SECTION B
CHAPTER TEACHING MATERIALS
,
, 1
PERSONAL FINANCIAL PLANNING: AN INTRODUCTION
CHAPTER OVERVIEW
This chapter provides the foundation for Personal Finance and the study of financial planning. The
chapter starts with a discussion of an overview of the financial planning process. Next, the
opportunity costs, or trade-offs, of decisions are considered in relation to personal and financial
resources. This is followed by coverage of the personal, 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. Finally, 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 Analyze the process Personal financial planning involves the following process: (1)
for making personal determine your current financial situation; (2) develop financial
financial decisions. goals; (3) identify alternative courses of action; (4) evaluate
alternatives; (5) create and implement a financial action plan; and
(6) reevaluate and revise the financial plan.
Obj. 2 Develop personal Financial goals should (1) be realistic; (2) be stated in specific,
financial goals. measurable terms; (3) have a time frame; (4) indicate the type of
action to be taken.
Obj. 3 Assess personal and Financial decisions are affected by personal factors (income,
economic factors that household size, health, values, and goals), social factors
influence personal (demographic trends and government actions), and economic
financial planning. factors (prices, interest rates, and employment opportunities).
Obj. 4 Determine the personal Every decision involves a trade-off; the selection of one alternative
and financial prevents the selection of another. Personal opportunity costs may
opportunity costs include time, effort, and health. Financial opportunity costs are
associated with based on the time value of money. Future value and present value
personal financial calculations enable you to measure the increased value (or lost
decisions. interest) that results from a saving, investing, borrowing, or
purchasing decision.
Obj. 5 Determine strategies Successful financial planning requires specific goals combined with
for achieving personal spending, savings, investing, and borrowing strategies based on
financial goals for
, different life situation. your personal situation and various social and economic factors.
INTRODUCTORY ACTIVITIES
• Ask students to comment on the opening case for the chapter (p. 3).
• Point out the learning objectives (p. 3) in an effort to highlight the key points in the chapter.
• 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. The Financial Planning Process
A. Step 1: Determine Your Current Financial Situation
B. Step 2: Develop Your Financial Goals
C. Step 3: Identify Alternative Courses of Action
D. Step 4: Evaluate Alternatives
1. Consequences of Choices
2. Evaluation of Risk
3. Financial Planning Information Sources
E. Step 5: Create and Implement a Financial Action Plan
F. Step 6: Review and Revise Your Plan
II. Developing Personal Financial Goals
A. Types of Financial Goals
1. Timing of Goals
2. Goals for Different Financial Needs
B. Goal-Setting Guidelines
III. Influences on Personal Financial Planning
A. Life Situation and Personal Values
B. Economic Factors
CHAPTER TEACHING MATERIALS
,
, 1
PERSONAL FINANCIAL PLANNING: AN INTRODUCTION
CHAPTER OVERVIEW
This chapter provides the foundation for Personal Finance and the study of financial planning. The
chapter starts with a discussion of an overview of the financial planning process. Next, the
opportunity costs, or trade-offs, of decisions are considered in relation to personal and financial
resources. This is followed by coverage of the personal, 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. Finally, 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 Analyze the process Personal financial planning involves the following process: (1)
for making personal determine your current financial situation; (2) develop financial
financial decisions. goals; (3) identify alternative courses of action; (4) evaluate
alternatives; (5) create and implement a financial action plan; and
(6) reevaluate and revise the financial plan.
Obj. 2 Develop personal Financial goals should (1) be realistic; (2) be stated in specific,
financial goals. measurable terms; (3) have a time frame; (4) indicate the type of
action to be taken.
Obj. 3 Assess personal and Financial decisions are affected by personal factors (income,
economic factors that household size, health, values, and goals), social factors
influence personal (demographic trends and government actions), and economic
financial planning. factors (prices, interest rates, and employment opportunities).
Obj. 4 Determine the personal Every decision involves a trade-off; the selection of one alternative
and financial prevents the selection of another. Personal opportunity costs may
opportunity costs include time, effort, and health. Financial opportunity costs are
associated with based on the time value of money. Future value and present value
personal financial calculations enable you to measure the increased value (or lost
decisions. interest) that results from a saving, investing, borrowing, or
purchasing decision.
Obj. 5 Determine strategies Successful financial planning requires specific goals combined with
for achieving personal spending, savings, investing, and borrowing strategies based on
financial goals for
, different life situation. your personal situation and various social and economic factors.
INTRODUCTORY ACTIVITIES
• Ask students to comment on the opening case for the chapter (p. 3).
• Point out the learning objectives (p. 3) in an effort to highlight the key points in the chapter.
• 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. The Financial Planning Process
A. Step 1: Determine Your Current Financial Situation
B. Step 2: Develop Your Financial Goals
C. Step 3: Identify Alternative Courses of Action
D. Step 4: Evaluate Alternatives
1. Consequences of Choices
2. Evaluation of Risk
3. Financial Planning Information Sources
E. Step 5: Create and Implement a Financial Action Plan
F. Step 6: Review and Revise Your Plan
II. Developing Personal Financial Goals
A. Types of Financial Goals
1. Timing of Goals
2. Goals for Different Financial Needs
B. Goal-Setting Guidelines
III. Influences on Personal Financial Planning
A. Life Situation and Personal Values
B. Economic Factors
