Unit 1: The Financial Planning Process I can… • • • • • • • • • • Learning Objectives I can explain why personal financial planning is so important. I can describe the five basic steps of personal financial planning. I can set short, intermediate, and long term goals. I can explain how career management and education can determine income level. I can calculate monthly income using hourly, overtime, and commission based rates. I can create a resume. I can create a cover letter. I can explain appropriate interview attire for a male and female. I can list what to do before, during, and after an interview. Financial planning allows you to accomplish the following: • Manage the unplanned – Plan to deal with the unexpected – Allows you to bounce back from a hard knock instead of going down for the count • Accumulate wealth for special expenses – Maps out strategies for travel, a big wedding, college for you or your children, or buying a home • Save for retirement – You do not want to be penniless at 65 – Planning will help you live a life of retirement ease. Financial planning allows you to accomplish the following (cont.): • “Cover your assets” – Protect what you’ve got • Invest intelligently – Providing basic principles of investment for smart investing • Minimize your payments to Uncle Sam: – Helps you legally reduce the amount of tax you have to pay The five basic steps to personal financial planning… • Step 1: Evaluate Your Financial Health • Step 2: Define Your Financial Goals • Step 3: Develop A Plan of Action – – – – Flexibility Liquidity Protection Minimization of Taxes • Step 4: Implement Your Plan • Step 5: Review Your Progress, Reevaluate, and Revise Your Plan Establishing Goals • Short-term- can be accomplished in a one year period – Example: new shoes, television, taking a vacation • Intermediate term- may take from 1 year to 10 years to accomplish – Saving for college, a new car, a home, a wedding • Long term- takes more than 10 years to accumulate money – A second home, retirement Financial Life Cycle • Stage 1: Early Years- time for wealth accumulation (through age 54) • Stage 2: Approaching Retirement- the Golden Years (ages 55-64) • Stage 3: The Retirement Years (age 65 and older) • Estate planning- planning for your eventual death and the passage of your wealth to your heirs • Inflation- an economic condition in which rising prices reduce the purchasing power of money What are your financial goals? Bellringer • Write the question and answer on a scratch piece of paper. We will turn these in later. • How do YOU feel career choices impact your financial health? Explain using 2 or more sentences. Research Shows… Average Yearly Income 120000 100000 99300 $ 80000 60000 40000 45400 20000 18900 25900 0 High School Dropout High School Diploma College Graduates Professional Degrees Research Shows… What A Difference A Degree Makes 4 3.5 3.4 In millions 3 2.5 2.5 2 2.1 1.5 1 1.2 0.5 0 High School Diploma Bachelors Degree Masters Degree Doctoral Degrees