Presentation on theme: "16 Money Management and Financial Planning"— Presentation transcript:
1 16 Money Management and Financial Planning C H A P T E R16Money Management and Financial Planning16-1 Personal Financial Statements16-2 Budgeting Techniques16-3 Taxes in Your Life16-4 Your Financial Future
2 KEY TERMSmoney management- the daily financial activities that meet the wants and needs of a person with a limited income.personal assets- anything of financial valueliabilities- debt- anything you owenet worth- personal assets minus personal liabilitiescash flow statement- the monthly inflow of income versus the outflow of expenses
3 SUCCESSFUL MONEY MANAGERS Set goalsMake wise decisionsBuy wiselyLive within their income
4 PERSONAL BALANCE SHEET AssetsLiabilitiesNet Worth
5 PERSONAL CASH FLOW STATEMENT Cash inflowsCash outflowsCompare inflows and outflows
6 16-2 Budgeting Techniques CHAPTER 1616-2 Budgeting Techniques4/16/2017Goal 1 Identify purposes of a budget.Goal 2 Describe steps for preparing a budget.Goal 3 Describe characteristics of successful budgeting.
7 THE BUDGET PROCESS Set financial goals Plan budget categories Maintain financial recordsEvaluate your budgetBUDGET CATEGORIESSavingsFoodClothingHouseholdTransportationHealth and personal careRecreation and educationGifts and contributions
8 KEY TERMSfixed expenses- monthly expenses that do not change from month to month(example- rent or house payment)variable expenses- monthly expenses that change from month to month(example- electricity bill, grocery bills)allowance- the amount of money you plan to use for a certain budget categorybudget variance- the changes from month to month of income or expenses
10 16-3 Taxes in Your LifeGoal 1 Identify the types of taxes paid by consumers.Goal 2 Describe the steps when filing a federal income tax return.Goal 3 Explain tax-assistance sources.Goal 4 Identify common tax-planning strategies.
11 TAXESTaxes- a charge imposed by a government to finance public services4 AREAS OF TAXATIONTaxes on purchasesTaxes on propertyTaxes on wealthTaxes on earnings
12 PREPARING THE FEDERAL INCOME TAX RETURN Step 1: Determine gross incomeStep 2: Calculate adjusted gross incomeStep 3: Subtract deductionsStep 4: Determine exemptionsStep 5: Compute taxable incomeStep 6: Taxes owedStep 7: Make tax payments or ask for a refund or credit
13 Income & Deductions Earned Income- Wages from a job Investment Income- Income from investments such as stocks, bond, and mutual funds.Tax Deductions- Items you can write off from your taxes (example- child care)
14 16-4 Your Financial Future Goal 1 Describe the financial planning process.Goal 2 Explain actions for implementing a financial plan.Goal 3 Identify actions for reviewing a financial plan.
15 KEY TERMSfinancial plan- a report that summarizes your current financial condition while preparing for future expenses.individual retirement account (IRA)- an account set up for retirement that has tax benefits (tax deferred or tax free earnings)
16 DEVOLPING A FINANCIAL PLAN A financial plan is a report thatSummarizes your current financial conditionAcknowledges your financial needsSets a direction for your future financial activitiesFinancial planning includesEvaluating one’s financial positionSetting financial goalsGuiding activities and resources toward reaching those goals
17 FINANCIAL PLANNING PROCESS 1. Analyze your current financial condition2. Develop financial goals that are responsive to your vision3. Create your financial plan4. Implement the plan5. Revise your financial plan
19 USING A FINANCIAL PLANNER Questions to 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?
20 REVIEW YOUR FINANCIAL PLAN Revise financial goalsReview financial activitiesRemember to save and share