1. Personal Financial Planning Chapter One, Section One

2. Personal Financial Planning Defined: spending, saving & investing money so you can have the kind of life you want financial security Goals: are the things you want to accomplish With a good plan you can: know how to use the money you have have less of a chance to go into debt you can’t handle help support a family down the road

3. What is Your Financial ID? Turn to Page 28 in your text Complete in your notebook

4. Financial Planning Process Step One – Determine your current situation Step Two – Develop your financial plan Step Three – Identify alternative courses Step Four – Evaluate your alternatives Step Five – Create and use your financial plan Step Six – Review and revise your plan

5. Financial Planning Process Step One – Determine your current financial situation Income vs. Expenses (a.k.a. budget) Savings Debts Step Two – Develop your financial goals What is your attitude towards money Values – the beliefs and principles you consider important What are your goals for the future (education, family) Spend now or save for the future Determine Needs and Wants Step Three – Identify Your Options Expand current situation Change current situation Start something new Continue with the same course of action Financial Plans Change

6. Financial Planning Process Step Four – Evaluate your alternatives Consider consequences and risks of each decision Turn to Page 8-9 in your textbook Sources of Financial Information – stay up on current events Consequences of Choices – Opportunity Cost – what you give up when you make a decision between two alternatives Opportunity Benefits – (Not in the book) what you gain from a decision between two alternatives

7. Financial Planning Process Understanding Risks Inflation Risk – cost of bread 1930’s to now Interest Rate Risk – cost to borrow could go up or down Income Risk – your income could change (new job, lose of job, etc.) Personal Risk – danger vs. safety (lineman, police, fire vs. secretary) Liquidity Risk – Liquidity: the ability to easily convert your financial resources into cash with a loss in value (car vs. house – which would sell faster?)

8. Financial Planning Process Step Five – Create and use your financial plan Ways to achieve your financial goals Step Six – Review & revise your plan Finances and needs will change as you get older

9. Developing Personal Financial Goals Time Frame Short Term under 1 year (saving for an iPod Intermediate 1+ - 5 years (saving for a down payment on a car) Long-Term 5+ years (planning for retirement)

10. Developing Personal Financial Goals Service vs. Goods What is the difference? Service – a task that a person or a machine performs for you Good – a physical object that is produced and an be weighed or measured

11. Developing Personal Financial Goals Types of Goods Consumable goods: purchases made and use up quickly (shampoo, conditioner, food) Durable goods: expensive items such as a car, used for three or more years (car) Intangible goods – can not be touched and are important to your well being (education)

12. Game Rules Find a partner One piece of paper, one pen per group One person will be the recorder Hint…pick the person that can write the quickest and neatest Folder Paper in Half At the top of column one write: Consumable At the top of column one write: Durable Put your pen down. No writing before or after the time allotted or you will be disqualified!

13. Game Rules You and your partner have three minutes… Make a list of TYPES (categories) of consumable goods and durable goods For every consumable good you must have a durable good for it to count The team with the most will win a homework pass!

14. Activity Turn to Page 12 in your textbook Complete the activity in your notebook

15. Guidelines for Setting Goals Should be realistic Should be specific Should have a clear time frame Should help you decide what type of action to take Turn to Figure 1.2 on page 13 in your textbook

16. $avvy Saver Turn to page 14 in your textbook

17. Influences on Personal Financial Planning Economics: study of decisions that go into making, distributing, and using goods and services Economy: consists of the ways in which people make, distribute, and use goods and services Market Forces Supply: the amount of G&S available for sale Demand: the amount of G&S people are willing to buy Inverse Relationship:  in demand  $ iPods at Christmas 2004  in demand  $ sales

18. Influences on Personal Financial Planning Financial Institutions: Banks, credit unions, savings and loan associations, insurance companies and investment companies Federal Reserve System (FED): central banking org. in the US controls the money supply changes interest rates and has some say in how much we pay for goods and services Global Influences: Take a look at the products that you use, how many say made in ________ (any other country but the US)? We are part of a Global Market All countries want their products sold in other countries

19. Influences on Personal Financial Planning Can anyone tell me what a consumer is?

20. Influences on Personal Financial Planning Economic Conditions: Consumer: person who purchases and uses goods and services Consumer Prices: over time, price of everything goes up (bread 1930’s to now) Inflation – rise in the level of prices for goods and services iPod this year $300, 10% inflation, next year cost $330 More Consumer Spending spending more jobs to meet the demand for goods and services Interest Rates: price paid for use of another’s money Interest on loans Interest from savings accounts

21. Opportunity Costs and Strategies Chapter One, Section Two

22. Question Is it important to start planning your financial future and monitoring your costs at your age now? Why or why not? Answer this question in your notebook

23. Time Value of Money The increase in money because of interest or dividends earned $100 in the bank at 5% interest, in one year you earn $5 interest, The time value of money is the $5 interest you earned. If you had spent that $100 you would not have earned the $5 Calculating Interest: 3 things you need to know 1. Principal: the amount of money you borrow 2. Annual Interest Rate 3. Time your money will be in the account

24. Future Value A.K.A. Compounding Interest The amount your original deposit will be worth in the future Based on earning a specific interest rate over a specific period of time Turn to Page 21 in your text book Look at “Go Figure” at the bottom of the page

25. More Ways to Calculate Interest Future Value of a Series of Deposits Regular deposits, a.k.a. Annuity Present Value of a Single Deposit $ you need to put in now to get a desired amount later. Present Value of a Series of Deposits How much do you need to deposit so you can take a set amount out for a set number of years

26. 8 Strategies for Achieving Your Financial Goals 1.Obtain – money - foundation of financial planning 2.Plan – how will you spend your money 3.Spend – spend less than you make 4.Save – on a regular basis, P.Y.F. 5.Borrow – wisely and only when necessary 6.Invest – two reasons… increase current income for long-term growth 7.Manage Risk – protect if you get hurt or sick (Insurance Coverage) 8.Retire – when, where, how will you spend your time