PERSONAL

FINANCIAL
MANAGEMENT

FOR THE SPECIAL

DEVELOPMENT
INITIATIVE SECRETARAIT
What’s your take?
 Personal financial planning
typically involves creating a
personal financial
sustainability plans
including personal
budgeting, planning for
taxes, setting up savings
and retirement benefit
plans and developing a debt
management and recovery
plans.
The Personal Financial Landscape…
MENU
Introduction

What Is Personal Financial Management (PFM)?

Financial planning in 7 steps

The “Future-Today” Spending Formular, cont’d

Signs of Poor Financial Planning Behaviours…

The Permanent Wealth Ratio, PWR Concept

Conclusion
Introduction
THE YOUNG-AGED 5w QUESTIONS?
CATEORIES OF PERSIONERS
What Is Personal
Financial
Management (PFM)?
Personal finance is about managing your
budget and how best to put your money to
work to realize your financial independence
and goals.
Personal Finance
 #1 Income
• Income refers to a source of cash • Hourly wages

inflow that an individual receives • Pensions

and then uses to support • Dividends

themselves and their family. It is • These sources of income all
the starting point for our financial generate cash that an individual
planning process. can use to either spend, save, or
• Common sources of income are: invest. In this sense, income can
• Salaries
be thought of as the first step in
• Bonuses
our personal finance roadmap.
 #2 Spending
• Spending includes all types of expenses an • Food
individual incurs related to buying goods and • Entertainment
services or anything that is consumable (i.e.,
not an investment). All spending falls into two • Travel
categories: cash (paid for with cash on hand) • Credit card payments
and credit (paid for by borrowing money). The
majority of most people’s income is allocated• The expenses listed above all reduce the amount
to spending. of cash an individual has available for saving and
investing. If expenses are greater than income,
• Common sources of spending are: the individual has a deficit. Managing expenses
• Rent is just as important as generating income, and
typically people have more control over their
• Mortgage payments discretionary expenses than their income. Good
• Taxes spending habits are critical for good personal
finance management.
 #3 Saving
• Savings bank account
• Saving refers to excess cash that is
• Checking bank account
retained for future investing or
spending. If there is a surplus between • Money market securities

what a person earns as income and • Most people keep at least some savings
what they spend, the difference can be to manage their cash flow and the short-
directed towards savings or term difference between their income
investments. Managing savings is a and expenses. Having too much savings,
critical area of personal finance. however, can actually be viewed as a
• Common forms of savings include: bad thing since it earns little to no
return compared to investments.
• Physical cash
 #4 Investing
• Investing relates to the purchase of assets
• Real estate
that are expected to generate a rate of
return, with the hope that over time the • Private companies

individual will receive back more money • Commodities

than they originally invested. Investing • Art / Farms / Science
carries risk, and not all assets actually end
up producing a positive rate of return. This• Investing is the most complicated area
is where we see the relationship between of personal finance and is one of the
risk and return. areas where people get the most
professional advice. There are vast
• Common forms of investing include:
differences in risk and reward between
• Shares / Stocks
different investments, and most people
• Bonds seek help with this area of their financial
• Mutual funds plan.
Commodities
#5 Protection
Financial planning in 7 steps

• Personal financial management is often used to refer to ways of managing

your personal finances, it is also an actual term often known by its acronym,
PFM.
• A financial plan paints a comprehensive picture of your current finances,
your financial goals and any strategies you've set to achieve those goals.
Good financial planning should include details about your cash flow,
savings, debt, investments, insurance and any other elements of your
financial life.
THE CASHFLOW QUARDRANT
The “Future-Today” Spending Formular, cont’d
The “Future-Today” Spending Formular, cont’d
 1. Set financial goals
• A good financial plan is guided by your financial goals. If you approach your
financial planning from the standpoint of what your money can do for you —
whether that's buying a house or helping you retire early — you'll make saving feel
more intentional.

• Make your financial goals inspirational. Ask yourself: What do I want my life to
look like in five years? What about in 10 and 20 years? Do I want to own a car, or a
house? Do I want to be debt-free? Pay off my student loans? Are kids in the
picture? How do I imagine my life in retirement?

• Having concrete goals can make it easier to identify and complete the next steps,
and provide a guiding light as you work to make those aims a reality.
Signs of Poor Financial Planning Behaviours…
Signs of Poor Financial Planning Behaviours…
2. Track your money
• Get a sense of your monthly cash flow — what’s coming in and what’s going
out. An accurate picture is key to creating a financial plan and can reveal ways
to direct more to savings or debt pay-down. Seeing where your money goes can
help you develop immediate, medium-term and long-term plans.

