introduction to business and marketing. explain the steps involved in the financial planning...
TRANSCRIPT
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Managing Personal Finances
Introduction to Business and Marketing
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ObjectivesExplain the steps involved in the
financial planning process.
Identify sources of financial information.
Discuss sources of risk.
Discuss the consequences of choices.
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The Main Idea Financial planning provides a solid foundation for
making financial decisions. It involves looking at
your financial position and setting goals.
Read “Teach Your Teens Financial Responsibility”
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Personal financial planning will
help you reach your goals
Includes spending, saving and
investing your money in a way
that provides enjoyment AND
financial security
Making Financial Decisions
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Financial Planning StepsDetermine Your
Financial Situation
Develop Your Financial Goal
Identify Possible Courses of
Action
Evaluate Your Alternatives
Implement a Financial Plan of
Action
Review and Revise Your Plan
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Make a list to help you
determine your
financial situation
A good way to
estimate your
expenses is to
carefully track them
for one month
Step 1: Determine Your Financial Situation
Savings
Monthly Income
Monthly Expenses
Debts
My Financial Situation
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Think about your attitude toward money
◦Do you want to spend money now or save for
the future?
◦What are your wants and needs?
◦Do you want to get a job right after high
school or continue your education?
Step 2: Develop Your Financial Goals
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Consider your options before
making a decision
Generally you will have
several possible courses of
action
Step 3: Identify Possible Courses of Action
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Use sources of financial
information to help you
evaluate your alternatives.
Consider the consequences
and risks of each decision you
make.
Step 4: Evaluate Your Alternatives
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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 5: Implement a Financial Plan of Action
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As you get older, your finances
and needs will change.
You should reevaluate and revise
your financial plan every year.
Step 6: Review and Revise Your Plan
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The Internet
Magazines
Newspapers
Sources of Financial Information
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When you make a financial decision, you also accept certain risk.
Understanding Risk
Types of Financial Risk
Inflation RiskInflation is the general increase in the cost of goods. If you wait to purchase you could risk the price increasing
Interest Rate RiskInterest rates rise and fall, which may affect the cost of borrowing or the profit you earn off investing
Income Risk Your income may rise and fall (lose your job or get a better job)
Personal Risk Some choices increase risk
Liquidity RiskLiquidity is the ability to convert your recourses into cash easily without losing value
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Insurance can minimize risk by protecting
investments like houses and cars
Diversification – spreading wealth out over
different types of investments
Minimizing Risk
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An opportunity cost is sometimes called a
tradeoff.
◦ It is whatever you give up when you make a
choice
Consequences of Choice
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Lawn and Order - Why its Important to Save
Debt of a Salesman - Debt and Borrowing M
oney