,TABLE OF CONTENT sg sg
1. Understanding the Financial Planning Process.
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2. Developing Your Financial Statements and Plans.
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3. Preparing Your Taxes.
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Part II: MANAGING BASIC ASSETS. sg sg sg sg
4. Managing Your Cash and Savings.
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5. Making Automobile and Housing Decisions.
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Part III: MANAGING CREDIT. sg sg sg
6. Using Credit.
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7. Using Consumer Loans.
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Part IV: MANAGING INSURANCE NEEDS. sg sg sg sg
8. Insuring Your Life.
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9. Insuring Your Health.
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10. Protecting Your Property.
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Part V: MANAGING INVESTMENTS. sg sg sg
11. Investment Planning.
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12. Investing in Stocks and Bonds.
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13. Investing in Mutual Funds and Real Estate.
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Part VI: RETIREMENT AND ESTATE PLANNING.
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14. Planning for Retirement.
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15. Preserving Your Estate.
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Understanding the FinancialPlanningProc sg sgsg gs gs
ess Chapter 1 sg sg
How Will This Affect Me? sg sg sg sg
The heart of financial planning is making sure your values line up with how you spend and save. That
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means knowing where you are financially and planning on how to get where you want to be in the futur
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e no matter what life throws at you. For example, how should your plan handle the projection that Soc
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ial Security costs may exceed revenues by 2035? And what if the government decides to raise tax rates
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to help cover the federal deficit? An informed financial plan should reflect such uncertainties and mo
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re.
This chapter overviews the financial planning process and explains its context. Topics include how
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financialplans change to accommodate your current stage in life and the role that financial planners
sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg
can play in helping you achieve your objectives. After reading this chapter you will have a good per
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spective on how to organize your overall personal financial plan.
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LEARNING GOALS sg
LG1 Identify the benefits of using personal financial planning techniques to manage your financ
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,es.
Key concept in this section is the planning model as displayed in Exhibit 1.1. Your standard of livin
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g is greatly impacted by your spending habits and your commitment to saving. Your spending is me
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asured by your propensity to consume. Wealth is the total value of all property you own less the a
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mount that you owe to others.
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ACTIVITY: Ask the studentsto assume that theyhave just inherited $100,000. What will you do wi
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th the money? Write down three ways you will spend or use the money.
sg sg sg sg sg sg sg sg sg sg sg sg sg
, Ask the students to share one itemwith the class and record what theysayso that the entire class can re
sg sg sg sg sg sg gs sg sg sg sg sg sg gs sg sg sg sg sg sg sg
flect on the answers. Hopefully, at least a few will mention investing even if only $10,000 ofthe amo
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unt. Use their answers to discuss taking care of current needs versus future needs.
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Focus on their propensityto consume and its impact on accumulating wealth. Point out the Financial P
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lanning Tip, ―Be SMART in Planning Your FinancialGoals.‖ sg sg sg sg sg sg sg gs
Use Exhibit 1.2 to show how the average person earns and spends their money and Exhibit 1.6 to help t
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he student identify where they are now.
sg sg sg sg sg sg
LG2 Describe the personal financial planning process and define your goals.
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Dwight Eisenhower,army generaland president, is quoted as saying ―Plans are useless;Planning is pr
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iceless‖. The process of planning allows you to focus on the issues that are most important and to be
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ready when things change. sg sg sg
Exhibit 1.3 lists the Six Step Financial Planning Process. The first and most important is defining y
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our financial goals. Exhibit 1.6 lists goals by age to demonstrate how goals change over time. Use th
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e examples in Exhibit 1.5 to ask students ifthe assumptions are realistic. Yes, the answer is in the exhi
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bit, but manywill not have read chapter at this point. For your use, the assumptions are:
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Assumption 1: Saving a few thousand dollars a year should provide enough to fund mychild‘s coll sg sg sg sg sg sg sg sg sg sg sg sg sg sg gs sg
ege Education. sg
Assumption 2: Anemergency fund lasting 3 months should be adequate. sg sg gs sg sg sg sg sg sg sg
Assumption 3: I will be able to retire at 65 and should have plenty to live on in retirement. Assu sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg
mption 4: I‘m relying on the rule of thumb that I will need only 70 percent of my pre-
sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg
retirement income to manage nicely in retirement.
