Ch 1 -Financial literacy in your life
Tuesday, January 27, 2026 3:42 PM
To add additional income to start your emergency fund, set money aside for financial
uncertainty learn learn to avoid common mistakes. Your knowledge and actions will allow
you to use wise finances for your personal goals
The Financial Process
- Being rich means many thing to different people, some associate it w/ not having
to worry about paying bills while others do worry about paying bills. For some it
can mean donating to organizations that make a difference in society
○ People obtain financial wealth in various ways:
§ Starting a business
§ Pursing higher education
□ These two are the most common
§ Frugal Living
§ Wise Investing
§ An Opportunity Fund
□ expanding your income & investing in yourself with an
advanced degree
§ Personal Financial Planning
□ The process of managing your money to achieve personal
economic satisfaction
§ Financial Literacy
□ The use of knowledge & skills for earning, saving, spending &
investing to achieve personal, family & community goals
□ Leads to financial well being & a life time of financial security
allowing to adapt to changes in your personal economic
circumstances, these advantages include
® increase the effectiveness in obtaining, using &
protecting financial resources
® Expanded control of financial activities, avoiding
excessive debt bankruptcy & dependency on others
® Improves personal relationships w/ well planned &
communicated financial decisions
® Enhanced freedoms of financial worries in the future,
anticipated expenses & achieving personal goals
The Financial Process in Short
1. Spending
a. Daily expenses, major expensive and recreational Activities
2. Saving
a. For emergencies & Long-term financial security
3. Sharing
a. For local and global programs to assist those in need
Determine your current financial situation
Step 1: Determine income, savings, living expenses and debts
Step 2: Develop Financial goals
- Are your financial priorities based on social pressures, household needs, or a desire
for security?
- Will the economy affect your goals and priorities?
Step 3: Identify alternative courses of action
- Continue the same course of action
○ You may decide the amount you’re saving each month is appropriate for
your situation
- Expand the current situation
○ You choose to save a larger amount each month
- Change the current situation
○ You made decide to use a money market account instead of a regular
savings account
- Take a new course of action
○ You might use your monthly savings to pay off credit card debt
An example of creative decision making based on your income and considering on
alternatives can be changing from driving a car to using public transportation
Step 4: Evaluate your alternative
- Consider your life situation, Personal values & Economic conditions
○ How would your dependency of income affect your savings goals?
○ How do you spend your leisure time?
○ How will changes in interest rate rates affect your financial situation?
The consequences of choices
- Opportunity cost
○ What do you give up by making a choice
§ Commonly referred to as a trade-off is not always measured in
dollars
§ It can be time to spend in school versus shopping for a major
purchase, remember that the trade is either time or money
□ The resources you give up (time or money) have now lost
their value
- Evaluating risk
○ Selecting a college major can involve risk, What if you end up not liking your
job? What if you can’t find a job? Most decisions involve low risk such as
putting money into a savings account or purchasing items that cost a few
dollars something a great value are very low.
