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Slide 1
Financial Decisions and
Planning
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Slide 2
What Are Needs and Wants?
• Needs are things you must have.o Examples: food, clothing, shelter
• Financial resources are used to acquire goods and services.
• Wants are things people desire.o Examples: new cars,
vacations, luxury items
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Slide 3
How Are Income and Wealth Measured?• Personal cash flow statement lists cash
inflows and outflows.o Inflows = incomeoOutflows = expenses
• Personal net worth statement shows a person’s net worth based on assets and liabilities.o Assets = money or items of valueo Liabilities = debts
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How Is Wealth Measured?
4-1 Resources and Choices
PERSONAL NET WORTH STATEMENT
Assets Liabilities
Cash and checking account $ 452.56 Car loan $1,100.00
Savings account 500.00 Credit card debt 200.98
Savings bond 300.00 Total liabilities $1,300.98
Baseball card collection 100.00
Computer, iPod, games 300.00
Car, current value 3,000.00 Net Worth
Total assets $4,652.56 Assets minus liabilities 3,351.58
Total liabilities and net worth $4,652.56
Net Worth
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How Can You Make Good Financial Choices?Decision-Making Process1.Define the need.
2.List options for meeting the need.
3.Compare the options.o Consider the opportunity cost—the value of your
next best option.
4.Make a decision.
5.Take action based on your decision.
6.Reevaluate your choice.
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Slide 6
Building Communications Skills
Reading Vocabulary• Try to learn the meaning of a word by seeing
how it is used in a sentence.• Divide a long word into parts.• Look up a word in the dictionary.• Look up a word in the glossary.• Practice using new words in conversation or
writing.
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Slide 7
What Is the Purpose of Budgeting?• A budget is a spending
and saving plan.
• It is based on estimated income and expenses.
• Use spreadsheet software to prepare a budget.
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Slide 8
How Do You Prepare a Budget?
• Step 1: Estimate income
• Step 2: Plan savings
• Step 3: Estimate expenseso Variable expenseso Fixed expenseso Charitable giving
• Step 4: Balance the budget
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Slide 9
Personal Budget
Income Weekly Monthly Yearly
Work (part-time) $30.00 $120.00 $1,440.00Allowance for household chores 10.00 40.00 480.00Lunch money allowance 15.00 60.00 720.00Savings account interest .50 2.00 24.00Total income $55.50 $222.00 $2,664.00
Savings
Deposit to savings account $ 5.50 $ 22.00 $ 264.00
Expenses
Gifts $ 5.00 $ 20.00 $ 240.00Clothes and shoes 15.00 60.00 720.00Loan payment to parents 5.00 20.00 240.00Lunches 15.00 60.00 720.00Entertainment/miscellaneous 10.00 40.00 480.00Total expenses $50.00 $200.00 $2,400.00
Total savings and expenses $55.50 $222.00 $2,664.00
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Slide 10
Focus On . . .
Philanthropy • Philanthropy is a form of charitable giving.• It supports a societal cause.• It often lasts for an extended period of time.• It is the primary source of funding for the fine
arts, performing arts, and most religious and humanitarian causes.
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Slide 11
Success Skills
Dealing With Conflict• Stop and take a ten-second time out.
o Ask “what is happening here?”o Listen rather than talk.
• Suggest that you continue your talk later.• Focus on the problem, not the person.• Be objective.• Be willing to compromise when
appropriate.
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Slide 12
What Is Financial Planning?
• Financial planning is a process of looking at your current financial situation and thinking about your future.
• A financial plan has personal and financial goals along with steps and a timeline.
• Review and update your financial plan periodically.
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Slide 13
What Is Financial Planning?
• Step 1: Gather financial information
• Step 2: Analyze information
• Step 3: Set goalso Personal and financial
• Step 4: Develop a timeline and benchmarks
• Step 5: Implement and evaluate the plan
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Slide 14
Financial Plan (One Goal)
FINANCIAL PLAN
Net worth on April 1, 20--: $525.56
Personal Goal Financial Goal Benchmarks Timeline
Live in my own house in the country.
Buy a house in the country.
1. Save money for a down payment ($12,000)
5 years
• Set aside $200 per month
Once per month
• Open a separate account for money saved
April 8 (next week)
• Talk to a mortgage broker to get prepared
Make an appointment for April 15
2. Get a job that provides enough income to make monthly payments
2 years
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Slide 15
Where Can You Get Good Financial Advice?• Financial planners
• Financial experts
• Newspapers and magazines
• Seminars and workshops
• Financial websites
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Slide 16
How Can You Protect Financial Resources?• Deal only with financial advisers you
know and trust.
• Keep good records.
• Verify account balances regularly.
• Guard passwords.
• Be aware of phishing.
• Guard against identity theft.