Click here to advance to the next slide.. Chapter 28 Managing Personal Finances Section 28.1 Personal Financial Planning.

Click here to advance to the next slide.

Chapter 28

Managing PersonalFinances

Section 28.1

Personal FinancialPlanning

Read to Learn

Explain the steps involved in the financial planning process.

Identify sources of financial information.

Discuss sources of risk.

Discuss the consequences of choices.

The Main Idea

Financial planning provides a solid foundation for making financial decisions. It involves looking at your financial position and setting goals.

Key Concepts

Making Financial Decisions

Sources of Financial Information

Understanding Risk

Consequences of Choices

Key Terms

personalfinancialplanning

goals

spending, saving, and investing your money so you can enjoy the kind of life you want, along with financial security

the things you want to accomplish

Key Terms

opportunitycost

what you give up when you make one choice instead of another

Making Financial Decisions

Personal financial planning will help you reach your goals.

personal financial planningspending, saving, and investing your money so you can enjoy the kind of life you want, along with financial security

goalsthe things you want to accomplish

Graphic Organizer

1 2 3 4 5 6

DetermineYour FinancialSituation

DevelopYourFinancialGoals

IdentifyPossibleCoursesof Action

EvaluateYourAlternatives

Implementa FinancialPlan ofAction

Reviewand ReviseYour Plan

The Six Steps of Financial Planning

Step 1: Determine Your Financial Situation

Make a list to help youdetermine yourfinancial situation.

Savings

Monthly Income

Monthly Expenses

Debts

My Financial Situation

Step 2: Develop Your Financial Goals

You need to think about your attitude toward money. Do I want to spend money

now or save for the future?

What are my wants and needs?

Do I want to get a job rightafter high school orcontinue my education?

My Attitude Toward Money

Step 3: Identify Possible Courses of Action

Consider your options before making a decision.

Step 4: Evaluate Your Alternatives

Use sources of financial information to help you evaluate your alternatives.

Consider the consequences and risks of each decision you make.

Step 5: Implement a Financial Plan of Action

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 6: Review and Revise Your Plan

As you get older, your finances and needs will change.

You should reevaluate and revise your financial plan every year.

Making Money

The most common way for teens to earn money is through an allowance. However, many teens do not get an allowance. Some other ways to get money may be by doing work around the house, or as a reward for receiving good grades.

Sources of Financial Information

Sources of financial information include:

The Internet

Magazines

Newspapers

Graphic Organizer

Sources of Financial Information

Internet Magazines Newspapers

Companies put facts about their company and financial situation on their Web sites.

• BusinessWeek

• Time

• U.S. News & World Report

• Wall Street Journal

• New York Times

• Financial Times

Understanding Risk

When you make a financial decision, you also accept certain risk.

You need to understand which risks you can afford to take and which ones you cannot.

Understanding Risk

Insurance and diversification of your assets are two ways to minimize risk.

Graphic Organizer

Types ofFinancial Risk

InflationRisk

Interest RateRisk

IncomeRisk

PersonalRisk

LiquidityRisk

Consequences of Choices

An opportunity cost is sometimes called a tradeoff.

opportunity costwhat you give up when you make one choice instead of another

Consequences of Choices

Choosing between alternatives involves not only knowing what you forgo.

Choosing between alternatives also involves knowing what you gain.

1. What are some examples of long-range goals that consumers may have?

getting a college education, buying a car, or starting a business

2. List the steps of the financial planning process.

determine your financial situation, develop your financial goals, identify alternative courses of action, evaluate your alternatives, create and use your financial plan of action, and review and revise your plan

3. Name some types of financial risk.

inflation risk, interest rate risk, income risk, personal risk, and liquidity risk

Chapter 28

Managing PersonalFinances

Section 28.1

Personal FinancialPlanning

End of