- Identifying which is best is difficult, the best way to consider information is based
on your experience and experiences of other financial information sources before
making a decision
Step 5: Create & implement your financial action plan
- Increase your savings by reducing your spending
- Working extra hours
- If you’re concerned about your income tax payments, you may increase the
amount from your paycheck
○ Also ask for assistance from an insurance agent, from banks to invest online
to purchase stocks, bonds or mutual funds
Step 6: Review & Revise your plan
- Over the course of 6 months to a year review your finances and adjust for any
social, personal & economic factors to your current life situation to meet your
financial goals
Influences on Personal Financial Planning
- Life Situations & Personal Values
○ As society changes so do a persons financial needs
§ Theses changes are affected by
□ Age, income, household size, personal beliefs & savings
patterns
§ Some changes include marrying later & a dual income household
compared to the past
- The Adult Life Cycle
○ The stages in a family situation & financial needs of an adult are affected by
§ Martial Status, household size, employment & Life mile stones
□ Life Mile stones
® graduations, birth/adoption of a child, career change,
dependents leaving the home, changes in health,
divorce, retirement and/or the death of a
spouse/family member
- Values
○ The idea’s & principles that you consider to be correct, desirable and/or
important
The Financial System & Economic Factors
- The financial system & daily economic activities that influence a persons financial
decisions, money flows from providers of funds to user of funds through financial
intermediaries & financial markets
- Security
○ A financial instrument that represents debt and/or equity
- Debt Securities
○ Like bonds, represent money borrowed by companies or govts
- Equity Securities (Stocks)
○ Represent ownership in a corporation
- Shares
○ Bought by investors
- Other examples of securities are
○ Mutual funds, certificates of deposit (CD’s) & commodity futures
- Economics
○ The study of how wealth is created & distributed
Global Influences
- Our economy is affected by both finance activities of foreign investors & global
competition from global companies, the U.S. competes w/ them for the spending
dollar of consumers
○ When the US value of exported goods are lower than imported goods, value
leaving the US is less then what is coming in
○ This reduces funds available for domestic spending & investments
○ If foreign companies don’t invest is the U.S., money supply is reduced
§ Trade deficit is when money supply reduction leads to higher interest
rates
□ This also affects the value of the nations currency & items
being purchased by consumers
§ Tariffs may be imposed
□ Tariffs are import taxes, used to reduce trade deficits & may
not always have the intended affect on the economy
Economic Conditions
1. Consumer Price inflations - The general level of prices
a. In times of inflation the power of the dollar decreases
b. The main cause for inflation increase is demand w/o supply
c. If people have more money to spend because of pay increases but the
amount of goods & services don’t change, the value of goods & services go
up in prices
d. Inflation is most harmful to those living on fixed incomes and/or retired
who cant afford certain goods & services
e. It’s can also affect money lenders, w/o adequate interest rates, amounts
repaid by borrowers have less buying power than the money borrowed
f. During the 50’s & 60’s the annual inflation rate was 1-2%, in the 70’s-80’s
it was 10-12% meaning prices doubled in the span of 6 yrs
i. To find out how fast prices or your savings will double/change use
the rule of 72
72 𝑑𝑖𝑣𝑖𝑑𝑒𝑑 𝑏𝑦 𝑖𝑛𝑓𝑙𝑎𝑡𝑖𝑜𝑛 𝑝𝑒𝑟𝑐𝑒𝑛𝑡𝑎𝑔𝑒 = 𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑦𝑒𝑎𝑟𝑠 𝑖
1) 𝑡𝑎𝑘𝑒𝑠 𝑓𝑜𝑟
𝑦𝑜𝑢𝑟 𝑠𝑎𝑣𝑖𝑛𝑔𝑠 𝑡𝑜 𝑐ℎ𝑎𝑛𝑔𝑒
g. (CPI) Consumer Price Index
i. A measure of the average change in prices for goods & services
h. Personal Inflation Rate
i. A rate higher than the state CPI, can be affected by location and
cost of living
i. Deflation
i. A decline in prices that can cause damage to the economy
2. Consumer Spending
a. The total demand for good & services in the economy can influence:
i. employment opportunities, potential income & financial resources
of employees
b. Reduce consumer spending
i. this can lead to unemployment, Staff reduction, lower demand for
company good and services
1) Financial hardship lead to concerns of labor, business, and
government
2) Retaining programs, Income assistance and job services
help people adjust
3. Interest rates
a. The cost of money
i. Supply demand or what influence interest rates
1) Consumer, saving and investing increase the supply of
money interest rate can decrease however, businesses,
government and foreign borrowing increase money and
interest rates
ii. Interest rates affect financial planning
1) Earning as a saver or investor reflect in rates known as a
risk premium
a) Premium is based on the length of time funds will
be used by others & uncertainty of a return
2) Risk
a) Factor interest rate you pay as a borrower
b) Credit rating pay a higher interest than those with
the credit & influence many financial decisions
Developing personal finance goals
- Types of financial goals
