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Chapter 28
Managing Personal
Finances
Section 28.1
Personal Financial
Planning
Read to Learn
Explain the steps involved in the financial
planning process.
Identify sources of financial information.
Discuss sources of risk.
Discuss the consequences of choices.
The Main Idea
Financial planning provides a solid foundation for
making financial decisions. It involves looking at
your financial position and setting goals.
Key Concepts
Making Financial Decisions
Sources of Financial Information
Understanding Risk
Consequences of Choices
Key Terms
personal
financial
planning
spending, saving, and investing your
money so you can enjoy the kind of
life you want, along with financial
security
goals
the things you want to accomplish
Key Terms
opportunity
cost
what you give up when you make
one choice instead of another
Making Financial Decisions
Personal financial
planning will help you
reach your goals.
personal financial planning
spending, saving, and
investing your money so you
can enjoy the kind of life you
want, along with financial
security
goals
the things you want to
accomplish
Graphic Organizer
The Six Steps of Financial Planning
1
Determine
Your
Financial
Situation
2
Develop
Your
Financial
Goals
3
Identify
Possible
Courses
of Action
4
5
6
Evaluate
Your
Alternatives
Implement
a Financial
Plan of
Action
Review
and Revise
Your Plan
Step 1: Determine Your Financial Situation
Make a list to help you
determine your
financial situation.
My Financial Situation
 Savings
 Monthly Income
 Monthly Expenses
 Debts
Step 2: Develop Your Financial Goals
You need to think
about your attitude
toward money.
My Attitude
Toward Money
 Do I want to spend money
now or save for the future?
 What are my wants and
needs?
 Do I want to get a job right
after high school or
continue my education?
Step 3: Identify Possible Courses of Action
Consider your options before making a
decision.
Step 4: Evaluate Your Alternatives
Use sources of financial information to help
you evaluate your alternatives.
Consider the consequences and risks of each
decision you make.
Step 5: Implement a Financial Plan of Action
A plan of action is a list of ways to achieve
your financial goals.
If your goal is to increase your savings, a plan
of action could be to cut back on spending, or
get a part-time job.
Step 6: Review and Revise Your Plan
As you get older, your finances and needs will
change.
You should reevaluate and revise your
financial plan every year.
Making Money
The most common way for teens to earn money
is through an allowance. However, many teens
do not get an allowance. Some other ways to get
money may be by doing work around the house,
or as a reward for receiving good grades.
Sources of Financial Information
Sources of financial information include:
The Internet
Magazines
Newspapers
Graphic Organizer
Sources of Financial Information
Internet
Companies put
facts about their
company and
financial situation
on their Web sites.
Magazines
• BusinessWeek
• Time
• U.S. News &
World Report
Newspapers
• Wall Street
Journal
• New York Times
• Financial Times
Understanding Risk
When you make a financial decision, you also
accept certain risk.
You need to understand which risks you can
afford to take and which ones you cannot.
Understanding Risk
Insurance and diversification of your assets are
two ways to minimize risk.
Graphic Organizer
Inflation
Risk
Liquidity
Risk
Types of
Financial Risk
Personal
Risk
Interest Rate
Risk
Income
Risk
Consequences of Choices
An opportunity cost
is sometimes called a
tradeoff.
opportunity cost
what you give up when
you make one choice
instead of another
Consequences of Choices
Choosing between alternatives involves not
only knowing what you forgo.
Choosing between alternatives also involves
knowing what you gain.
1. What are some examples of long-range goals
that consumers may have?
getting a college education, buying a car, or
starting a business
2. List the steps of the financial planning
process.
determine your financial situation, develop your
financial goals, identify alternative courses of
action, evaluate your alternatives, create and
use your financial plan of action, and review
and revise your plan
3. Name some types of financial risk.
inflation risk, interest rate risk, income risk,
personal risk, and liquidity risk
End of
Chapter 28
Managing Personal
Finances
Section 28.1
Personal Financial
Planning