Download Chapter 1 Understanding the Financial Planning Process

Chapter 1 –
Understanding the
Financial Planning Process
COPYRIGHT © 2008 by Nelson, a division of Thomson Canada Ltd
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Chapter 1 - Learning Goals
LG 1 - Identify the benefits of using personal financial
planning techniques to manage your finances.
LG 2 - Describe the personal financial planning process and
define your financial goals.
LG 3 - Explain why personal financial plans should be flexible
and responsive to your life situation.
LG 4 - Examine the external factors that can influence
personal financial planning.
LG 5 - Evaluate the impact of age, marital state, education
and geographic location on personal income.
LG 6 - Understand the importance of career choices and their
relationship to personal financial planning.
Learning
Goals
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Chapter 1 – Understanding the Financial Planning Process
Internet Links and On-line Resources
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Online
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Price Canada
Price Grabber
Investors Group Polls
Insurance Canada
Canadian Life Health
Insurance Association
Forbes Best on the Web
Stockhouse
Globeinvestor
Canoe Money
Office of the Superintendent
of Bankruptcy Canada
Statistics Canada
Inflation calendar
Online calculator
Kiersey temperament test
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Chapter 1 – Understanding the Financial Planning Process
Key Chapter Terms and Definitions
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Standard of living
Average propensity to
consume
Wealth
Financial assets
Tangible assets
Personal Financial
Planning
Financial Goals
Money
Utility
Expansion
 Recession
 Depression
 Recovery
 Gross Domestic
Product
 Inflation
Terms
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Chapter 1 – Understanding the Financial Planning Process
Definitions
Standard of Living
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The necessities, comforts and luxuries
enjoyed or desired by an individual or
group.
Also known as quality of life.
Terms
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Chapter 1 – Understanding the Financial Planning Process
Definitions
Average propensity to consume
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The percentage of each dollar of income,
on average, that a person spends for
current consumption.
Terms
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Chapter 1 – Understanding the Financial Planning Process
Definitions
Wealth
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The total value of all items owned by an
individual, such as savings accounts,
stocks, bonds, home and automobiles.
Terms
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Chapter 1 – Understanding the Financial Planning Process
Definitions
Financial assets
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Intangible assets, such as savings accounts
and securities, that are acquired for some
promised future return.
Terms
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Chapter 1 – Understanding the Financial Planning Process
Definitions
Tangible assets
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Physical assets, such as real estate and
automobiles, that can be held for either
consumption or investment purposes.
Terms
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Chapter 1 – Understanding the Financial Planning Process
Definitions
Personal Financial Planning
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Planning the covers the important elements
of an individual’s financial affairs and is
aimed at fulfilling his or her financial goals.
Terms
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Chapter 1 – Understanding the Financial Planning Process
Definitions
Financial goals
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Short-, intermediate-, and long-term
results that an individuals wants to attain,
such as controlling living expenses,
managing taxes, establishing savings and
investment programs, and meeting
retirement needs.
Terms
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Chapter 1 – Understanding the Financial Planning Process
Definitions
Money
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The medium of exchange used as a
measure of value in financial transactions.
Terms
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Chapter 1 – Understanding the Financial Planning Process
Definitions
Utility
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The amount of satisfaction an individual
receives from purchasing certain types or
quantities of goods and services.
Terms
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Chapter 1 – Understanding the Financial Planning Process
Definitions
Economic Expansion
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The phase of the economic cycle during
which the level of employment and growth
of economic activity are both high:
generally accompanied by rising prices for
goods and services.
Terms
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Chapter 1 – Understanding the Financial Planning Process
Definitions
Economic Recession
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The phase of the economic cycle during
which the level of employment falls and
growth in economic activity slows.
Terms
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Chapter 1 – Understanding the Financial Planning Process
Definitions
Economic Depression
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The phase of the economic cycle during
which the employment level is low and
economic growth is at a virtual standstill.
Terms
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Chapter 1 – Understanding the Financial Planning Process
Definitions
Economic Recovery
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The phase of the economic cycle during
which the employment level is improving
and the economy is experiencing increased
activity and growth.
Terms
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Chapter 1 – Understanding the Financial Planning Process
Definitions
Gross Domestic Product (GDP)
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The total of all goods and services
produced by workers located within a
country; used to monitor economic growth.
Terms
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Chapter 1 – Understanding the Financial Planning Process
Definitions
Inflation

A state of the economy in which the
general price level is rising due to excessive
demand or rapidly rising production costs;
usually occurs during the recovery and
expansion phases of the economic cycle.
Terms
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Chapter 1 – Understanding the Financial Planning Process
In Summary you have Learned that…
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Financial planning can make a significant improvement in
the standard of living of people from all walks of life.
The financial planning process starts with identifying
financial goals.
There are six steps in the financial planning process.
Tools such as knowledge, the time value of money and
the computer, can be applied to personal financial
problems.
Financial planning takes place in a changing economic
environment.
Personal income is determined through factors such as:
age, marital status, education, location, career.
Summary
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Chapter 1 – Understanding the Financial Planning Process
THE END!
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