○ Timeframe - Set amount of time needed to achieve a goal
○ Financial needs - drives your goal
- Timing of goals
○ Short-term goals
§ Saving for a vacation
§ Paying off a small debt
§ Something that can be achieved within the next year
○ Intermediate goals
§ To be completed within a timeframe of 1 to 5 years
○ Long-term goals
§ Involve financial plans of five years or more
□ Retirement
□ Funding college education for a child
□ The purchase of a vacation home
○ Both long-term and short term goals should be coordinated
- Goal frequency
○ The amount of times you achieve a goal
Goals for different financial needs
- Consumable product Goals
○ Occur on a periodic basis & involve items used relatively quickly
§ Food, clothing & entreatment
§ Unplanned can lead to negative affects on your financial standing
- Durable Product Goals
○ Infrequent purchases, usually expensive like appliances, cars or sports
equipment, items that are tangible
- Intangible Purchases
○ Goals that relate to personal relationships, health, education & leisure
Goal Setting Guidelines
- Goals are a foundation of planning, implementing & measuring progress of
spending, saving & investing. Use S.M.A.R.T
S. Specific - know exactly what your goals are & create a plan to achieve
them
M. Measurable - using specific numeric amounts, i.e. saving $300 in the span
of 3 months
A. Action Orientated - Personal financial activities i.e. reducing credit card
usage to manage credit card debt
R. Realistic - Selecting goals based on income & life situation
T. Time based - Indicating a time frame to achieve a goal over a period of
time & allows you to measure your goal
- Your financial goals include identifying & implementing actions that must begin
now
○ Commit to the process, be ready to modify & revise goals due to
uncontrollable events i.e. COVID-19 pandemic
Opportunity Costs & Time Value of Money
- Opportunity Costs
○ Are viewed in terms of both personal & financial resources
- Personal Opportunity Costs
○ Involve time used for studying, working, shopping etc but will not be
available for other uses
○ Select your use of time to meet your needs, achieve goals & satisfy personal
values
- Health
○ Poor health; bad eating habits, lack of sleep and/or avoiding exercise can
result in:
§ Illness
§ Time away from school/work
§ Increased health care costs
§ Reduced financial security
Financial Opportunity Costs
- would you rather have $100 today or 105 a year from now including current needs
uncertainty and current interest rate rates
○ Time value of money - The calculated interest in the amount of money as a
result of interest earned
§ Every time you spend, save and invest or borrow money, you should
consider the value of the money as an opportunity cost. Spending
money from your savings account means lost interest interest
earning, However, the purchase may have a higher priority these
earnings
- Opportunity cost of the value of money is present in these financial decisions:
○ Set aside funds in a saving plan w/ little or no risk has the opportunity cost
of potentially higher returns from a investment with greater risk
○ Having extra money withheld from your paycheck to receive a tax refund
has the opportunity of cost in lost interest from the money you earned
○ Making annul deposits into a retirement account can avoid the cost of
inadequate funds in the future
○ Purchasing a new home appliance/car has potential benefits of saving
money on future maintenance & energy costs
- Interest Calculations
There are 5 methods of used to calculate present & future values
1. Formula
A. Math notations are used to compute future & present value
2. Time Value Money Tables
A. Used for easier calculations before the formula method
3. Financial Calculator
A. specialized calculators programed with financial functions used for easier
calculations
4. Spreadsheet software
A. Excel and other programs have built in formulas for financial computation,
including future and present value
5. Websites and apps
A. Value of money calculators are available online to mobile devices. They
can calculate future value of savings as well as loan payment amounts
Future value of a single amount
- Future value
○ The amount to current savings will grow based on certain interest rates and
certain time periods
§ Future value = 100 + (100 x 0.04 x 1 yr) + 104
□ FV = $100 + ( $100 x 0.04% x 1yr ) + 104
- Financial calculator index
○ FV - Future Value
○ I - Interest rate
○ N - # of time periods
○ PV - Potential Value
○ TVM - Time Value of Money
- Future Value of a series of deposits
○ Annuity - a series of equal deposits or payments (must be a consistent rate)
○ I.E. $50 deposit x 7% x 6yrs
§ (money)(percent)(time)
- Present Value of a Single Amount
○ The Current value for a future amount based on a certain interest rate & a
certain period of time
§ Discounting - determines how much to deposit to attain a certain
amount in the future
- Present Value of a series of deposits
○ The current value for future amount based on interest rates for a certain
period of time
§ I.E. $748 ($1,000 x 0.784)
□ Have(want x percent)
Achieving Financial Goals
- A preview of what’s ahead
○ Ch 2 - obtaining
○ Ch - 3 & 4 planning
○ Ch - 5 Saving
○ Ch 6 & 7 - Borrowing
○ Ch 8 & 9 - Spending
○ Ch 10-12 - Managing Risk
○ Ch 13-17 Investing
○ Ch 18 & 19 - Retirement & Estate Planning
Vocabulary to know!!
