Download Chapter 1 Personal Financial Planning

Section 1.1
Financial Decisions and Goals
 Definition: arranging
to spend, save, and
invest money to live comfortably, have
financial security, and achieve goals.
 Benefits
 Determine Your
Current Financial
Situation
 Example
• Disposable Income
 Develop Your
Financial Goals
 Identify Your
Options
 Evaluate Your Alternatives
• Sources of Financial Information
• Consequences of Choices
 Opportunity Cost – What is given up when making one
choice instead of another.
• Understanding Risks
 Inflation
 Interest
 Income
 Personal
 Liquidity – Ability to easily convert financial assets into
cash without loss of value.
 Create
and Use Your Financial Plan of
Action
• Increase Savings? = Cut Spending
• Increase Income? = Get part time job
 Short
Term Goals
 Intermediate
 Long Term
Goals
Goals
 Service
–
 Good
–
 Consumable goods
 Durable
goods
 Intangible
items
 Life
Situations and Personal Values
 Economic Factors
• Economics – the study of the decisions that go
into making, distributing, and using goods and
services.
• Economy – consists of the ways in which people
make, distribute and use their goods and
services.
• Supply –
• Demand –
 Federal
Reserve System
• Central banking organization of the United States.
• Primary role in the US economy is the regulation of
the money supply.
 Inflation
• Rise in the level of prices for goods and services
 Consumer
• Person who purchases goods and services
 Interest
• The price that is paid for the use of another’s money.