Unit 1 - Your Financial Plan: Where It All Begins

Unit 1 - Your Financial Plan: Where It All Begins

“Most people don’t plan to fail…They simply fail to plan!” 1-A

A blueprint or plan for managing all components of a person’s money. Arranging to spend, save, and invest money to live comfortably, have financial security, and achieve goals. What is Financial Planning

Financial Planning is more than budgeting and investing. Financial planning is a thinking process that helps achieve goals.

Goals Net Worth Statement Budget Insurance Plan Savings Plan Investment Plan What are the components of a Financial Plan?

You have more money and financial security. You know where to use money to achieve your goals. You have less chance of going into debt you cannot handle. Benefits of Having a Financial Plan—Which one(s) do you think is most important?

The Five-Step Financial Planning Process 1-B

STEP 1 Set SMART Goals

"If you don't know where you are going, ANY ROAD will take you there." Cheshire Cat, Alice In Wonderland

WANTS VS. NEEDS These are issues that will affect this step

Needs vs. Wants Activity Directions: Stand up if this is a need for you. Sit down if this is a want for you. • Clothing (basic) • Going to the movies • Going out to eat • Place to live (shelter) • A vehicle • A computer • An I-POD • Going to a basketball game • Food • Cell phone • Cable television • Designer clothing

Values strongly influence our spending habits. We don’t usually spend our money on things we do not feel are important. Values

Getting a good education Religious faith or beliefs Social causes Handling money responsibly Friendships/The people I hang out with ____________________________ ____________________________ Examples of Values 1-D

Incidental Goals Stepping stones to short-term goals SHORT-TERM GOALS Within three months INTERMEDIATE-TERM GOALS Three months to a year LONG-TERM GOALS More than a year Term Goals 1-E

Examples of Delayed Gratification Saving money over time to make a major purchase. Waiting to buy a new product until the price goes down. Waiting to see the latest movie until the crowds get smaller and the lines shorter. Instant vs. Delayed Gratification 1-F

S-M-A-R-T GOAL CRITERIA Specific Measurable Attainable Realistic Time-Limited 1-G

STEP 2 Analyze Information

Cash Flow A measure of the money you receive and the money you spend.

Spending Record $6.00 $35.00 $4.00 $7.00 $5.00 $8.00 $15.00 $15.00 $55.00 $40.00 $15.00 1-I

STEP 3 Create a Plan (Decide)

The process of considering and analyzing information in order to make a decision. Decision Making

Age Factors That AffectDecision Making Needs Wants What about you? Family Culture Time Society Motivation Money Values Education Habits Attitudes 1-J

Choosing one option may mean giving up altogether another goal. It’s a tradeoff! Personal example: Concert vs. Algebra Test Financial Example: $129 pair of shoes vs. saving Opportunity Cost

Decision-Making Process Identify Your Goal Establish Criteria Examine Options Weigh Pros and Cons Make a Decision Evaluate Results 1-K

STEP 4 Implement the Plan

REALITYRecognize that unless you strike it rich somehow, you’ll have limited amounts of time and money to use. That’s the Reality. RESPONSIBILITYIf you handle your money wisely, you can do a lot of good for yourself and others. On the other hand, it’s your own fault if you blow it. That’s the Responsibility. RESTRAINTRemember the idea of delayed gratification? You show Restraint when you have the self-control to save your money for a future goal instead of spending it now. 1-N

SAVING SPENDING SHARING 1-O

STEP 5 Monitor & Modify the Plan

Are your existing goals still worth doing? Is there a new goal to add to your list? Is there an existing goal you want to drop or change? Monitor and Modify

Unit 1: Your Financial Plan: Where it All Begins

Unit 1 - Your Financial Plan: Where It All Begins