- Liquidity
○ The ability to readily convert financial resources into cash w/o a loss in
value
- Bankruptcy
○ The legal status of a person who is not able to pay debts owed
Developing a Financial Plan
- Financial Plan
○ A report that summarizes your current financial status, analyzes financial
needs & recommends future financial activities
** A common mistake when studying personal finances is a low desire to learn
○ Action is developing good studying habits
○ Results for success in both the class & both personal & financial life
Ch 1 Review
Financial Planning
- Track daily spending to develop a budget
- Create a regular & emergency savings
- Establish a plan for banking & credit usage
- Pay off any college loans
- Continue proper spending & credit habits
Next Steps
- Asses progress towards long term goals
- Evaluate needed insurance for both the home changes and/or financial situation
Later Steps
- Assess needs for long-term financial goals
- Review your will & estate plan
- Consider activities & locations for retirement
Tuesday, January 27, 2026 3:42 PM
To add additional income to start your emergency fund, set money aside for financial
uncertainty learn learn to avoid common mistakes. Your knowledge and actions will allow
you to use wise finances for your personal goals
The Financial Process
- Being rich means many thing to different people, some associate it w/ not having
to worry about paying bills while others do worry about paying bills. For some it
can mean donating to organizations that make a difference in society
○ People obtain financial wealth in various ways:
§ Starting a business
§ Pursing higher education
□ These two are the most common
§ Frugal Living
§ Wise Investing
§ An Opportunity Fund
□ expanding your income & investing in yourself with an
advanced degree
§ Personal Financial Planning
□ The process of managing your money to achieve personal
economic satisfaction
§ Financial Literacy
□ The use of knowledge & skills for earning, saving, spending &
investing to achieve personal, family & community goals
□ Leads to financial well being & a life time of financial security
allowing to adapt to changes in your personal economic
circumstances, these advantages include
® increase the effectiveness in obtaining, using &
protecting financial resources
® Expanded control of financial activities, avoiding
excessive debt bankruptcy & dependency on others
® Improves personal relationships w/ well planned &
communicated financial decisions
® Enhanced freedoms of financial worries in the future,
anticipated expenses & achieving personal goals
The Financial Process in Short
1. Spending
a. Daily expenses, major expensive and recreational Activities
2. Saving
a. For emergencies & Long-term financial security
3. Sharing
a. For local and global programs to assist those in need
Determine your current financial situation
Step 1: Determine income, savings, living expenses and debts
Step 2: Develop Financial goals
- Are your financial priorities based on social pressures, household needs, or a desire
for security?
- Will the economy affect your goals and priorities?