• For example, developing a budget is a typical immediate plan. NerdWallet

recommends the 50/30/20 budget principles: Put 50% of your take-home pay
toward needs (housing, utilities, transportation and other recurring payments),
30% toward wants (dining out, clothing, entertainment) and 20% toward
savings and debt repayment. Reducing credit card or other high-interest debt is
a common medium-term plan, and planning for retirement is a typical long-
term plan.
The Need for Personal Financial Planning…
Secure the future your family
❑ Provide a safe and secure future to your family.
❑ It strengthens you to face the adversities in life
without disturbing the overall financial structure
of your life e.g. insurance covers
❑ It also offers a solid financial platform for your
family members to thrive on in the future.
Investments
❑ It helps to cover personal circumstances, risk
appetite, and future objectives which guides to
select the right investments that suit perfectly
with personal requirements and objectives;
❑ Helps one to plan and create financial assets for
the future.
The Need for Personal Financial Planning…
3. Get your
employer match
THE PERMANENT WEALTH RATIO, PWR CONCEPT

The rationale for this ratio is to find out if one’s

portfolio and passive income (the permanent) will
equal or exceed his/her total expenditure for the
period.
A ratio of 1 or more indicates a permanent wealth
or ability to continue to maintain current living
style after retirement.

The question then is…

What is your permanent wealth
ratio?
How long can you maintain your
current living style or standard after
tomorrow?
THE PERMANENT WEALTH RATIO, PWR CONCEPT
4. Plan for emergencies
• The bedrock of any financial plan is putting cash away for emergency
expenses. You can start small — GHS500 is enough to cover small
emergencies and repairs so that an unexpected bill doesn’t run up credit
card debt. Your next goal could be GH1,000, then one month’s basic living
expenses, and so on.
• Building credit is another way to shock-proof your budget. Good credit
gives you options when you need them, like the ability to get a decent
rate on a car loan. It can also boost your budget by getting you cheaper
rates on insurance and letting you skip utility deposits.
5. Tackle high-interest debt
• A crucial step in any financial plan: Pay down “toxic” high-
interest debt, such as credit card balances, payday loans, title
loans and rent-to-own payments. Interest rates on some of
these may be so high that you end up repaying two or three
times what you borrowed.
• If you’re struggling with revolving debt, a debt consolidation
loan or debt management plan may help you wrap several
expenses into one monthly bill at a lower interest rate.
 6. Invest to build your savings
• Investing sounds like something for rich people or for when you’re established in your career
and family life. It’s not.

• Investing can be as simple as putting money in a 401(k) and as frictionless as opening a

brokerage account (many have no minimum to get started). Financial plans use a variety of
tools to invest for retirement, a house or college:
• Employer-sponsored retirement plans. If you have a 401(k), 403(b) or similar plan, gradually expand your
contributions toward the IRS limit of $20,500 per year in 2022. If you’re 50 or older, the limit goes up to
$27,000.
• Traditional or Roth IRA. These tax-advantaged investment accounts can further build retirement savings by
up to $6,000 a year in 2022 (or $7,000, if you are over 50). This NerdWallet IRA guide can help you choose
the right type of IRA and show you how to open an account.
• 529 college savings plans. These state-sponsored plans provide tax-free investment growth and
withdrawals for qualified education expenses.
7. Protect and grow your financial
well-being
Conclusion

This Photo by Unknown Author is licensed under CC BY

Going Forward – Planning Personal Finances
Going Forward – Planning Personal Finances
A financial plan isn’t a static
document — it's a tool to
track your progress, and one
you should adjust as your life
evolves. It's helpful to
reevaluate your financial
plan after major life
milestones, like getting
married, starting a new job,
having a child or losing a
loved one.
Food 4 Thought!
 CONCLUSION

https://youtu.be/xJ4upCSNgDE

Credit: WHY YOU ARE NOT RICH AS YOU SHOULD BE by Joseph Kyei Ankrah
 A financial plan isn’t a static document — it's a tool to

Summary track your progress, and one you should adjust as your
life evolves. It's helpful to reevaluate your financial plan
after major life milestones, like getting married, starting
a new job, having a child or losing a loved one.
Thank You

www.yennob.com