sg sg sg sg sg sg sg
There are several worksheets in the book. Worksheet 1.1 gives the student a format to write downth
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eir PersonalFinancialGoals. There is power in writing downgoals [and most anyother plan]. Record
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ing the goal and then reviewing three months later will help you to keep focus on the goal.
sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg
LG3 Explain the life cycle of financial plans, their role in achieving your financial goals, how
sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg
to deal with special planning concerns, and the use of professional financial planners.
sg sg sg sg sg sg sg sg sg sg sg sg
Exhibit 1.7 can help focus the attention on how goals differ between the various stages of life. Secti
sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg
on 1-3b lists various decisions that you will have to make over your life. The section 1-
sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg
3c addresses Special Planning Concerns. Worksheet 1.2 focuses on the financial benefit to the fami
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ly ofthe second income. Ifthe second income is from a minimum wage job, it may not be a goodfina
sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg gs
ncialdecision. Ofcourse having a job, even a minimumwage job, may give the person psychic inco
gs sg gs sg sg sg sg sg sg gs sg sg sg sg sg sg sg
me that will override the financial impact.
sg sg sg sg sg sg
While perhaps off topic, I recall a high school science teacher who was a smoker. He walked throug
sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg
hthe amount of money he spent onpurchasing tobacco products. That computation had a
sg sg sg sg sg sg sg sg sg sg s g sg sg sg
1. Understanding the Financial Planning Process.
sg sg sg sg sg
2. Developing Your Financial Statements and Plans.
sg sg sg sg sg sg
3. Preparing Your Taxes.
sg sg sg
Part II: MANAGING BASIC ASSETS. sg sg sg sg
4. Managing Your Cash and Savings.
sg sg sg sg sg
5. Making Automobile and Housing Decisions.
sg sg sg sg sg
Part III: MANAGING CREDIT. sg sg sg
6. Using Credit.
sg sg
7. Using Consumer Loans.
sg sg sg
Part IV: MANAGING INSURANCE NEEDS. sg sg sg sg
8. Insuring Your Life.
sg sg sg
9. Insuring Your Health.
sg sg sg
10. Protecting Your Property.
sg sg sg
Part V: MANAGING INVESTMENTS. sg sg sg
11. Investment Planning.
sg sg
12. Investing in Stocks and Bonds.
sg sg sg sg sg
13. Investing in Mutual Funds and Real Estate.
sg sg sg sg sg sg sg
Part VI: RETIREMENT AND ESTATE PLANNING.
sg sg sg sg sg
14. Planning for Retirement.
sg sg sg
15. Preserving Your Estate.
sg sg sg
Understanding the FinancialPlanningProc sg sgsg gs gs
ess Chapter 1 sg sg
How Will This Affect Me? sg sg sg sg
The heart of financial planning is making sure your values line up with how you spend and save. That
sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg
means knowing where you are financially and planning on how to get where you want to be in the futur
sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg
e no matter what life throws at you. For example, how should your plan handle the projection that Soc
sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg
ial Security costs may exceed revenues by 2035? And what if the government decides to raise tax rates
sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg
to help cover the federal deficit? An informed financial plan should reflect such uncertainties and mo
sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg
re.
This chapter overviews the financial planning process and explains its context. Topics include how
sg sg sg sg sg sg sg sg sg sg sg sg sg sg
financialplans change to accommodate your current stage in life and the role that financial planners
sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg
can play in helping you achieve your objectives. After reading this chapter you will have a good per
sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg
spective on how to organize your overall personal financial plan.
sg sg sg sg sg sg sg sg sg
LEARNING GOALS sg
LG1 Identify the benefits of using personal financial planning techniques to manage your financ
sg sg sg sg sg sg sg sg sg sg sg sg sg
,es.
