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Financial Planning Your Roadmap. What does this mean?

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Presentation on theme: "Financial Planning Your Roadmap. What does this mean?"— Presentation transcript:

1 Financial Planning Your Roadmap

2 What does this mean?


4 Values The beliefs and practices in your life that are important to you.The beliefs and practices in your life that are important to you. Reflect your upbringingReflect your upbringing Change little without constant effortChange little without constant effort FamilyFamily FriendsFriends WorkWork HonestyHonesty Self-RelianceSelf-Reliance IndependenceIndependence ReligionReligion

5 Values strongly influence our spending habits. We dont usually spend our money on things we do not feel are important. Typically, the more important something is, the more we are willing to spend on it. Financial Values

6 NEEDS vs WANTS NEEDS –Essentials…the basics of life –Food –Clothing –Shelter

7 NEEDS vs WANTS WANTS –Simply increase the quality of living

8 What is a goal? A written statement of something a person wants or needs to accomplish. –Examples Graduate from high school Earn a college degree Buy a car Get a job Lose 15 pounds

9 Why Set Goals? Would you set out on a cross-country adventure without a road map? Setting goals are like a road map –Provide direction –Focus on the important things –Keep end results in mind

10 Michael Phelps won the gold medal and set a world record in the Mens 200 meter freestyle with a one minute 42.96 seconds

11 Time-bound Goals Short Term Goals –Present to 6 months Improve grades at school Make the basketball team Long Term Goals –6 month and longer Attending college Buy a new car THIS WILL VARY AMONG RESOURCES

12 Smart Goals S pecific-S pecific- State exactly what is to be done with the money. M easurableM easurable-Write the exact dollar amount A ttainableA ttainable- How can it be reached R ealisticR ealistic- Do not set goals for something unrealistic T ime-boundT ime-bound- When will the goal be met

13 Whats Missing? Financial Goal #1Financial Goal #1: I plan to save $5,000 for college living expenses in four years. Measurable Attainable Specific Financial Goal #2 Financial Goal #2: I plan to save for a new computer by saving $150 each month for one year. Financial Goal #3 Financial Goal #3: I plan to save $2,500 by saving $105 each month for 2 years

14 Whats Missing? (continued) Financial Goal #4Financial Goal #4: I plan to save $1,500 to buy a used car by saving $75 from each paycheck. Time Bound Realistic Financial Goal #5: I plan to save $2,000 to pay for a new computer by saving my whole paycheck for the next 6 months

15 Decision Making The process of gathering and analyzing information in order to make a decision.

16 Factors that influence Decisions Values Peers Habits Consequences Family Age Feelings (love, rejection, anger) Risks

17 Steps for Decision Making Set Goals Analyze Information Create a Plan Implement the Plan Monitor and Modify the Plan Source: NEFE

18 The 3 Rs of Money RealityReality –Limited amount of time and money to use Responsibility-Responsibility- Handle money wisely RestraintRestraint – Save your money for a future goal.

19 Types of Influences on Financial Behavior CulturalCultural –Language, the way someone is raised, geographic location. SocialSocial –Peer pressure, fads, marketing, advertising EmotionalEmotional –Binge spending, comfort shopping, fear of making a decision

20 Peer Pressure The influence others have on an individuals personal decisions.

21 Forms of Peer Pressure as it Relates to Purchasing Decisions Friends Newspapers Magazines Telephone Directories Direct Mail Commercials Catalogs Radio Advertisements

22 Emotional Factors Related to Peer Pressure Gossip Acceptance Disapproval Insecurities Boyfriend/Girlfriend Sarcasm Fear Clubs Athletics Cliques Rich/Poor

23 Scarcity Scarcity is an economic principle stating that because of limited resources, an economic system cannot possibly produce all the goods and services that people want; therefore, choices must be made about how the limited resources will be used. -Consumer Economics & Education, Glencoe, 2003

24 Marketing, Advertising and Sales Strategies/Techniques People who sell products and services are fishing for customers. They lure them in with sales, coupons, and other enticements. Unlike fish, consumers can benefit in this situation – if they know how to take advantage of special purchasing opportunities.

25 Examples of Marketing, Advertising and Sales Strategies Clearance Sales Holiday Sales Coupons Rebates Sweepstakes Contests Sales People Attractive Décor Background Music Items purchased most often are in back of store (bread/milk) Most profitable items are given prominent positions.

26 Opportunity Cost Refers to what a person gives up when a decision is made. This cost, often called a trade-off, may involve one or more of your resources: Time Money Effort Watch Opportunity Cost Clip

27 Financial Planning The process of: defining goals developing a plan to achieve them Putting the plan into action

28 Benefits of Having a Financial Plan? You have more money and financial security. You know where to use money to achieve your goals. You have less chance of going into debt you cannot handle. You can help your partner and support children if you have a family.

29 How do I make a Financial Plan? 1.Determine your current financial situation. Make a list of items that relate to your finances: Savings/Investments Monthly Income (Job Earnings, Allowance, Gifts, Interest) Monthly Expenses Debts

30 How do I make a Financial Plan? 2.Develop your financial goals. Consider your attitude toward money. Ask yourself the following: How do I determine if it is more important to spend money now, or save it for the future? How do your personal values affect your financial decisions?

31 How do I make a Financial Plan? 3.Identify your options. Expand the current situation. Change the current situation. Start something new. Continue the same course of action.

32 How do I make a Financial Plan? 4.Evaluate your alternatives. Consider the risks and consequences of each decision you make. Be aware of all sources of financial information. Evaluate consequences of choices, both good and bad. Understand risks involved with choices.

33 How do I make a Financial Plan? 5.Create and use your financial plan of action.

34 How do I make a Financial Plan? 6.Review and revise your plan. As we get older and our circumstances, our finances, needs, and wants will change, therefore, our financial plan must be flexible as well.

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