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CHAPTER 1 UNDERSTANDING PERSONAL FINANCE

CHAPTER 1 UNDERSTANDING PERSONAL FINANCE. FIN 235 SPRING 2013. The US is a fully developed market economy An efficient banking system. An active and liquid securities market. A well defined insurance network. A highly developed system for consumer and business financing

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CHAPTER 1 UNDERSTANDING PERSONAL FINANCE

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  1. CHAPTER 1UNDERSTANDING PERSONAL FINANCE FIN 235 SPRING 2013

  2. The US is a fully developed market economy An efficient banking system. An active and liquid securities market. A well defined insurance network. A highly developed system for consumer and business financing An increasing demand for financial specialists to analyze, manage, and advise. Our Mission: learning to navigate the economy for our benefit What’s this course about?

  3. UNDERSTANDING PERSONAL FINANCE • LEARNING OBJECTIVES • Use the building blocks to achieving financial success. • Understand how the economy affects your personal financial success. • Apply economic principles when making financial decisions. • Perform time value of money calculations in personal financial decision making. • Make smart decisions about your employee benefits. • Identify the professional qualifications of providers of financial advice

  4. UNDERSTANDING PERSONAL FINANCE • Building Blocks to Achieving Personal Financial Success • Spend less so you borrow less and save and invest more. • Define your own financial success and happiness • Use the building blocks of financial success. (See Fig 1-1 on page 6) • Establish your financial bases: banking, brokerage, insurance, job benefits • Define your goals (Short and Long-term), budget, reserve funds • Manage day-to-day expenses • Handling credit, savings, none household costs • Manage your investments

  5. UNDERSTANDING PERSONAL FINANCE • Learn How the Economy Impacts your Financial Success • The importance of understanding the business cycle • Learning about the indicators: leading, coincident, lagging • Understanding the impact inflation on earnings, values, investment returns • Learn to Apply Principles of Economics • Opportunity cost • Marginal utility of [additional income and living costs] • Impact of taxes on financial decisions

  6. UNDERSTANDING PERSONAL FINANCE • Time Value of Money Principles • Simple interest vs. Compound interest • Present values of future income • Future values of savings and investments

  7. UNDERSTANDING PERSONAL FINANCE • Time Value and Wealth Accumulation • There are no real “get rich quick” schemes • Wealth accumulation is the endgame of planning and discipline • Making smart decisions at work • Choosing among tax-free cafeteria plan benefits • Making health plan decisions • Using flexible spending accounts • Employer life, disability and long-term care insurance plans • Using your employer’s retirement plan • Know how and where to get help (need to have goals in mind)

  8. UNDERSTANDING PERSONAL FINANCE • Homework • Do The Math: 1, 2 a & b, 3 b & d • Being you own Personal Financial Manager: 1, 6

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