Glencoe Business and Personal Finance
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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
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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
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Chapter
10
Personal Financial Planning
Section 1 Financial Decisions and Goals
Personal Financial Decisions
Step 2: Develop your Financial Goals
Values
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Needs vs. Wants
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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
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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
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
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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
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Chapter
10
Personal Financial Planning
Section 1 Financial Decisions and Goals
Influences on Personal Financial Planning
Economic Factors
Market
Forces
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Financial
Institutions
Global
Influences
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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
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Health
Knowledge
Skills
Time
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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.
Chapter
10
Personal Financial Planning
Section 2 Opportunity Costs and Strategies
Financial Opportunity Cost
Save
Spend
Invest
Time Value of
Money
Time Value of money – increase in the amount of money due to
earned interest or dividends.
Glencoe Business and Personal Finance
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Chapter
10
Personal Financial Planning
Section 2 Opportunity Costs and Strategies
Future and Present Values
Future Value of
Single Deposit
Future Value of a
Series of Deposits
Present Value of a
Single Deposit
Present Value of a
Series of Deposits
Time Value of money – increase in the amount of money due to
earned interest or dividends.
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Future Values
Future value – the amount your original
deposit will be worth in the future based on
earning a specific interest rate for a specific
amount of time.
Future values are “compounding” which means
your money increases in value faster. (interest
is added to principal each year)
– Deposit of $1,000 at age 40 at 5% = $3,387 at 65
– Deposit of $1,000 at age 25 at 5% = $7,040 at 65
Glencoe Business and Personal Finance
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Present Values
Present value – the amount you would need to
deposit now in order to have a desired amount
in the future.
Principal
Principal– the original amount of money on
deposit. (For a loan, this is the amount you
borrow)
Glencoe Business and Personal Finance
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Chapter
10
Personal Financial Planning
Section 2 Opportunity Costs and Strategies
Future and Present Values
$1000 at 7% for 7
yrs = $1,606
(one deposit)
$1,000 at 5% for 6
yrs = $6,802
( 6 deposits/annuity)
Want $1,000 at 5%
in 5 yrs = $784
(one deposit now)
Take $400 each year
for 9 years at 8% =
$2,498.80
(one deposit now)
Tables on page 307
Glencoe Business and Personal Finance
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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.
Glencoe Business and Personal Finance
Plan for retirement.
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End of
Glencoe Business and Personal Finance
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