![Page 1: PFIN 4 Understanding the Financial Planning Process 1 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,](https://reader035.vdocument.in/reader035/viewer/2022070400/56649f135503460f94c27c76/html5/thumbnails/1.jpg)
PFIN 4
Understanding the Financial Planning Process
1
Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
GITMAN/ JOEHNK/ BILLINGSLEY
![Page 2: PFIN 4 Understanding the Financial Planning Process 1 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,](https://reader035.vdocument.in/reader035/viewer/2022070400/56649f135503460f94c27c76/html5/thumbnails/2.jpg)
2Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
1 Identify the benefits of using personal financial planning techniques to manage your finances
2 Describe the personal financial process and define your goals
3 Explain the life cycle of financial plans, the role they play in achieving your financial goals, how to deal with special planning concerns, and the use of professional financial planners
LEARNING OUTCOMES
PFIN4 | CH1
![Page 3: PFIN 4 Understanding the Financial Planning Process 1 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,](https://reader035.vdocument.in/reader035/viewer/2022070400/56649f135503460f94c27c76/html5/thumbnails/3.jpg)
3Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
4 Examine the economic environment’s influence on personal financial planning
5 Evaluate the impact of age, education, and geographic location on personal income
6 Understand the importance of career choices and their relationship to personal financial planning
LEARNING OUTCOMES (continued)
PFIN4 | CH1
![Page 4: PFIN 4 Understanding the Financial Planning Process 1 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,](https://reader035.vdocument.in/reader035/viewer/2022070400/56649f135503460f94c27c76/html5/thumbnails/4.jpg)
Rewards of Sound Financial Planning
4Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
• Improving your standard of living• Spending money wisely• Accumulating wealth
PFIN4 | CH1
![Page 5: PFIN 4 Understanding the Financial Planning Process 1 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,](https://reader035.vdocument.in/reader035/viewer/2022070400/56649f135503460f94c27c76/html5/thumbnails/5.jpg)
Exhibit 1.1
5Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Organizational Planning Model
PFIN4 | CH1
![Page 6: PFIN 4 Understanding the Financial Planning Process 1 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,](https://reader035.vdocument.in/reader035/viewer/2022070400/56649f135503460f94c27c76/html5/thumbnails/6.jpg)
Personal Financial Planning
6Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
• Systematic process that considers important elements of an individual’s financial affairs to fulfill financial goals
PFIN4 | CH1
![Page 7: PFIN 4 Understanding the Financial Planning Process 1 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,](https://reader035.vdocument.in/reader035/viewer/2022070400/56649f135503460f94c27c76/html5/thumbnails/7.jpg)
Exhibit 1.3
7Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Six-Step Financial Planning Process
PFIN4 | CH1
![Page 8: PFIN 4 Understanding the Financial Planning Process 1 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,](https://reader035.vdocument.in/reader035/viewer/2022070400/56649f135503460f94c27c76/html5/thumbnails/8.jpg)
Financial Goals
8Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
• Results that an individual wants to attain• Utility and cost are to be considered when
evaluating alternative qualities of life, spending patterns, and forms of wealth accumulation• Money and utility are linked to psychological
concepts of values, emotion, and personality• Financial planning is an important part of
the conflict resolution process
PFIN4 | CH1
![Page 9: PFIN 4 Understanding the Financial Planning Process 1 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,](https://reader035.vdocument.in/reader035/viewer/2022070400/56649f135503460f94c27c76/html5/thumbnails/9.jpg)
Target Dates on Financial Goals
9Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. PFIN4 | CH1
• Goal dates: Target dates in the future when certain financial objectives are expected to be completed
• Long-term goals• Indicates wants and desires for a period
covering about 6 years out to the next 30 or 40 years
• Short-term financial goals• Set each year and cover a 12-month period
• Intermediate goals• Bridge the gap between short- and long-term
goals
![Page 10: PFIN 4 Understanding the Financial Planning Process 1 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,](https://reader035.vdocument.in/reader035/viewer/2022070400/56649f135503460f94c27c76/html5/thumbnails/10.jpg)
Exhibit 1.4
10Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Personal Financial Planning Life Cycle
PFIN4 | CH1
![Page 11: PFIN 4 Understanding the Financial Planning Process 1 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,](https://reader035.vdocument.in/reader035/viewer/2022070400/56649f135503460f94c27c76/html5/thumbnails/11.jpg)
Types of Financial Planning
11Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
• Asset acquisition• Liability and insurance• Savings and investment• Employee benefit• Tax• Retirement and estate
PFIN4 | CH1