Step 3: Identify alternative courses of action
- Continue the same course of action
○ You may decide the amount you’re saving each month is appropriate for
your situation
- Expand the current situation
○ You choose to save a larger amount each month
- Change the current situation
○ You made decide to use a money market account instead of a regular
savings account
- Take a new course of action
○ You might use your monthly savings to pay off credit card debt
An example of creative decision making based on your income and considering on
alternatives can be changing from driving a car to using public transportation
Step 4: Evaluate your alternative
- Consider your life situation, Personal values & Economic conditions
○ How would your dependency of income affect your savings goals?
○ How do you spend your leisure time?
○ How will changes in interest rate rates affect your financial situation?
The consequences of choices
- Opportunity cost
○ What do you give up by making a choice
§ Commonly referred to as a trade-off is not always measured in
dollars
§ It can be time to spend in school versus shopping for a major
purchase, remember that the trade is either time or money
□ The resources you give up (time or money) have now lost
their value
- Evaluating risk
○ Selecting a college major can involve risk, What if you end up not liking your
job? What if you can’t find a job? Most decisions involve low risk such as
putting money into a savings account or purchasing items that cost a few
dollars something a great value are very low.
- Identifying which is best is difficult, the best way to consider information is based
on your experience and experiences of other financial information sources before
making a decision
Step 5: Create & implement your financial action plan
- Increase your savings by reducing your spending
- Working extra hours
- If you’re concerned about your income tax payments, you may increase the
amount from your paycheck
○ Also ask for assistance from an insurance agent, from banks to invest online
to purchase stocks, bonds or mutual funds
Step 6: Review & Revise your plan
- Over the course of 6 months to a year review your finances and adjust for any
social, personal & economic factors to your current life situation to meet your
financial goals
Influences on Personal Financial Planning
- Life Situations & Personal Values
○ As society changes so do a persons financial needs
§ Theses changes are affected by
□ Age, income, household size, personal beliefs & savings
patterns
§ Some changes include marrying later & a dual income household
compared to the past
- The Adult Life Cycle
○ The stages in a family situation & financial needs of an adult are affected by
§ Martial Status, household size, employment & Life mile stones
□ Life Mile stones
® graduations, birth/adoption of a child, career change,
dependents leaving the home, changes in health,
divorce, retirement and/or the death of a
spouse/family member
- Values
○ The idea’s & principles that you consider to be correct, desirable and/or
important
The Financial System & Economic Factors
- The financial system & daily economic activities that influence a persons financial
decisions, money flows from providers of funds to user of funds through financial
intermediaries & financial markets
- Security
○ A financial instrument that represents debt and/or equity
- Debt Securities
○ Like bonds, represent money borrowed by companies or govts
- Equity Securities (Stocks)
○ Represent ownership in a corporation
- Shares
○ Bought by investors
- Other examples of securities are
○ Mutual funds, certificates of deposit (CD’s) & commodity futures
- Economics
○ The study of how wealth is created & distributed
Global Influences
- Our economy is affected by both finance activities of foreign investors & global
competition from global companies, the U.S. competes w/ them for the spending
dollar of consumers
○ When the US value of exported goods are lower than imported goods, value
leaving the US is less then what is coming in
○ This reduces funds available for domestic spending & investments
○ If foreign companies don’t invest is the U.S., money supply is reduced
§ Trade deficit is when money supply reduction leads to higher interest
rates
□ This also affects the value of the nations currency & items
being purchased by consumers
§ Tariffs may be imposed
□ Tariffs are import taxes, used to reduce trade deficits & may
