Do you have clear financial goals? Do you know if you have enough money to buy a car or house, if you can afford to take a cut in pay in order to go back to school, if you will have enough money to retire? Do you know how much tax you will be expected to pay this year and next, or what you might be able to do right now that will lower your tax long into the future? Do you have enough insurance? Have you developed a household budget and are you sticking to it?
2. The Role of Personal Financial Planning
To manage income and expenses.
To create an awareness of your current financial
status.
To plan for the future by developing goals and devising
ways to achieve those goals.
To provide a system of evaluation and revision for your
financial progress.
3. Why Do You Need a Personal Financial Plan?
For most people it is
easier to spend than
save.
To track your expenses,
so you don’t spend more
than you think you’re
spending.
To retire someday.
4. Why Should You Develop a Personal Financial
Plan?
It helps you achieve your financial goals.
It helps you achieve financial independence.
It helps you understand where all your money is
spent.
It may even help you support those that have
supported you.
5. Why Isn’t Personal Financial Planning Easy?
Some people are uncomfortable discussing financial matters, the
“fear of finance.”
Motivation and time is required to complete an accurate plan.
Good record keeping is necessary both before and during the
planning period.
6. What Can You Accomplish As a Result of This
Course?
Manage the unplanned.
Accumulate wealth for special
expenses.
Save for retirement.
“Cover your assets.”
Invest intelligently.
Minimize your payments to
Uncle Sam.
7. The Personal Financial Planning Process
Step 1: Evaluate Your Financial Health
Step 2: Define Your Financial Goals
Step 3: Develop a Plan of Action
- Flexibility, Liquidity, Protection, Minimization
of Taxes
- Consider Your Goals
Step 4: Implement Your Plan
Step 5: Review Your Progress, Reevaluate,
and Revise Your Plan
8. Step 1: Evaluate Your Financial Health
Evaluate your current
situation: income, spending,
wealth
Assess your whole financial
picture
9. Step 2: Define Your Financial Goals
Specifically define and write down your
financial goals to reflect your financial and
life situation.
Attach a cost to each goal.
Set a date for when the money is needed to
accomplish the goal.
10. What Are the Time Horizons for Financial Goals?
Short-term goals can be accomplished within a 1-
year period .
Intermediate-term goals take 1-10 years to
accomplish.
Long-term goals take more than 10 years to
achieve.
11. Goals: The Cornerstone of a Financial Plan
Goals keep the future in mind by reminding you of the rewards.
Goals entice you to keep the plan in effect.
Goals provide tangibility for the question, “Why?”
12. Step 3: Develop a Plan of Action
Flexibility -- The ability for
your plan to change as your
situations or goals change.
Liquidity -- Your ability to
convert noncash assets into
cash with relative ease and
speed.
13. Step 3: Develop a Plan (cont’d)
Protection -- Your ability to meet the
unexpected large expenses without
destroying your plan.
Minimization of Taxes -- Your ability to pay as
little as possible to Uncle Sam.
14. Step 3: Develop a Plan (cont’d)
Consider future needs:
- Create a budget
- Determine investment strategies
- Plan for big-ticket purchases
- Plan for managing debt
- Plan for insurance
- Plan for the expense of children
- and college
- Plan for retirement
- Plan for estate transfer
15. Step 4: Implement Your Plan
Use common sense and moderation; don’t force
yourself to track every penny.
Remain positive about your plan; use it as a
roadmap.
Stay on track after the detours; rewards await
you.
16. Step 5: Revise Your Plan
Periodically review your progress to see if any
fine tuning needs to be done.
Make sure that your plan still matches your
goals.
Be prepared to start over if your plan no longer
meets your needs.
17. The Life Cycle of Financial Planning
Stage 1: The Early Years -- A Time of
Wealth Accumulation
Stage 2: Approaching Retirement -- The
Golden Years
Stage 3: The Retirement Years
18. Stage 1: The Early Years -- A Time of Wealth
Accumulation
Develop your savings plan.
Set your initial goals of all
lengths.
Establish your long-range
investment strategy.
19. Stage 2: Approaching Retirement -- The Golden
Years
Realize intermediate-term
goals that were established
during Stage 1.
Re-evaluate the plan to match
current goals.
Plan for retirement.
20. Stage 3: The Retirement Years
Reduce investment risk
Concentrate on
preservation rather than
growth of assets
Plan for the transfer of your
estate
21. Managing Your Career
Find a career path for the rest of your life
- Work that is enjoyable and satisfying
- Adequate financial support
- Balance between work and personal life
22. Deciding On A Career
Conduct a self-assessment
Research academic and career
alternatives that match your skills and
interests
Talk to people in the career field
Make a decision and start work on your
future
23. Getting A Job
Start your job search in summer, before your
senior year
- Develop your resume before fall
- Starting early tells employers you are
serious and organized
- Recruiting cycles often start in fall
24. Getting A Job (cont’d)
Prepare for the interview
- Practice
- Learn about the company before the
interview
- Prepare: rest, dress, arrive early, make a
good impression
- Thank the interviewer at the close; follow-
up with a letter
25. Building Job Security
Keep up, with education and new skills
Do good work
Match your image to that of the company
Know and use the power structure
Take new assignments and make others
aware of your work
Be loyal and supportive of your boss
Learn to network, in case you need another
job
26. Your Income: What Determines It
Earnings determine standard of living.
Education is the key factor in determining
income level.
70% of wealthy householders finished
college.
28. The 15 Axioms of Personal Finance
Axiom 1: The Risk-
Return Tradeoff
Axiom 2: The Time
Value of Money
Axiom 3: Diversification
Reduces Risk
Axiom 4: All Risk Is Not
Equal
29. The 15 Axioms of Personal Finance (cont’d)
Axiom 5: The Curse of Competitive Investment
Markets
Axiom 6: Taxes Affect Personal Finance Decisions
Axiom 7: Stuff Happens, or The Importance of
Liquidity
30. The 15 Axioms of Personal Finance (cont’d)
Axiom 8: Nothing Happens
Without a Plan
Axiom 9: The Best
Protection is Knowledge
Axiom 10: Protect Yourself
Against Major Catastrophes
31. The 15 Axioms of Personal Finance (cont’d)
Axiom 11: The Time Dimension of Investing
Axiom 12: The Agency Problem-- Beware of
the Sales Pitch
32. The 15 Axioms of Personal Finance (cont’d)
Axiom 13: Pay
Yourself First
Axiom 14: Money
Isn’t Everything
Axiom 15: Just Do
It!
33. Summary
Build your financial future around this text and a financial
plan:
- Manage the unplanned -- financial planning withstands
minor setbacks
- Accumulate wealth -- financial planning maps out
strategies for meeting your goals
- Save for retirement -- financial planning helps you
determine the costs of retirement
34. Summary (cont’d)
- “Cover your assets” -- financial planning includes
protecting your assets with insurance
- Invest intelligently -- financial planning helps you
understand the principles of investing
- Minimize taxes -- financial planning helps you keep your
assets where they should be, in your own pocket
35. Summary (cont’d)
Develop a personal financial plan
- Evaluate -- know where you are today
- Define -- know where you want to go
- Develop a plan -- draw the map
- Implement -- follow the plan with action
- Review progress-- check the map to ensure
you are on course
36. Summary (cont’d)
Don’t overlook the financial life cycle
- The Early Years
- Approaching Retirement
- The Retirement Years
37. Summary (cont’d)
Manage your career to ensure personal and financial
success
Remember the 15 axioms, but most importantly remember
the 15th -- Just Do It!