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© Goodheart-Willcox Co., Inc.. 6 Personal Finance: An Overview.

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Presentation on theme: "© Goodheart-Willcox Co., Inc.. 6 Personal Finance: An Overview."— Presentation transcript:

1 © Goodheart-Willcox Co., Inc.

2 6 Personal Finance: An Overview

3 Objectives Prepare a _______ tailored to income and needs. Prepare __________and ____worth statements. __________family finances for different stages in the life cycle. Give examples of economic, demographic, cultural, and technological ________that can impact financial planning. continued

4 Objectives Explain ways to deal with a financial_______ Identify important financial and legal ______________to keep on hand.

5 Preparing Financial Statements Financial planning enables you to –_–________important_________ –a–achieve a sense of financial ________for life Financial security is the ability to ________ essential ______without taking on more debt than you can repay continued

6 Preparing Financial Statements Financial __________is –h–having a ______understanding of _________and ______needed to manage financial resources –B–Being ______of and knowledgeable about financial management_______ –F–Feeling _____in your _________ to make your resources work for you continued

7 Preparing Financial Statements Financial statements include –_–__________ –_–______ ___________statement –_–________________statement

8 Tailoring a Budget to Income and Needs A __________helps you manage –_–_________and ____________ –_–______-to-day expenses Creating a basic budget involves ________steps

9 1. Establish Financial_______ _____your financial _______ Your goals will change over time

10 2. _______and Total Your Income _________a budget_______ _________ _______ from each source ______the estimated income

11 3. ________and Total Your______ _______expenses –_–_____ ____ _______ each budget period –a–are often the ______or nearly the same amount from month to month –i–include payments for_____, _________, _________, ________premiums, and auto and other________ continued

12 3. Estimate and Total Your Expenses _________expenses –C–Can _______from month to month, both in amount and time to pay –c–can often be pared down or_____ –i–include payments for______, _________, _______expenses, ____________expenses continued

13 3. Estimate and Total Your Expenses Use a _____to estimate and total expenses

14 Building Savings into Your Budget Build _______into a budget for –U–Unexpected ___________: medical expense, car______, a possible period of______________ –m–medium- and ______-term goals –i–investments to _________your financial circumstances

15 Charitable Giving as an Expense Budget for philanthropy by giving to _________ charities Making _________may lower______

16 4. Analyze Current Income and Spending Subtract ________from_______ If the number is________, you have money left over for_____ If the number is 0 or________, find ways to increase _______or cut__________ continued

17 4. Analyze Current Income and Spending Ways to increase ________: –H–Handle more ____________at home to possibly increase your_________ –G–Get a part-time ____ –I–If you work, negotiate a _____ or increased ______ continued

18 4. Analyze Current Income and Spending Ways to reduce _______: –R–Reduce or cut ____________ expenses –R–Reduce ____ and ________ expenses –C–Cut expenses unrelated to goals and __________

19 5. Prepare a Trial Budget Use goals, income, and expenses Use ________ expenses

20 6. Put Your Budget into Action Fill in actual amounts for income and expenses If actual amounts exceed budgeted amounts, identify the cause Revise budget using actual costs Study budget before making financial decisions

21 7. Evaluate Your Budget Periodically Is your _______ working? Are you reaching ________ goals and setting new ones? Are you _________ your spending? Has your income or spending _______ changed? Do ____ changes call for adjustments?

22 Preparing a Cash Flow Statement Shows real ______ and ________ Inflow is income; _______ is _________ Prepare at end of ________ period continued

23 Preparing a Cash Flow Statement By _________ income and expenses, you get a good picture of your _________ patterns

24 Preparing a Net Worth Statement Net ______ = assets – liabilities –_–________ net worth lets you meet your financial _________ and goals, and __________ wealth –N–Negative net worth can be _________ by reducing expenses or _________ income continued

25 Preparing a Net Worth Statement This measures your ________ standing at a specific point in _____

26 Assets Liquid assets are easily ________ to cash –_–_____, money in savings Investment assets are _______ funds set aside for long-term goals –S–Stocks, ______ Use assets are _______ goods –A–Auto, furniture

27 Liabilities Current ________ are items that must be paid soon, usually within a year –_–________ bill, taxes, _________ bill Long-term _________ are obligations paid over a longer period of time –M–Mortgage, student loan

28 Planning Family Finances Factors affecting adult budgeting decisions are –a–age –s–stage in the family life cycle Families can skip, overlap, or repeat family life cycle stages continued

29 Planning Family Finances Family life cycle_________ –_–_________ –_–__________ –_–___________ –_–___________ –_–___________

30 Beginning Stage _______ _______ from parents, obtain higher education,_______, start jobs and_________ _________: education, college loans, home down payment, auto, home furnishings, insurance

31 Expanding Stage Job___________, increasing income, increasing responsibilities, childbirth, and parenting Expenses: child-related costs, increased _________protection, increased housing expenses

32 __________Stage _______school-age children and___________, climbing income and expenses Expenses: child- and ______-________ costs,_______ ______, retirement planning

33 _________of children from home, peaking earnings, aging parents Expenses:________, retirement savings, costs of caring for _______ ________

34 In Your Opinion Which stages of the family life cycle can you recognize in your own family’s history? Were any stages skipped or repeated?

