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Glencoe Business and Personal Finance Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Chapter Personal Financial Planning 10 Why is it important to learn now how to plan for your financial future? Glencoe Business and Personal Finance Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Chapter Personal Financial Planning 10 The financial planning process can help you reach your financial goals. Glencoe Business and Personal Finance Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Chapter Personal Financial Planning 10 personal financial planning goals values liquidity service good Glencoe Business and Personal Finance consumer interest time value of money principle future value annuity present value Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Chapter Personal Financial Planning 10 Glencoe Business and Personal Finance Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 10 Personal Financial Planning Section 1 Financial Decisions and Goals Define personal financial planning. List the six steps of financial planning. Identify factors that affect personal financial decisions. Glencoe Business and Personal Finance Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 10 Personal Financial Planning Section 1 Financial Decisions and Goals Personal Financial Decisions Benefits of Planning Increased effectiveness in managing financial resources Glencoe Business and Personal Finance Debt avoidance and reduced dependence on others Improved personal relationships A sense of freedom from financial worries Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 10 Personal Financial Planning Section 1 Financial Decisions and Goals Personal Financial Decisions Step 1 Determine Your Current Financial Situation Savings Monthly Income Monthly Expenses Debts Glencoe Business and Personal Finance Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 10 Personal Financial Planning Section 1 Financial Decisions and Goals Personal Financial Decisions Develop Your Financial Goals Step 2 Needs Wants Values are the beliefs and principles you consider important, correct, and desirable. Glencoe Business and Personal Finance Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 10 Personal Financial Planning Section 1 Financial Decisions and Goals Personal Financial Decisions Step 3 Identify Alternative Courses of Action Continue the same course of action Expand the current situation Change the current situation Take a new course of action Glencoe Business and Personal Finance Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 10 Personal Financial Planning Section 1 Financial Decisions and Goals Personal Financial Decisions Step 4- Evaluate Your Alternatives – Opportunity Cost – Risk • • • • • Inflation Interest Rate Income Personal Liquidity Step 5-Create and Use Your Financial Plan of Action Step 6-Review and Revise Your Plan Glencoe Business and Personal Finance Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 10 Personal Financial Planning Section 1 Financial Decisions and Goals Developing Personal Financial Goals Short-Term Goals Intermediate Goals Long-Term Goals One year or less Two to five years More than five years Glencoe Business and Personal Finance Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Chapter Personal Financial Planning 10 Glencoe Business and Personal Finance Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 10 Personal Financial Planning Section 1 Financial Decisions and Goals Developing Personal Financial Goals Tips for Setting Your Financial Goals Glencoe Business and Personal Finance Be realistic Be specific Have a clear time frame Know what type of action to take Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 10 Personal Financial Planning Section 1 Financial Decisions and Goals Influences on Personal Financial Planning Life Situations Glencoe Business and Personal Finance Personal Situations Economic Factors Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 10 Personal Financial Planning Section 1 Financial Decisions and Goals Influences on Personal Financial Planning Economic Factors Market Forces Glencoe Business and Personal Finance Financial Institutions Global Influences Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Chapter Personal Financial Planning 10 Glencoe Business and Personal Finance Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 10 Personal Financial Planning Section 1 Financial Decisions and Goals Often people with conflicting financial values and practices experience challenges in their business or personal relationships. How could such problems be minimized or prevented using what you have learned in this chapter? Answers will vary. Sample answer: Spouses who disagree about how much to spend on certain goods or activities may have frequent arguments. To reduce arguments, they need to communicate with each other before making decisions. Glencoe Business and Personal Finance Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 10 Personal Financial Planning Section 2 Opportunity Costs and Strategies Explain the opportunity costs associated with personal financial decisions. Understand the time value of money. Identify eight strategies for achieving financial goals at different stages of life. Glencoe Business and Personal Finance Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 10 Personal Financial Planning Section 2 Opportunity Costs and Strategies Personal Opportunity Cost Personal Resources Require Management Health Knowledge Skills Time The student will investigate financial management strategies. Glencoe Business and Personal Finance Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Financial Opportunity Costs Time Value of Money Principal (Go Figure pg. 305) Interest (Go Figure pg. 305) Future Value (Go Figure pg. 306) Annuity Present Value The student will investigate financial management strategies. Glencoe Business and Personal Finance Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 10 Personal Financial Planning Section 2 Opportunity Costs and Strategies Achieving Your Financial Goals Strategies 1 5 Obtain financial records. 2 Plan how you will spend your money. 3 Borrow wisely. 6 Invest to increase current income and for long-term growth 7 Spend wisely. 4 Manage risk. 8 Save on a regular basis. Plan for retirement. The student will investigate financial management strategies. Glencoe Business and Personal Finance Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 10 Personal Financial Planning Section 2 Opportunity Costs and Strategies A common piece of financial advice is “Do not live beyond your means.” Explain the meaning of this statement. Do you think it is good advice? Why or why not? The statement means do not spend more than what you have. Students should say that it is good advice because one of the eight strategies discussed in the chapter is spending wisely. Glencoe Business and Personal Finance Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Chapter Personal Financial Planning 10 Opportunity Cost An opportunity cost is what you give up to get something else. Source: www.collegeboard.com Glencoe Business and Personal Finance Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. End of Glencoe Business and Personal Finance Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.