SECTION B
CHAPTER TEACHING MATERIALS
, CHAPTER 1
PERSONAL FINANCIAL PLANNING IN ACTION
CHAPTER OVERVIEW
This chapter provides the foundation for Focus on Personal Finance and the study of financial
planning. The chapter starts with a discussion of social and economic factors that make up the
financial planning environment. Next, the main components of financial planning (obtaining,
planning, saving, borrowing, spending, managing risk, investing, and retirement and estate
planning) are discussed. This is followed by guidelines for creating personal financial goals. Then,
the opportunity costs, or trade-offs, of decisions are considered in relation to personal and financial
resources. This is followed by coverage. Finally, an overview of the financial planning process along
with strategies for creating and using a financial plan are introduced.
LEARNING OBJECTIVES CHAPTER SUMMARY
After studying this chapter, students will be able to:
Obj. 1 Identify social and Financial decisions are affected by a person’s life situation
economic influences (income, age, household size, health), personal values, and
on personal financial economic factors (prices, interest rates, and employment
goals and decisions. opportunities). The major elements of financial planning are
obtaining, planning, saving, borrowing, spending, managing
risk, investing, and retirement and estate planning.
Obj. 2 Develop personal Financial goals should take a S-M-A-R-T approach with goals
financial goals. that are: Specific, Measurable, Action-oriented, Realistic, and
Time-based.
Obj. 3 Calculate time value of Every decision involves a trade-off with things given up.
money situations Personal opportunity costs include time, effort, and health.
associated with Financial opportunity costs are based on the time value of
personal financial money. Future value and present value calculations enable you
decisions. to measure the increased value (or lost interest) that results
from a saving, investing, borrowing, or purchasing decision.
Obj. 4 Implement a plan for Personal financial planning involves the following process: (1)
making personal determine your current financial situation; (2) develop
financial and career financial goals; (3) identify alternative courses of action; (4)
,decisions. evaluate alternatives; (5) create and implement a financial
action plan; and (6) review and revise the financial plan.
, INTRODUCTORY ACTIVITIES
• Ask students to comment on the “3 Steps to Financial Literacy" feature at the start of the
chapter (p. 2).
• Point out the learning objectives (p. 3) in an effort to highlight the key points in the chapter.
• Provide an overview of the “Your Personal Financial Plan Sheets” for this chapter (p. 3).
• Ask students to provide examples of social and economic factors that have increased the
importance of personal financial planning today.
• Have students answer these three questions as individuals or in small discussion groups:
1. What do you currently know about personal financial planning?
2. What questions do you need answers for about personal finance?
3. How and where might you obtain answers to the questions you have about personal
finance?
CHAPTER 1 OUTLINE
I. Making Financial Decisions
A. Your Life Situation and Financial Planning
B. Financial Planning in Our Economy
1. Global Influences
2. Inflation
3. Interest Rates
C. Financial Planning Activities
1. Obtaining
2. Planning
3. Saving
4. Borrowing
5. Spending
6. Managing risk
7. Investing
8. Retirement and Estate Planning
II. Developing and Achieving Financial Goals
A. Types of Financial Goals
B. Goal-Setting Guidelines
III. Opportunity Costs and the Time Value of Money
A. Personal Opportunity Costs
B. Financial Opportunity Costs
1. Interest Calculations
CHAPTER TEACHING MATERIALS
, CHAPTER 1
PERSONAL FINANCIAL PLANNING IN ACTION
CHAPTER OVERVIEW
This chapter provides the foundation for Focus on Personal Finance and the study of financial
planning. The chapter starts with a discussion of social and economic factors that make up the
financial planning environment. Next, the main components of financial planning (obtaining,
planning, saving, borrowing, spending, managing risk, investing, and retirement and estate
planning) are discussed. This is followed by guidelines for creating personal financial goals. Then,
the opportunity costs, or trade-offs, of decisions are considered in relation to personal and financial
resources. This is followed by coverage. Finally, an overview of the financial planning process along
with strategies for creating and using a financial plan are introduced.
LEARNING OBJECTIVES CHAPTER SUMMARY
After studying this chapter, students will be able to:
Obj. 1 Identify social and Financial decisions are affected by a person’s life situation
economic influences (income, age, household size, health), personal values, and
on personal financial economic factors (prices, interest rates, and employment
goals and decisions. opportunities). The major elements of financial planning are
obtaining, planning, saving, borrowing, spending, managing
risk, investing, and retirement and estate planning.
Obj. 2 Develop personal Financial goals should take a S-M-A-R-T approach with goals
financial goals. that are: Specific, Measurable, Action-oriented, Realistic, and
Time-based.
Obj. 3 Calculate time value of Every decision involves a trade-off with things given up.
money situations Personal opportunity costs include time, effort, and health.
associated with Financial opportunity costs are based on the time value of
personal financial money. Future value and present value calculations enable you
decisions. to measure the increased value (or lost interest) that results
from a saving, investing, borrowing, or purchasing decision.
Obj. 4 Implement a plan for Personal financial planning involves the following process: (1)
making personal determine your current financial situation; (2) develop
financial and career financial goals; (3) identify alternative courses of action; (4)
,decisions. evaluate alternatives; (5) create and implement a financial
action plan; and (6) review and revise the financial plan.
, INTRODUCTORY ACTIVITIES
• Ask students to comment on the “3 Steps to Financial Literacy" feature at the start of the
chapter (p. 2).
• Point out the learning objectives (p. 3) in an effort to highlight the key points in the chapter.
• Provide an overview of the “Your Personal Financial Plan Sheets” for this chapter (p. 3).
• Ask students to provide examples of social and economic factors that have increased the
importance of personal financial planning today.
• Have students answer these three questions as individuals or in small discussion groups:
1. What do you currently know about personal financial planning?
2. What questions do you need answers for about personal finance?
3. How and where might you obtain answers to the questions you have about personal
finance?
CHAPTER 1 OUTLINE
I. Making Financial Decisions
A. Your Life Situation and Financial Planning
B. Financial Planning in Our Economy
1. Global Influences
2. Inflation
3. Interest Rates
C. Financial Planning Activities
1. Obtaining
2. Planning
3. Saving
4. Borrowing
5. Spending
6. Managing risk
7. Investing
8. Retirement and Estate Planning
II. Developing and Achieving Financial Goals
A. Types of Financial Goals
B. Goal-Setting Guidelines
III. Opportunity Costs and the Time Value of Money
A. Personal Opportunity Costs
B. Financial Opportunity Costs
1. Interest Calculations
