Personal Financial Plan & Management – Finance

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


Liquidity

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
invested


What do potential investments include?

Stocks, bonds, mutual funds, and real estate


Risk

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
goals.


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?

Cash


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.


Assets

What you own


Liabilities

What you owe


Net Worth

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


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