not always have the intended affect on the economy
Economic Conditions
1. Consumer Price inflations - The general level of prices
a. In times of inflation the power of the dollar decreases
b. The main cause for inflation increase is demand w/o supply
c. If people have more money to spend because of pay increases but the
amount of goods & services don’t change, the value of goods & services go
up in prices
d. Inflation is most harmful to those living on fixed incomes and/or retired
who cant afford certain goods & services
e. It’s can also affect money lenders, w/o adequate interest rates, amounts
repaid by borrowers have less buying power than the money borrowed
f. During the 50’s & 60’s the annual inflation rate was 1-2%, in the 70’s-80’s
it was 10-12% meaning prices doubled in the span of 6 yrs
i. To find out how fast prices or your savings will double/change use
the rule of 72
72 𝑑𝑖𝑣𝑖𝑑𝑒𝑑 𝑏𝑦 𝑖𝑛𝑓𝑙𝑎𝑡𝑖𝑜𝑛 𝑝𝑒𝑟𝑐𝑒𝑛𝑡𝑎𝑔𝑒 = 𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑦𝑒𝑎𝑟𝑠 𝑖
1) 𝑡𝑎𝑘𝑒𝑠 𝑓𝑜𝑟
𝑦𝑜𝑢𝑟 𝑠𝑎𝑣𝑖𝑛𝑔𝑠 𝑡𝑜 𝑐ℎ𝑎𝑛𝑔𝑒
g. (CPI) Consumer Price Index
i. A measure of the average change in prices for goods & services
h. Personal Inflation Rate
i. A rate higher than the state CPI, can be affected by location and
cost of living
i. Deflation
i. A decline in prices that can cause damage to the economy
2. Consumer Spending
a. The total demand for good & services in the economy can influence:
i. employment opportunities, potential income & financial resources
of employees
b. Reduce consumer spending
i. this can lead to unemployment, Staff reduction, lower demand for
company good and services
1) Financial hardship lead to concerns of labor, business, and
government
2) Retaining programs, Income assistance and job services
help people adjust
3. Interest rates
a. The cost of money
i. Supply demand or what influence interest rates
1) Consumer, saving and investing increase the supply of
money interest rate can decrease however, businesses,
government and foreign borrowing increase money and
interest rates
ii. Interest rates affect financial planning
1) Earning as a saver or investor reflect in rates known as a
risk premium
a) Premium is based on the length of time funds will
be used by others & uncertainty of a return
2) Risk
a) Factor interest rate you pay as a borrower
b) Credit rating pay a higher interest than those with
the credit & influence many financial decisions
Developing personal finance goals
- Types of financial goals
○ Timeframe - Set amount of time needed to achieve a goal
○ Financial needs - drives your goal
- Timing of goals
○ Short-term goals
§ Saving for a vacation
§ Paying off a small debt
§ Something that can be achieved within the next year
○ Intermediate goals
§ To be completed within a timeframe of 1 to 5 years
○ Long-term goals
§ Involve financial plans of five years or more
□ Retirement
□ Funding college education for a child
□ The purchase of a vacation home
○ Both long-term and short term goals should be coordinated
- Goal frequency
○ The amount of times you achieve a goal
Goals for different financial needs
- Consumable product Goals
○ Occur on a periodic basis & involve items used relatively quickly
§ Food, clothing & entreatment
§ Unplanned can lead to negative affects on your financial standing
- Durable Product Goals
○ Infrequent purchases, usually expensive like appliances, cars or sports
equipment, items that are tangible
- Intangible Purchases
○ Goals that relate to personal relationships, health, education & leisure
Goal Setting Guidelines
- Goals are a foundation of planning, implementing & measuring progress of
spending, saving & investing. Use S.M.A.R.T
S. Specific - know exactly what your goals are & create a plan to achieve
them
M. Measurable - using specific numeric amounts, i.e. saving $300 in the span
of 3 months
A. Action Orientated - Personal financial activities i.e. reducing credit card
usage to manage credit card debt
R. Realistic - Selecting goals based on income & life situation
T. Time based - Indicating a time frame to achieve a goal over a period of
time & allows you to measure your goal
- Your financial goals include identifying & implementing actions that must begin
now
○ Commit to the process, be ready to modify & revise goals due to
uncontrollable events i.e. COVID-19 pandemic
Opportunity Costs & Time Value of Money
- Opportunity Costs
○ Are viewed in terms of both personal & financial resources
- Personal Opportunity Costs