![Page 12: PFIN 4 Understanding the Financial Planning Process 1 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,](https://reader035.vdocument.in/reader035/viewer/2022070400/56649f135503460f94c27c76/html5/thumbnails/12.jpg)
Exhibit 1.5
12Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
How a $1,000 Investment Grows Over Time
PFIN4 | CH1
![Page 13: PFIN 4 Understanding the Financial Planning Process 1 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,](https://reader035.vdocument.in/reader035/viewer/2022070400/56649f135503460f94c27c76/html5/thumbnails/13.jpg)
Financial Planning Concerns
13Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
• Managing two incomes• Managing employee benefits• Managing finances in tough economic
times
PFIN4 | CH1
![Page 14: PFIN 4 Understanding the Financial Planning Process 1 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,](https://reader035.vdocument.in/reader035/viewer/2022070400/56649f135503460f94c27c76/html5/thumbnails/14.jpg)
Financial Planning Players
14Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
• Government• Source of revenue for business and wages for
consumers• Business
• Important part of the circular flow of income that sustains a free enterprise system
• Consumers• Consumer choices determine the kinds of
goods and services that businesses provide
PFIN4 | CH1
![Page 15: PFIN 4 Understanding the Financial Planning Process 1 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,](https://reader035.vdocument.in/reader035/viewer/2022070400/56649f135503460f94c27c76/html5/thumbnails/15.jpg)
Exhibit 1.6
15Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Financial Planning Environment
PFIN4 | CH1
![Page 16: PFIN 4 Understanding the Financial Planning Process 1 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,](https://reader035.vdocument.in/reader035/viewer/2022070400/56649f135503460f94c27c76/html5/thumbnails/16.jpg)
Phases of Economic Cycles
16Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. PFIN4 | CH1
![Page 17: PFIN 4 Understanding the Financial Planning Process 1 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,](https://reader035.vdocument.in/reader035/viewer/2022070400/56649f135503460f94c27c76/html5/thumbnails/17.jpg)
Exhibit 1.7
17Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Business Cycle
PFIN4 | CH1
Source: Adapted from William Boyes and Michael Melvin, Economics, 8th ed. (Cengage, 2011), p. 135.
![Page 18: PFIN 4 Understanding the Financial Planning Process 1 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,](https://reader035.vdocument.in/reader035/viewer/2022070400/56649f135503460f94c27c76/html5/thumbnails/18.jpg)
Economy
18Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. PFIN4 | CH1
![Page 19: PFIN 4 Understanding the Financial Planning Process 1 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,](https://reader035.vdocument.in/reader035/viewer/2022070400/56649f135503460f94c27c76/html5/thumbnails/19.jpg)
Factors that Determine the Personal Income
19Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
• Place of residence• Difference in salaries earned• Difference in living costs
• Career• Social, demographic, economic, and
technological trends influence decisions regarding the fields that offer best opportunities for future
PFIN4 | CH1
![Page 20: PFIN 4 Understanding the Financial Planning Process 1 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,](https://reader035.vdocument.in/reader035/viewer/2022070400/56649f135503460f94c27c76/html5/thumbnails/20.jpg)
Steps for Career Planning
20Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
• Identify interests, skills, needs, and values• Set specific long- and short-term career
goals• Develop and use an action plan to achieve
those goals• Review and revise career plans as the
situation changes
PFIN4 | CH1
![Page 21: PFIN 4 Understanding the Financial Planning Process 1 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,](https://reader035.vdocument.in/reader035/viewer/2022070400/56649f135503460f94c27c76/html5/thumbnails/21.jpg)
21Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
• Standard of living • Average propensity to
consume• Wealth• Tangible assets• Personal financial
planning• Utility• Goal dates
KEY TERMS
• Peak• Contraction• Trough• Inflation• Consumer price index• Purchasing power• Expansion• Flexible-benefit
(cafeteria) plans
PFIN4 | CH1
![Page 22: PFIN 4 Understanding the Financial Planning Process 1 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,](https://reader035.vdocument.in/reader035/viewer/2022070400/56649f135503460f94c27c76/html5/thumbnails/22.jpg)
22Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
SUMMARY
• Sound financial planning is necessary for achieving financial objectives
• Planning what to do with one’s money and spending and investing it wisely involves personal financial planning
• Financial goals help in achieving financial goals
• Financial planning constitutes a dynamic environment including business and consumers
PFIN4 | CH1
![Page 23: PFIN 4 Understanding the Financial Planning Process 1 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,](https://reader035.vdocument.in/reader035/viewer/2022070400/56649f135503460f94c27c76/html5/thumbnails/23.jpg)