CH 1 - Understanding The Financial Planning Process
CH 1 - Understanding The Financial Planning Process
CH 1 - Understanding The Financial Planning Process
Planning Process
Chapter 1
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system
for classroom use.
Learning Goals
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system
for classroom use.
How Will this Affect Me
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system
for classroom use.
Financial Facts or Fantasies?
Your income level depends on your age, education, and career choice
Over the long run, gaining only an extra percent or two on an investment
makes little difference in the amount of earnings generated
Personal financial planning involves translating personal financial goals
into specific plans and arrangements that put these plans into action.
A savings account is an example of a tangible asset because it
represents something on deposit at a bank or other financial institution.
An improved standard of living is one of the payoffs of sound personal
financial planning.
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system
for classroom use.
Personal Financial Planning
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system
for classroom use.
Six-Steps
Financial Planning Process
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system
for classroom use.
Rewards of Sound Financial Planning
Flexibility
Improved Standard of Living
Spend money more wisely
Accumulate Wealth
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system
for classroom use.
Organizational Planning Model
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system
for classroom use.
The Average American,
Financially Speaking
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system
for classroom use.
Financial Goals
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system
for classroom use.
Financial Goals Myths
Long-term
6 years or more
Intermediate-term
the next 2-5 years
Short-term
in the next year
The Personal Financial Planning
Life Cycle
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system
for classroom use.
Retirement Planning
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system
for classroom use.
How a $1,000 Investment
Grows over Time
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system
for classroom use.
Special Planning Concerns
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system
for classroom use.
Two Income Family
Facts or Fantasies
Two-income couples account for the majority of U.S.
households
Often a second income does not add as much as expected to
the bottom line
Two-income couples should have two checking accounts to
keep earnings separate
Second income is used only for investments
Two-income couples have more stress and spend less time
with family
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system
for classroom use.
Professional Financial Planner
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system
for classroom use.
Using Professional Financial Planners
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system
for classroom use.
Financial Planners Designations
Exhibit 1.9
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system
for classroom use.
The Planning Environment
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system
for classroom use.
Business Cycle – Four stages: Expansion,
Peak, Contraction, Trough
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system
for classroom use.
What Determines your
Personal Income
Your Education
Where you Live
Your Career
Examples of Average Annual Salary
Accountants -- $73,760
Computer Programmer - $82,690
Lawyer - $133,470
Financial analyst - $92,250
Teacher, elementary - $56,830
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system
for classroom use.
How Age and Education
Affect Annual Income
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system
for classroom use.