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01 Personal Financial Planning

Personal financial planning is important for several reasons: 1) Many people live paycheck to paycheck and have more credit card debt than emergency savings. 2) Having a bad credit history can cost you jobs as many employers now check credit before hiring. 3) Personal financial planning through budgeting, saving, investing and insurance protects your assets and helps ensure steady progress toward your financial goals.

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Grantt Christian
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225 views16 pages

01 Personal Financial Planning

Personal financial planning is important for several reasons: 1) Many people live paycheck to paycheck and have more credit card debt than emergency savings. 2) Having a bad credit history can cost you jobs as many employers now check credit before hiring. 3) Personal financial planning through budgeting, saving, investing and insurance protects your assets and helps ensure steady progress toward your financial goals.

Uploaded by

Grantt Christian
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Why is Personal

Financial Planning
important?
Personal
Financial
Planning
Vocabulary Check!
● Liquid Assets - something owned that can be
rapidly converted to cash without a risk of
significant loss (e.g. Savings account)
● Withhold - refuse to give (something that is due to
or is desired by another)
● Credit History - a record of a borrower's
responsible repayment of debts
Personal Financial Planning
the process of planning every aspect of your personal finances
which includes…
Borrowing or Saving and
Spending
01 02 Financing 03 Investing

04 Insurance 05 Retirement
-- to achieve
highest quality
of life possible
We need personal financial planning
because..

More than About


25% half Many
30%

of high school of consumers of all people employers now


students use a credit indicated that they surveyed who are check your credit
card and more than have more credit working full-time in history before
80% of card debt than the United States offering
undergraduate emergency savings. report that they live employment. Bad
college students paycheck to credit can cost you a
have at least one paycheck. job.
credit card
Having wealth reduces
the need for financial
planning?

Agree Disagree
Limit Debt and use
Devise a budget
credit cards wisely

Personal
Finance
Strategies in
a nutshell
Create an Plan and save for
emergency fund retirement
Step by step decision making
STEP 1: Establish your financial goals.
● Short-term goals are those you plan to accomplish within the next year.
Intermediate-term goals are those you aim to meet within the next one to
five years.
● Long-term goals will take more than five years to accomplish

STEP 2: Evaluate your current financial position.


Cash inflow – income (external sources, savings or investments)
Cash outflows – expense (phone bills and car payments)
● Fixed expense – expenses that remain the same from period to period
● Variable expense – expenses that may change from one period to the
next
Step by step decision making
STEP 3: Identify and evaluate options for accomplishing your goals.
There are several ways to achieve goal.
One decision has a major impact on your financial plan.
STEP 4: Pick the best plan.
Most realistic and works for you
There is an element of risk in all financial decisions. Knowing your tolerance for
risk can help you make the choices that are right for you.
STEP 5: Periodically evaluate your plan.
Monitor your progress because sometimes your plans may falter or get off track.
STEP 6: Revise your financial plan as necessary.
Any revision to one part of your financial plan may impact other aspects of your
plan.
A good financial plan..
include plans for managing
includes creating a your borrowing and a plan to
budget as well as plans make sure you have enough
for managing your insurance to protect your
liquid assets. assets (houses, cars, and
other assets).

spells out every aspect helps ensure that as you


of how much to move forward in your life,
accumulate and grow you are making steady
wealth and provide for progress toward your
emergencies. financial goals.
An understanding of personal finance helps you make
informed decisions about your personal situation,
because every time you decide to buy something, you
incur an opportunity cost.

Benefits of Good Financial Planning


Good financial decisions Good financial decisions
lead to flexibility. allows you to achieve your
true desires in due time
with confidence that you
can pay.

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