Goals: Describe the financial planning process. Explain action for implementing a financial plan. Identify actions for reviewing a financial plan.

Developing a financial plan  Financial plan- is a report that summarizes your current financial condition, acknowledge your financial needs, and sets a direction for your future financial activities.  Financial planning includes evaluating one’s financial position, setting financial goals, and guiding activities and resources toward reaching goals. Financial planning advantages:  Your financial uncertainties will be reduced.  You will gain more control of financial activities.  Your family and household members will know more about your financial situation in case they need to assume the control of your finances.  Earning,spending,protecting, and saving your resources will be more symmetric.

Financial planning process 1. Analyze your current financial condition. You should create a balance sheet and a cash flow chart. 2. Develop financial goals that are responsive to your vision. What short- term and long- term goals do you have? How much money will you need and when? 3. Create your financial plan. This activities will require that you plan various actions for saving and spending goals. 4. Implement the plan. This may involve the buying or selling property or investment, moving bank accounts, acquiring insurance, or any number of financial activities. 5. Revise your financial plan. As time goes on frequently evaluate and revise your financial plan.

Financial inventory  A financial inventory will usually include the creation of a personal balance sheet and cash flow sheet.  This process will provide information about your current financial position in terms of income, savings, investments, property, living expenses, insurance and money owed.

Personal financial filing system  To keep your financial inventory and other records in order you should create a personal filing system.  These files should contain all the documents and records related to contracts, bills, receipts, banks balance, and legal papers.

Financial life cycle  Most people’s lives follow a predictable pattern called a life cycle.  Each stage in life is distinguished by unique characteristics, requirements, and expectations.

Using a financial planner  Questions you might ask when choosing a financial planner should include:  What experience and training do you have?  Are you willing to supply references from past clients?  How are fees determined?

Implement a financial plan  To implement your plan you may need to move your savings to an account in which you will earn higher interest rate. You may begin to work more hours at your part-time job to earn more money.

Insure current income  Protecting your income so that it contributes to your goals is a key financial planning action.  To replace income that is lost when you cannot work because of an illness or injury you can purchase disability income insurance.  To reduce financial hardships of unemployment more states have an unemployment insurance.

Plan for future income  A key form of income protection comes through the federal government social security system called retirement, survivors, and disability insurance.  A pension is a series of regular payments made to a retired worker under an organized plan.  Individuals retirement account (IRA)- a tax sheltered retirement plan in which people can annually invest earnings up to certain amount an amount of money an insurance company pays to a person who has previously deposited money with the company is called an annuity.

Revise financial goals  Once you have an understanding of changes in your financial plan or personal situations you should consider changes in your financial goals.  Often short- term goals may need to be given up in order to achieve long-term goals.

Review financial activities  Changes in your goals require changes in spending and saving habits.  Estate planning-involves the accumulation and management of property during one’s lifetime and the distribution of one’s lifetime and the distribution of one’s property at death.

Remember to save and share  Every decision you make will affect both current spending and long term financial security.  Your budget and spending activities should also involve sharing some resources.  This may involve religious donations or contributions to local and global organizations that provide food, housing, and other necessities to people in need.

16-3 assessment  A common source of retirement income is a. Disability income insurance b. A mortgage c. Pensions d. Unemployment insurance  A long term financial goal usually involves a. Less than 2 years b. Buying with a credit card c. Using the service of a financial planner d. Saving over many years