○ Involve time used for studying, working, shopping etc but will not be
available for other uses
○ Select your use of time to meet your needs, achieve goals & satisfy personal
values
- Health
○ Poor health; bad eating habits, lack of sleep and/or avoiding exercise can
result in:
§ Illness
§ Time away from school/work
§ Increased health care costs
§ Reduced financial security
Financial Opportunity Costs
- would you rather have $100 today or 105 a year from now including current needs
uncertainty and current interest rate rates
○ Time value of money - The calculated interest in the amount of money as a
result of interest earned
§ Every time you spend, save and invest or borrow money, you should
consider the value of the money as an opportunity cost. Spending
money from your savings account means lost interest interest
earning, However, the purchase may have a higher priority these
earnings
- Opportunity cost of the value of money is present in these financial decisions:
○ Set aside funds in a saving plan w/ little or no risk has the opportunity cost
of potentially higher returns from a investment with greater risk
○ Having extra money withheld from your paycheck to receive a tax refund
has the opportunity of cost in lost interest from the money you earned
○ Making annul deposits into a retirement account can avoid the cost of
inadequate funds in the future
○ Purchasing a new home appliance/car has potential benefits of saving
money on future maintenance & energy costs
- Interest Calculations
There are 5 methods of used to calculate present & future values
1. Formula
A. Math notations are used to compute future & present value
2. Time Value Money Tables
A. Used for easier calculations before the formula method
3. Financial Calculator
A. specialized calculators programed with financial functions used for easier
calculations
4. Spreadsheet software
A. Excel and other programs have built in formulas for financial computation,
including future and present value
5. Websites and apps
A. Value of money calculators are available online to mobile devices. They
can calculate future value of savings as well as loan payment amounts
Future value of a single amount
- Future value
○ The amount to current savings will grow based on certain interest rates and
certain time periods
§ Future value = 100 + (100 x 0.04 x 1 yr) + 104
□ FV = $100 + ( $100 x 0.04% x 1yr ) + 104
- Financial calculator index
○ FV - Future Value
○ I - Interest rate
○ N - # of time periods
○ PV - Potential Value
○ TVM - Time Value of Money
- Future Value of a series of deposits
○ Annuity - a series of equal deposits or payments (must be a consistent rate)
○ I.E. $50 deposit x 7% x 6yrs
§ (money)(percent)(time)
- Present Value of a Single Amount
○ The Current value for a future amount based on a certain interest rate & a
certain period of time
§ Discounting - determines how much to deposit to attain a certain
amount in the future
- Present Value of a series of deposits
○ The current value for future amount based on interest rates for a certain
period of time
§ I.E. $748 ($1,000 x 0.784)
□ Have(want x percent)
Achieving Financial Goals
- A preview of what’s ahead
○ Ch 2 - obtaining
○ Ch - 3 & 4 planning
○ Ch - 5 Saving
○ Ch 6 & 7 - Borrowing
○ Ch 8 & 9 - Spending
○ Ch 10-12 - Managing Risk
○ Ch 13-17 Investing
○ Ch 18 & 19 - Retirement & Estate Planning
Vocabulary to know!!
- Liquidity
○ The ability to readily convert financial resources into cash w/o a loss in
value
- Bankruptcy
○ The legal status of a person who is not able to pay debts owed
Developing a Financial Plan
- Financial Plan
○ A report that summarizes your current financial status, analyzes financial
needs & recommends future financial activities
** A common mistake when studying personal finances is a low desire to learn
○ Action is developing good studying habits
○ Results for success in both the class & both personal & financial life
Ch 1 Review
Financial Planning
- Track daily spending to develop a budget
- Create a regular & emergency savings
- Establish a plan for banking & credit usage
- Pay off any college loans
- Continue proper spending & credit habits
Next Steps
- Asses progress towards long term goals
- Evaluate needed insurance for both the home changes and/or financial situation
Later Steps
- Assess needs for long-term financial goals
- Review your will & estate plan
- Consider activities & locations for retirement
