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Slide 1 Financial Decisions and Planning

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Page 1: Slide 1 Financial Decisions and Planning. Slide 2 What Are Needs and Wants? Needs are things you must have. o Examples: food, clothing, shelter Financial

Slide 1

Financial Decisions and

Planning

Page 2: Slide 1 Financial Decisions and Planning. Slide 2 What Are Needs and Wants? Needs are things you must have. o Examples: food, clothing, shelter Financial

Slide 2

What Are Needs and Wants?

• Needs are things you must have.o Examples: food, clothing, shelter

• Financial resources are used to acquire goods and services.

• Wants are things people desire.o Examples: new cars,

vacations, luxury items

Page 3: Slide 1 Financial Decisions and Planning. Slide 2 What Are Needs and Wants? Needs are things you must have. o Examples: food, clothing, shelter Financial

Slide 3

How Are Income and Wealth Measured?• Personal cash flow statement lists cash

inflows and outflows.o Inflows = incomeoOutflows = expenses

• Personal net worth statement shows a person’s net worth based on assets and liabilities.o Assets = money or items of valueo Liabilities = debts

Page 4: Slide 1 Financial Decisions and Planning. Slide 2 What Are Needs and Wants? Needs are things you must have. o Examples: food, clothing, shelter Financial

How Is Wealth Measured?

4-1 Resources and Choices

PERSONAL NET WORTH STATEMENT

Assets Liabilities

Cash and checking account $ 452.56 Car loan $1,100.00

Savings account 500.00 Credit card debt 200.98

Savings bond 300.00 Total liabilities $1,300.98

Baseball card collection 100.00

Computer, iPod, games 300.00

Car, current value 3,000.00 Net Worth

Total assets $4,652.56 Assets minus liabilities 3,351.58

Total liabilities and net worth $4,652.56

Net Worth

Page 5: Slide 1 Financial Decisions and Planning. Slide 2 What Are Needs and Wants? Needs are things you must have. o Examples: food, clothing, shelter Financial

How Can You Make Good Financial Choices?Decision-Making Process1.Define the need.

2.List options for meeting the need.

3.Compare the options.o Consider the opportunity cost—the value of your

next best option.

4.Make a decision.

5.Take action based on your decision.

6.Reevaluate your choice.

Page 6: Slide 1 Financial Decisions and Planning. Slide 2 What Are Needs and Wants? Needs are things you must have. o Examples: food, clothing, shelter Financial

Slide 6

Building Communications Skills

Reading Vocabulary• Try to learn the meaning of a word by seeing

how it is used in a sentence.• Divide a long word into parts.• Look up a word in the dictionary.• Look up a word in the glossary.• Practice using new words in conversation or

writing.

Page 7: Slide 1 Financial Decisions and Planning. Slide 2 What Are Needs and Wants? Needs are things you must have. o Examples: food, clothing, shelter Financial

Slide 7

What Is the Purpose of Budgeting?• A budget is a spending

and saving plan.

• It is based on estimated income and expenses.

• Use spreadsheet software to prepare a budget.

Page 8: Slide 1 Financial Decisions and Planning. Slide 2 What Are Needs and Wants? Needs are things you must have. o Examples: food, clothing, shelter Financial

Slide 8

How Do You Prepare a Budget?

• Step 1: Estimate income

• Step 2: Plan savings

• Step 3: Estimate expenseso Variable expenseso Fixed expenseso Charitable giving

• Step 4: Balance the budget

Page 9: Slide 1 Financial Decisions and Planning. Slide 2 What Are Needs and Wants? Needs are things you must have. o Examples: food, clothing, shelter Financial

Slide 9

Personal Budget

Income Weekly Monthly Yearly

Work (part-time) $30.00 $120.00 $1,440.00Allowance for household chores 10.00 40.00 480.00Lunch money allowance 15.00 60.00 720.00Savings account interest .50 2.00 24.00Total income $55.50 $222.00 $2,664.00

Savings

Deposit to savings account $ 5.50 $ 22.00 $ 264.00

Expenses

Gifts $ 5.00 $ 20.00 $ 240.00Clothes and shoes 15.00 60.00 720.00Loan payment to parents 5.00 20.00 240.00Lunches 15.00 60.00 720.00Entertainment/miscellaneous 10.00 40.00 480.00Total expenses $50.00 $200.00 $2,400.00

Total savings and expenses $55.50 $222.00 $2,664.00

Page 10: Slide 1 Financial Decisions and Planning. Slide 2 What Are Needs and Wants? Needs are things you must have. o Examples: food, clothing, shelter Financial

Slide 10

Focus On . . .

Philanthropy • Philanthropy is a form of charitable giving.• It supports a societal cause.• It often lasts for an extended period of time.• It is the primary source of funding for the fine

arts, performing arts, and most religious and humanitarian causes.

Page 11: Slide 1 Financial Decisions and Planning. Slide 2 What Are Needs and Wants? Needs are things you must have. o Examples: food, clothing, shelter Financial

Slide 11

Success Skills

Dealing With Conflict• Stop and take a ten-second time out.

o Ask “what is happening here?”o Listen rather than talk.

• Suggest that you continue your talk later.• Focus on the problem, not the person.• Be objective.• Be willing to compromise when

appropriate.

Page 12: Slide 1 Financial Decisions and Planning. Slide 2 What Are Needs and Wants? Needs are things you must have. o Examples: food, clothing, shelter Financial

Slide 12

What Is Financial Planning?

• Financial planning is a process of looking at your current financial situation and thinking about your future.

• A financial plan has personal and financial goals along with steps and a timeline.

• Review and update your financial plan periodically.

Page 13: Slide 1 Financial Decisions and Planning. Slide 2 What Are Needs and Wants? Needs are things you must have. o Examples: food, clothing, shelter Financial

Slide 13

What Is Financial Planning?

• Step 1: Gather financial information

• Step 2: Analyze information

• Step 3: Set goalso Personal and financial

• Step 4: Develop a timeline and benchmarks

• Step 5: Implement and evaluate the plan

Page 14: Slide 1 Financial Decisions and Planning. Slide 2 What Are Needs and Wants? Needs are things you must have. o Examples: food, clothing, shelter Financial

Slide 14

Financial Plan (One Goal)

FINANCIAL PLAN

Net worth on April 1, 20--: $525.56

Personal Goal Financial Goal Benchmarks Timeline

Live in my own house in the country.

Buy a house in the country.

1. Save money for a down payment ($12,000)

5 years

• Set aside $200 per month

Once per month

• Open a separate account for money saved

April 8 (next week)

• Talk to a mortgage broker to get prepared

Make an appointment for April 15

2. Get a job that provides enough income to make monthly payments

2 years

Page 15: Slide 1 Financial Decisions and Planning. Slide 2 What Are Needs and Wants? Needs are things you must have. o Examples: food, clothing, shelter Financial

Slide 15

Where Can You Get Good Financial Advice?• Financial planners

• Financial experts

• Newspapers and magazines

• Seminars and workshops

• Financial websites

Page 16: Slide 1 Financial Decisions and Planning. Slide 2 What Are Needs and Wants? Needs are things you must have. o Examples: food, clothing, shelter Financial

Slide 16

How Can You Protect Financial Resources?• Deal only with financial advisers you

know and trust.

• Keep good records.

• Verify account balances regularly.

• Guard passwords.

• Be aware of phishing.

• Guard against identity theft.