1.1 Business and Personal Finance Section 1.1 Decisions and Goals in Personal Finance Chapter 1 Personal Finance Planning

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Business and Business and Personal FinancePersonal Finance

Business and Business and Personal FinancePersonal Finance

Section 1.1

Decisions and Goals

in Personal Finance

Chapter 1

Personal Finance Planning

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In This Section . . .

Making Personal Financial Decisions Developing Personal Financial Goals Influences on Personal Financial Planning

What is personal finance planning?

It means spending, saving, and investing your money so you can have the kinds of life you want as well as financial security. This section discusses:

Decisions and Goals Decisions and Goals in Personal Financein Personal Finance 1.1

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What You’ll Learn How to create a financial plan

How to develop your financial goals

How to evaluate the economic factors that will affect your financial decisions


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Learning the steps in the financial planning process will give you a solid foundation for making all your financial decisions, big and small, now and in the future.

Why It’s Important

Decisions and Goals Decisions and Goals in Personal Financein Personal Finance

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Video Clip: Why Have a Financial Plan?

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Why Plan?

You have more money, know how to use money to achieve your goals, and are financially secure;

You have less chance of going into debt you can’t handle;

You can help your partner and support your children.

Some of the benefits of planning are:


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Create a Financial Plan

Step 1Step 1 Determine your current financial situation

Step 2Step 2 Develop your financial goalsStep 3Step 3 Identify alternative courses of

actionStep 4Step 4 Evaluate your alternativesStep 5Step 5 Create and use your financial plan

of actionStep 6Step 6 Review and revise your plan

The financial planning process has six steps:


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Common Cents Pay Yourself First

List your income (from your allowance or a part-time job). Set an amount to put aside every month and calculate how much you will save up in a year.

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Types of Goals

Short-term goals are those that you’ll reach in one year or less (saving to buy a computer).

Intermediate goals take two to five years to reach (saving for a down payment on a house).

Long-term goals take more than five years to reach (planning for retirement).

Goals can be defined by the time it takes to achieve them:


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Guidelines for Setting Goals

be realistic be specific have a clear time frame help you decide what type of action to take

Your financial goals should:


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Write it DownStudies show that people who write down

their goals are three times more likely to achieve them.


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Influences on Personal Financial Planning

Life situations Personal values Economic factors

Many influences affect your day-to-day decisions. The three most important are:


1.1Financial Goals and Activities

for Various Life Situations


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1.1Economic Conditions and

Financial Planning


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Check Your Understanding1) Name the six steps used to create a financial

plan.

2) What is the relationship between the timing of your goals and the type of good or service that you seek?

3) Describe two economic factors that affect financial decisions. How might these factors influence your financial planning?


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Think Critically

Why is it important to distinguish between your needs and your wants?


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End of Section 1.1


Documents

1.1 Business and Personal Finance Section 1.1 Decisions and Goals in Personal Finance Chapter 1 Personal Finance Planning