35 _______Stage ___________, earnings drop, “_______ _____”, birth of grandchildren, caring for elderly parents, estate planning __________: medical costs, insurance, travel, costs of caring for elderly parents Security at this stage depends on earlier planning

36 Variations in the Cycle _______and ________couples _____the expanding, developing, and launching stages Single parents who ________may _______stages with new spouses continued

37 Variations in the Cycle continued

38 Variations in the Cycle Single-parent ______-headed families often have ____ _______, less savings After separation and divorce, income often falls while _____ _____________

39 Financial Decisions in a Changing World Other forces impacting financial decisions: –_–__________factors –_–__________ factors –_–___________factors –_–____________ factors Financial planning and saving help people cope with economic challenges

40 The Economy and Your Finances During ______economic______, –c–consumers and business owners are___________ –m–most people who want _____can find them –_–_______and __________ rise –p–people save and ________for the future continued

41 The Economy and Your Finances During a_________, –p–people are_____________ –p–people fear or experience ___ ______incomes stagnate –p–people spend less; _______ ________ continued

42 The Economy and Your Finances During___________, –_–______ ______ _________than income –m–money buys_______ –p–people cannot buy or save as much

43 Demographics and Your Finances Demographic _______that impact the economy and people’s finances –A–An aging population –C–Changing job market –R–Rising educational requirements for jobs –M–More young adults living with their parents

44 Culture and Your Finances _________ethnic, cultural, religious diversity, especially in ______areas More relationships and marriages between people of different backgrounds Cultural and ethnic _________can affect financial decisions

45 Technology and Your Finances New technology can have financial impacts Example: _____________ advances led to longer lives and the ______for more__________ continued

46 Technology and Your Finances Positive impacts of advanced technology: –N–New markets in which to buy and sell –W–Wider _________of goods and services –_–_______ __________ goods and services –N–New_______ –N–New money management________ –E–Easy ________to information continued

47 Technology and Your Finances _______created by advanced technology: –O–Offshore____________—businesses move factories and jobs to other countries to benefit from cheap labor and weaker government regulations –A–American workers competing for jobs with lower-paid workers may ______ ___, benefits, or take pay cuts

48 Working Through Financial Problems To __________ a financial_______, –g–get the best ________and job training possible –K–Keep _____under __________ –C–Create ________ _______; save regularly –_–_______taking excess ________ –G–Get ___________protection –_–_______finances with household members

49 Unexpected Crisis Some crises ________ ____ _________ or prepared for in advance continued

50 Unexpected Crisis Causes of a family crisis include –j–job loss –s–separation and divorce –d–death –d–disability –s–serious illness –n–natural disaster continued

51 Unexpected Crisis To cope with a family crisis –d–discuss problem with adult members of household –l–list your resources –m–minimize negative financial consequences –g–get the help of professionals

52 Keeping Important Documents Keep documents and papers necessary for financial and legal transactions Develop a recordkeeping system

53 Key Lists to Keep Current and Available _______and _________ accounts Credit card and _______accounts ______Personal identification numbers) ___________and investment records _______and trusts _________policies Loan________, including mortgage continued

54 Key Lists to Keep Current and Available ______records Property ______and titles ____________plans and employee benefits documents ______Security and Medicare records ________, possessions, and _________ Product information and_________ Instructions for management of your affairs

55 Scheduling Bills Set aside a specific _____to put _____as they arrive If you don’t receive an expected bill, _______the business right away Keep track of _____dates Set a ______ ______for bill paying Pay bills ___the ______they are due

56 Keeping Budgeting Records Your files should contain records related to income, spending, and savings Keep _________for –_–_______expenses –_–__________you may want to________ –p–purchases that may need ________service

57 Central Ideas of the Chapter Enjoying financial security throughout life is an achievable goal. Budgets and other financial planning tools can help people achieve financial security.

58 Glossary of Key Terms budget. A spending plan for the use of money over time based on goals and expected income. cash flow statement. A summary of the amount of money received as well as the amount paid out for goods and services during a specific period. Back

59 Glossary of Key Terms demographics. The statistical characteristics of the population. expense. The cost of a good or service a person buys. family crisis. A major problem that impacts the future of the family and its lifestyle. Back

60 Glossary of Key Terms family life cycle. The stages of change a family passes through from formation to aging. financial literacy. The understanding of the basic knowledge and skills needed to manage financial resources. fixed expense. A set cost that must be paid each budged period. Back

61 Glossary of Key Terms income. Any form of money a person receives from various sources. liability. A financial obligation that a person currently owes or will owe in the future. net worth. The difference between what a person owns and owes. Back

62 Glossary of Key Terms net worth statement. A written record of a person ’ s current financial situation. philanthropy. The act of giving money, goods, or services for the good of others. recordkeeping. The process of setting up and maintaining an organized system for your financial affairs. Back

63 Glossary of Key Terms variable expense. A cost that changes both in the amount and time it must be paid. wealth. An abundance of assets that are accumulated over time. Back

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