1. Unit One Financial Planning: Your Roadmap

2. Questions to be answered: What are the five steps in the personal financial planning process? What are the five steps in the personal financial planning process? How do you set “SMART” goals? How do you set “SMART” goals? How do your choices affect your money? How do your choices affect your money? How can money help you live a satisfying life? How can money help you live a satisfying life?

3. What is Financial Planning? Personal Financial Planning is the process of defining goals, developing a plan to achieve them, and putting the plan into action. It is the blueprint (the plan) for handling all aspects of your money, including spending, credit saving, and investing.

4. Note that financial planning is an ongoing thinking process. The plan itself might be in writing, but it can and should change over time as your circumstances in life change. What are the elements of a good financial plan? Note that financial planning is an ongoing thinking process. The plan itself might be in writing, but it can and should change over time as your circumstances in life change. What are the elements of a good financial plan?

5. Five Elements of a Good Plan: 1. Set Goals 2. Analyze Information 3. Create a Plan 4. Implement the Plan 5. Monitor and Modify the Plan

6. Set Goals Most of us do not have enough money to do everything we want. We have to make choices and tradeoffs because of limited amounts of time and money. Most of us do not have enough money to do everything we want. We have to make choices and tradeoffs because of limited amounts of time and money. A good financial plan distinguishes between needs and wants. A good financial plan distinguishes between needs and wants. Needs are essentials, the basics of life. Needs are essentials, the basics of life. Wants simply increase the quality of living. Wants simply increase the quality of living.

7. People define needs and wants differently, depending on their own values. Your values are simply the beliefs and practices in your life that are very important to you. Lots of things may influence your values, such as your family, friends, teachers, church or your work. People define needs and wants differently, depending on their own values. Your values are simply the beliefs and practices in your life that are very important to you. Lots of things may influence your values, such as your family, friends, teachers, church or your work.

8. Examples of Values: Earning good grades Earning good grades Being responsible with money Being responsible with money Being on time for work Being on time for work Telling the truth Telling the truth Spending time with people you love. Spending time with people you love.

9. #1 - Setting Goals A goal is a destination, something you want or need, which you acquire by taking certain steps. It gives direction to your plan of action. One of the most valuable things you can learn to do is identify your goals clearly. A goal is a destination, something you want or need, which you acquire by taking certain steps. It gives direction to your plan of action. One of the most valuable things you can learn to do is identify your goals clearly. To be really effective, goals should always be in writing and should be meaningful to you. To be really effective, goals should always be in writing and should be meaningful to you.

10. “SMART” It’s helpful to define your goals in a “smart” way: It’s helpful to define your goals in a “smart” way: Specific – “I want to graduate from Dickinson State University”. Not “I want to graduate from college.” Specific – “I want to graduate from Dickinson State University”. Not “I want to graduate from college.” Measurable – I need $2500 a semester for tuition. Not “ I need some money for college. Measurable – I need $2500 a semester for tuition. Not “ I need some money for college.

11. Attainable – I’ll save $450 a month to pay for tuition. Not I’ll save money for college cost. Attainable – I’ll save $450 a month to pay for tuition. Not I’ll save money for college cost. Realistic – I will work at the Cenex all summer to make money for college tuition. Not I’ll get a job this summer. Realistic – I will work at the Cenex all summer to make money for college tuition. Not I’ll get a job this summer. Time-bound – I plan to graduate from Dickinson State University within four years of my high school graduation. Not I’ll plan to graduate from college. Time-bound – I plan to graduate from Dickinson State University within four years of my high school graduation. Not I’ll plan to graduate from college.

12. Think of your goals as what you want to be, do or have – in other words where you want to GO. Think of your goals as what you want to be, do or have – in other words where you want to GO.

13. Timelines for Goals Short-term: up to three months Short-term: up to three months Intermediate-term: three months to one year. Intermediate-term: three months to one year. Long-term: more than a year. Long-term: more than a year. Long-term goals require patience to achieve and a willingness to give up something you want now in return for something better later – delayed gratification.

14. #2 - Analyze Information Ask yourself these question: Ask yourself these question: 1.How much do you spend each wk? 2.What do you spend your money on? 3.Do you owe anyone money for all the stuff you have?

15. To help analyze these questions, you can track you cash flow with a Personal Spending Record. To help analyze these questions, you can track you cash flow with a Personal Spending Record. Cash flow – is simply a measure of the money you receive and the money you spend. Cash flow – is simply a measure of the money you receive and the money you spend.

16. #3 – Create a Plan Decision making is the process of considering and analyzing information in order to make a decision. It is time to make some financial decisions and formulate a plan. You have to make decisions based on the values you have and accept the tradeoffs. Choosing one option may mean giving up altogether on another goal. In economic terms, this is call opportunity cost. Decision making is the process of considering and analyzing information in order to make a decision. It is time to make some financial decisions and formulate a plan. You have to make decisions based on the values you have and accept the tradeoffs. Choosing one option may mean giving up altogether on another goal. In economic terms, this is call opportunity cost.

17. #4 – Implement the Plan With your plan in place, all you have to do is make it happen. It takes discipline. With your plan in place, all you have to do is make it happen. It takes discipline. In some form of fashion, you will be using money the rest of your life, so you may as well sharpen your money-handling skills now! In some form of fashion, you will be using money the rest of your life, so you may as well sharpen your money-handling skills now!

18. 3Rs of Money: Reality, Responsibility & Restraint 3Rs of Money: Reality, Responsibility & Restraint Reality: Recognizing that unless you strike it rich somehow, you’ll have limited amounts of time and money to use. Reality: Recognizing that unless you strike it rich somehow, you’ll have limited amounts of time and money to use. Responsibility: If you handle your money wisely, you can do a lot of good for yourself and others. Responsibility: If you handle your money wisely, you can do a lot of good for yourself and others. Restraint: Is when you have self- control to save your money for future goals instead of spending it now. Restraint: Is when you have self- control to save your money for future goals instead of spending it now.

19. #5 – Monitor and Modify the Plan After you create a plan, be aware you may need to change it over time. You will run into unexpected obstacles After you create a plan, be aware you may need to change it over time. You will run into unexpected obstacles Ask yourself these questions: Ask yourself these questions: 1.Are your existing goals still worth doing? 2.Is there a new goal to add to your list? 3.Is there and existing goal you want to drop or change?

20. Now you can see how all these elements combine to affect the financial planning process: your values influence your needs and goals; the decisions you make affect your goals; spending money on your wants may limit your needs; and all of this is your personal financial responsibility. Now you can see how all these elements combine to affect the financial planning process: your values influence your needs and goals; the decisions you make affect your goals; spending money on your wants may limit your needs; and all of this is your personal financial responsibility.

21. Financial planning in a nutshell: Financial planning in a nutshell: Making money work for you to let you lead the kind of life you want. Be careful about getting mixes up and letting money control you. Money is just a means to an end. With a personal financial plan, as you journey through life, rather than wandering aimlessly, you’ll know where you want to go today and tomorrow, and you’ll have a better idea how to get there.