1. The Importance of Planning
Unit 1
The Importance of Planning

2. My Bucket List Have you ever heard of a bucket list?
What would go on yours?? (write on back)
Volunteers to share
(Activity: Show Me The Money)

3. Learning objectives Understand the importance of setting goals
Identify the steps required in constructing a personal financial plan
Calculate net worth
Understand the difference between saving and investing

4. What is a Plan?
Plan- a detailed proposal/process for doing or achieving something
Financial Plan - The process of defining your financial goals and developing and implementing a strategy to achieve them
Goal- something you are trying to achieve
Experts believe that it is important to continually set goals for yourself and you should write them down.
Studies show that people who write down their goals are more likely to reach them.
Why does this work?

5. The Planning Process 6 step system
Used to develop goals, strategies, and task lists to achieve an objective

6. Steps in the Planning Process
Step 1- Establish a goal
Should be written in SMART format
Specific, Measurable, Attainable, Realistic & Time Bound
Goals can be short, medium, or long term.
Short-term goals: Under 1 year to achieve
Medium-term goals: 1-5 years to achieve
Long-term goals: 5 or more years to achieve

7. I will do better on my report card in the next marking period.
Is this a smart goal??
I will do better on my report card in the next marking period.
Specific
Measurable
Attainable
Realistic
Time Bound

8. Here’s how we can make it smarter
In the next marking period, I will get at least a C on all my math tests, and at least a B on most of my quizzes and homework assignments.
But it's not SMART yet because it has no action plan or benchmarks…

9. Here is a pretty SMART goal:
In the next marking period, I will take careful notes and review them at least two days before tests and quizzes so that I can ask the teacher questions about what I don't understand. I will do my math homework before I do things with friends, and when I hand it in, I will ask the teacher about anything I am not sure about. When I get anything wrong, I will make sure to ask the teacher, or one of my classmates how they got the right answer.

10. Remember…
A goal is an outcome, something that will make a difference as a result of achieving it.
It can't be too ambitious to be out of reach, but also not so simple that it does not challenge.
A goal has to be realistic with a stretch, requiring effort and focus to achieve it.
That's why goals need timeframes and measurable action steps along the way so that we can keep track of progress and make adjustments as necessary.

11. Goal – I want to buy a new car
Smart financial goals
Goal – I want to buy a new car
Smart Goal:
Specific – I plan to save for a down payment on a new car
Measurable – I plan to save $5,000 for a down payment on a new car
Attainable – I plan to save $5,000 for a down payment on a new car by saving $200 from every paycheck
Realistic – It is realistic to save $200 from each paycheck for a down payment on a car because usually waste the money on unnecessary items instead of saving it
Time Bound – I plan to save $5,000 for a down payment on a new car by saving $200 from each paycheck for two years

12. Steps in the Planning Process
Step 2- Gather Information
Determine what it will take to achieve the goal(s) you have set.
Research any information you don’t know
Amount of work may vary in this step
Step 3- Analyze All Your Options
What are the different options you could implement to reach your goal?
What are the pros/cons of each option
Consider what will work best for you

13. Steps in the Planning Process
Step 4- Develop a Strategy
Choose your best option from step 3; determine what will need to get done to implement the plan
Create a step-by-step guide
Step 5- Implement Your Plan
Make a commitment to the strategy you have chosen
Proceed step by step toward your goal

14. Steps in the Planning Process
Step 6- Monitor Your Progress
Review your progress periodically to determine if you need to revise your plan
Stay flexible – it’s ok to have to make adjustments; just don’t lose sight of your end goal

15. Activity: The Planning Process
State exactly what is to be done with the money involved
Specific
Write the exact dollar amount the goal is for
Measurable
Determine how it can be reached, which is often determined by your budget
Attainable
Do not set goal for something unattainable or unrealistic
Realistic
Specifically state when the goal needs to be reached
Time Bound
Remember for SMART Goals…

16. Planning VS Being Impulsive
There is a natural conflict between planning and being impulsive; between pursuing long-range goals and doing what you feel like doing right now.
In the short run planning may involve sacrifice, but in the long run, it gives you more options!
Can you think of someone who is completely impulsive and someone who is a complete planner?
What are some advantages/and or disadvantages of each extreme?

17. Benefits of Having a Plan
Live within your means
Allocate funds to meet expenses
Identify financial priorities
Save and invest to reach financial goals.
Meet financial emergencies and reduce credit use
Reduce uncertainty and conflict about financial affairs
Gain a sense of financial independence and control

18. Benefits of having a plan…
In the short run planning may involve sacrifice, but in the long run can give you more options

19. Aspects That Affect Financial Planning
Values
Personality
Knowledge of Finance
REMEMBER:
It takes more than luck to get what you want out of life.
You have to know what you want and then commit to a plan to meet your goals.
The hazards of not planning include the risk of having a lifestyle of limited choices.

20. Planning for your future
It is important to understand your Financial position in order to make informed decisions.
Before implementing your financial plan, you should first know:
The difference between saving and investing
Time Value of Money
Dollar Cost Averaging
Your Net Worth
The Rule of 72
These calculations/information will help you better understand what you need to do to successfully accomplish your financial goals.

21. Saving vs Investing Short-term Low risk Minimal gains Long-term
Saving- putting money into an account for short-term storage
Investing- committing money to an endeavor with the expectation of growing that amount of money
Short-term
Low risk
Minimal gains
Long-term
Higher risk/ potential for loss
Better gains

22. Time Value of Money
Time Value of Money- the idea that money available at the present time is worth more than the same amount in the future due to its potential earning capacity.
The younger you start investing/saving the more you’ll have at retirement age.

23. Dollar cost averaging
Dollar Cost Averaging- an investment technique of buying a fixed dollar amount of a particular investment on a regular schedule, regardless of the share price.

25. Calculating Net Worth
Assets- items you OWN and that are worth money (valuables)
Liabilities- monies/things you OWE to others (debts)
Net Worth = Assets – Liabilities

26. Example: calculating net worth
A newly married couple has the following assets:
home valued at $250,000
an investment portfolio valued at $100,000
automobiles and other assets valued at $25,000
Their liabilities include:
an outstanding mortgage balance of $100,000
one remaining car loan of $10,000
What is their Net Worth?

27. Answer:
Net Worth = total assets – total liabilities
Net worth = ($250,000 +$100,000 + $25,000) – ($100, $10,000)
Net worth = $265,000
Consistent increases in net worth indicate good Financial health
Important Note: Net worth could be reduced if assets depreciate (lose value)

28. Activity: Spending personality
(Pictures on wall)