Chapter 16
Money Management
and Financial Planning
16-1 Personal Financial Statements
16-2 Budgeting Techniques
16-3 Your Financial Future
Introduction to Business
© Thomson South-Western
LESSON 16-1
Personal Financial
Statements
Goals
 Explain the basics of money
management.
 Create a personal balance sheet.
 Develop a personal cash flow
statement.
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Introduction to Business
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Key Terms
 money management
 personal assets
 net worth
 cash flow statement
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MONEY MANAGEMENT
BASICS
 Refers to the day-to-day financial activities
associated with using limited income to
satisfy your unlimited needs and wants
 Involves getting the most for your money
through careful planning, saving, and
spending
 Involves making and using a plan for
spending
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SUCCESSFUL MONEY
MANAGERS
 Set goals
 Make wise decisions
 Buy wisely
 Live within their income
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>> C H E C K P O I N T
What are some characteristics of a wise
money manager?
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PERSONAL
BALANCE SHEET
 Assets
 Liabilities
 Net Worth
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SAMPLE PERSONAL
BALANCE SHEET
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>> C H E C K P O I N T
What are three main categories of a
personal balance sheet?
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PERSONAL CASH FLOW
STATEMENT
 Cash inflows
 Cash outflows
 Compare inflows and outflows
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SAMPLE PERSONAL
CASH FLOW STATEMENT
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>> C H E C K P O I N T
What do cash outflows represent?
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LESSON 16-2
Budgeting Techniques
Goals
 Identify purposes of a budget.
 Describe steps for preparing a budget.
 Describe characteristics of successful
budgeting.
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Key Terms
 fixed expenses
 variable expenses
 allowance
 budget variance
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BUDGET ACTIVITIES
 Live within your income
 Achieve your financial goals
 Buy wisely
 Avoid credit problems
 Plan for financial emergencies
 Develop good money management skills
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>> C H E C K P O I N T
What are the main purposes of a budget?
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Introduction to Business
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THE BUDGET PROCESS
 Set financial goals
 Plan budget categories
 Maintain financial records
 Evaluate your budget
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BUDGET CATEGORIES
 Savings
 Food
 Clothing
 Household
 Transportation
 Health and
personal care
 Recreation
and education
 Gifts and contributions
Introduction to Business
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SAMPLE FAMILY BUDGET
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>> C H E C K P O I N T
What are eight commonly used budget
categories?
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CHARACTERISTICS OF
AN EFFECTIVE BUDGET
 Must be realistic
 Should be flexible
 Should be evaluated regularly
 Must be well planned and clearly
communicated
 Should have a simple format
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BUDGETING FORMATS
 Software program
 Handwritten
 Checkbook
 Unwritten
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SAMPLE INCOME AND EXPENSE RECORD
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>> C H E C K P O I N T
What are five characteristics of an
effective budget?
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LESSON 16-3
Your Financial Future
Goals
 Describe the financial planning process.
 Explain actions for implementing a
financial plan.
 Identify actions for reviewing a financial
plan.
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Key Terms
 financial plan
 individual retirement account (IRA)
 estate planning
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ADVANTAGES OF
FINANCIAL PLANNING
 Your financial uncertainties will be reduced.
 You will gain more control of your financial
activities.
 Your family and household members will
know more in case they need to assume
control of your finances.
 Earning, spending, protecting, and saving
your resources will be more systematic.
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FINANCIAL PLANNING
PROCESS
1. Analyze your current financial condition
2. Develop financial goals that are
responsive to your vision
3. Create your financial plan
4. Implement the plan
5. Revise your financial plan
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FINANCIAL INVENTORY

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Careful review of your finances
Personal balance sheet
Personal cash flow statement
Information about current financial position

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
Income
Savings
Investments
Property
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 Living expenses
 Insurance
 Money owed
Introduction to Business
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PERSONAL FINANCIAL
FILING SYSTEM
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Personal records
Housing records
Consumer purchase records
Insurance records
Money management records
Tax records
Financial services and credit records
Investment, retirement, and estate records
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FINANCIAL LIFE CYCLE
 Teen years
 Twenties
 Later
 Retirement
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USING A
FINANCIAL PLANNER
 Questions you might ask when
choosing a financial planner
 What experience and training do you
have?
 Are you willing to supply references from
past clients?
 How are your fees determined?
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>> C H E C K P O I N T
List five recommended steps for financial
planning.
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IMPLEMENT A
FINANCIAL PLAN
 Insure current income
 Disability income insurance
 Unemployment insurance
 Plan for future income
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
Social Security
Pensions
Retirement accounts
Annuities
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>> C H E C K P O I N T
What are common sources of income
during retirement?
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REVIEW YOUR
FINANCIAL PLAN
 Revise financial goals
 Review financial activities
 Remember to save
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>> C H E C K P O I N T
What common activities are needed when
reviewing a financial plan?
Chapter 16
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Introduction to Business
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