
spending and which sources of credit to use

Insurance Planning

Determining the types and amount of insurance needed to protect
your assets

Types of insurance protection

1. Protect Assets= Automobile & Homeowner’s
2. Protect Income= Disability & Life
3. Limit potential medical expenses= Health

What should you invest?

Any funds beyond what you need to maintain liquidity should be

What do potential investments include?

Stocks, bonds, mutual funds, and real estate


Uncertainty surrounding the potential return on an investment

Retirement Planning

Determining how much money should be set aside each year for
retirement and how those funds should be invested

Estate Planning

Determining how your wealth will be distributed before or upon
your death

Personal Finance

The process of planning your spending, financing, and investing
so as to optimize your financial situation.

Personal Financial Plan

A plan that specifies your financial goals and describes the
spending, financing, and investing plans that are intended to achieve those

Opportunity Cost

What you give up as a result of a decision

What does an effective financial plan enhance?

Net worth and builds wealth

What does financing focus on?

Obtaining cash for large purchases or repaying loans

How can you protect assets and income?

By using cash for insurance and retirement

What does investing use to build wealth?


Steps to developing your financial plan

1. Establish your financial goals
2. Consider your current financial position
3. Identify and evaluate alternative plans that could achieve your goals
4. Select & implement the best plan for achieving your goals
5. Evaluate your financial plan
6. Revise your financial plan

 Budget Planning

The process of forecasting future expenses and savings.


What you own


What you owe

Net Worth

The value of what you own minus the value of what you owe