Key concept in this section is the planning model as displayed in Exhibit 1.1. Your standard of livin
sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg
g is greatly impacted by your spending habits and your commitment to saving. Your spending is me
sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg
asured by your propensity to consume. Wealth is the total value of all property you own less the a
sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg
mount that you owe to others.
sg sg sg sg sg
ACTIVITY: Ask the studentsto assume that theyhave just inherited $100,000. What will you do wi
s g sg sg gs sg sg sg gs sg sg sg sg sg sg sg sg
th the money? Write down three ways you will spend or use the money.
sg sg sg sg sg sg sg sg sg sg sg sg sg
, Ask the students to share one itemwith the class and record what theysayso that the entire class can re
sg sg sg sg sg sg gs sg sg sg sg sg sg gs sg sg sg sg sg sg sg
flect on the answers. Hopefully, at least a few will mention investing even if only $10,000 ofthe amo
sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg
unt. Use their answers to discuss taking care of current needs versus future needs.
s g sg sg sg sg sg sg sg sg sg sg sg sg
Focus on their propensityto consume and its impact on accumulating wealth. Point out the Financial P
sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg
lanning Tip, ―Be SMART in Planning Your FinancialGoals.‖ sg sg sg sg sg sg sg gs
Use Exhibit 1.2 to show how the average person earns and spends their money and Exhibit 1.6 to help t
sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg
he student identify where they are now.
sg sg sg sg sg sg
LG2 Describe the personal financial planning process and define your goals.
sg sg sg sg sg sg sg sg sg sg
Dwight Eisenhower,army generaland president, is quoted as saying ―Plans are useless;Planning is pr
sg gs sg sg sg sg sg sg sg sg sg sg sg sg sg
iceless‖. The process of planning allows you to focus on the issues that are most important and to be
sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg
ready when things change. sg sg sg
Exhibit 1.3 lists the Six Step Financial Planning Process. The first and most important is defining y
sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg
our financial goals. Exhibit 1.6 lists goals by age to demonstrate how goals change over time. Use th
sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg
e examples in Exhibit 1.5 to ask students ifthe assumptions are realistic. Yes, the answer is in the exhi
sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg
bit, but manywill not have read chapter at this point. For your use, the assumptions are:
sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg
Assumption 1: Saving a few thousand dollars a year should provide enough to fund mychild‘s coll sg sg sg sg sg sg sg sg sg sg sg sg sg sg gs sg
ege Education. sg
Assumption 2: Anemergency fund lasting 3 months should be adequate. sg sg gs sg sg sg sg sg sg sg
Assumption 3: I will be able to retire at 65 and should have plenty to live on in retirement. Assu sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg
mption 4: I‘m relying on the rule of thumb that I will need only 70 percent of my pre-
sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg
retirement income to manage nicely in retirement.
sg sg sg sg sg sg sg
There are several worksheets in the book. Worksheet 1.1 gives the student a format to write downth
sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg gs
eir PersonalFinancialGoals. There is power in writing downgoals [and most anyother plan]. Record
sg gs gs sg sg sg sg sg sg gs sg sg sg sg sg sg
ing the goal and then reviewing three months later will help you to keep focus on the goal.
sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg
LG3 Explain the life cycle of financial plans, their role in achieving your financial goals, how
sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg
to deal with special planning concerns, and the use of professional financial planners.
sg sg sg sg sg sg sg sg sg sg sg sg
Exhibit 1.7 can help focus the attention on how goals differ between the various stages of life. Secti
sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg
on 1-3b lists various decisions that you will have to make over your life. The section 1-
sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg
3c addresses Special Planning Concerns. Worksheet 1.2 focuses on the financial benefit to the fami
sg sg sg sg sg sg sg sg sg sg sg sg sg sg
ly ofthe second income. Ifthe second income is from a minimum wage job, it may not be a goodfina
sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg gs
ncialdecision. Ofcourse having a job, even a minimumwage job, may give the person psychic inco
gs sg gs sg sg sg sg sg sg gs sg sg sg sg sg sg sg
me that will override the financial impact.
sg sg sg sg sg sg
While perhaps off topic, I recall a high school science teacher who was a smoker. He walked throug
sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg sg
hthe amount of money he spent onpurchasing tobacco products. That computation had a
sg sg sg sg sg sg sg sg sg sg s g sg sg sg
