Setting Financial Goals

1. Setting Financial Goals Personal Finance

2. Recap – Financial Decisions • Financial Decisions are influenced by • ________ • ________ • ________ • Values enable us to make ________ that reflect what is important to us

3. Well-being can be divided into five domains Physical _________ Intellectual _________ Emotional

4. What contributes to financial well-being? Physical Financial Intellectual Social Emotional Your financial outlook

5. Set Goals! Goal – something you are working to _________ or _________ within a defined period of time. Goals need to be realistic, have a target _______, and if possible, an associated _______. Setting goals is like creating a map for a ______ ______

6. How can goal setting benefit you? Creates a _____ and provides guidance for your _______ Helps make the _____ you want to live a reality Helps with ________ making Helps _______ well-being

7. Is it realistic to write goals for every decision you make? Daily decisions that don’t require a lot of thought Require thought, effort, time, personal discipline What to do after high school graduation What to wear in the morning Is it realistic to write goals for_________decisions? Important to write goals for ________decisions

8. How can goal setting help you manage your money? Financial Planning - managing _______ continuously through life in order to reach financial goals and protect assets Financial Goals - specific __________ (or goals) that are accomplished through financial planning Setting financial goals will help you make ____ ___ _____spending decisions Goal setting is important to ____________ planning Financial plans need to be ___________ during different stages in life. Financial planning helps you have __________ for saving and investing.

9. Elements of a successful goal… __________ ___________________ ________________ ______________ ______ __________

10. S = Specific • _________ defined end result • Financial goal = state ________ what plan you have for the money involved • I will reduce my debt. • I will reduce the amount I owe on my car loan.

11. M = Measurable • Determine _________ when you will know that the goal has been met • Financial goal = state the ________ dollar amount • I will reduce the amount I owe on my car loan. • I will reduce the amount I owe on my car loan by $1,000.

12. A = Attainable • Create a step-by-step plan outlining exactly how the goal can be ____________ • Financial goal = Often determined by a spending plan or _________ • I will reduce the amount I owe on my car loan by $1,000. • Lacey has an extra $100 to spend: • I will reduce the amount I owe on my car loan by $1,000 by paying an extra $100 per month

13. R = Realistic Goals need to be _________ with a target __________. Examine the ______________ of that goal Opportunity cost - the ________ of the next best alternative that you will give up as a result of your plan Trade-off - _________ up one thing for another Consider the trade-offs and opportunity costs

14. R = Realistic • I will reduce the amount I owe on my car loan by $1,000 by paying an extra $100 per week. • Lacey has determined that paying her car loan is more important than any other use of her money. The opportunity cost of paying her car loan is higher than the alternative of saving that money.

15. T = Time Bound • Specifically state ________ the goal will be reached • Consider whether your goals are short-term or long-term • Short-term goal – attained in less than one year • Long-term goal – attained in more than one year • Financial goal – make sure to consider your long-term financial needs when ____________ financial goals • I will reduce the amount I owe on my car loan by $1,000 in 10 weeks by paying an extra $100 per week. • I will reduce the amount I owe on my car loan by $1,000 by paying an extra $100 per week.

16. SMART Financial Goals Summary Specific State exactly what is to be done with the money involved Measurable Write the exact dollar amount Attainable Create a step-by-step plan outlining exactly how the goal can be reached Realistic Think through the trade-offs and opportunity costs to analyze the consequences of your goal to make sure it isn’t unattainable Time Bound Specifically state when the goal will be reached

17. Example of a SMART Financial Goal • Pay off $5,000 in credit card ________ in 2 years • It is • Specific • _____________ • Attainable • _____________ • Time Bound • Is going to college a goal or dream?

18. Show Me the Goal! The following goals do not contain all elements of a successful SMART goal Identify the missing SMART goal element(s) for each

19. Show Me the Goal! Goal I plan to save $1,500 to buy a used car. I will do this by canceling my home cable service and saving that $75 each month instead. What is missing? ________________ Why? • How long it will take ______________ has not been identified

20. Show Me the Goal! Goal I plan to save $2,500 by automatically depositing $105 from my paycheck into a savings account each month for 2 years. What is missing? _____________ Why? • What the person is ____________ has not been identified

21. Show Me the Goal! Goal I plan to save $5,000 for college living expenses in four years. What is missing? ___________________ Why? • How the goal __________ has not been identified • Because of that, it isn’t possible to tell if the goal is ___________________.

22. Show Me the Goal! Goal Instead of signing up for a cell phone plan, I will save that money to buy a new computer in one year. I will do this by saving the $50 I would have spent on the cell phone bill every month. What is missing? ____________________ Why? • The ___________ of the computer has not been identified

23. Once you write a goal, how can you ensure that you reach it? • Continually __________ your goals • What will you do if something gets in the way of reaching your goal? • Make your goals ____________ • Ask a friend or family member to hold you __________________ • Use a goal setting website • ________ yourself for reaching your goal

24. Your First Financial Goal After you get your first job, your first financial goal should be ______________ a fund for _________________. You should have 3-6 months of _________ money in order to pay your bills if you cannot _________. This emergency fund should have a high degree of _________ and ___________.

25. UNANTICIPATED/UNEXPECTED • __________ • Gifts • Lottery • Can you think of any other examples? • ___________ • Flat tire • Flooded basement • Can you think of any other examples?

26. Summary How can goal setting _______ you? What is a _______? What are the __________ of a SMART goal? Why is setting financial goals ____________?

27. Now it’s your turn! Write one SMART financial goal for yourself from your letter Ask your group members if your goal includes all of the elements of a well written goal Based upon feedback from your group, edit your goal

28. Statement of Financial Position

29. Who is wealthier? Income - $30,000 Income - $85,000 Net Worth - $35,000 Net Worth - $50,000 Let’s learn more to answer this question!

30. Indicates the monetary value of all possessions that a person or household owns, minus the total amounts owed to others The measure of financial wealth

31. A person’s __________shows the relationship between debt and net worth! If a person has a _________of debt, the person has a ______ net worth! Net Worthvs. Income Money received such as wages earned from working for pay Depends on how a person manages their income A person may have high income and low net worth or vice versa

32. How do you determine What your net Worth is? ___________________- A financial statement that describes an individual or family’s financial condition on a specified date by showing assets, liabilities, and net worth Shows a person’s net worth Similar to a net worth statement or balance sheet

33. Three components • ________ • _________ • __________

34. Calculating Net Worth

35. Net Worth – Your Personal ______________ ________________ Provides a number that can objectively measure your “financial temperature” Determine what amount of net worth you desire and then set goals to reach that amount

36. How can you increase net worth? Assets Evaluate how you manage your money Liabilities

37. Summary Assets – Liabilities = ____________ Net worth is an objective measure of wealth Net worth is your “financial ___________” to objectively measure your financial position To increase net worth you will have to _______ assets or ____________ liabilities

38. INCOME AND EXPENSE STATEMENT

39. INCOME AND EXPENSE STATEMENTNet Gain or Net Loss Goal is to have income (from sources other than drawing down savings or selling assets) greater than expenses. Net gain • Net loss

40. Spending Plan/Budget

41. What is a Spending Plan? An income and expense statement sometimes referred to as a budget which records both planned and actual income and expenses over a period of time ___________

42. Spending Plan Development Process Step 1 - _____ Current Income and Expense Step 5 - _____ and _____ Adjustments Develop the spending plan Maintain the spending plan Step 4 - _______ and Control Step 2 - ______ Your Spending Plan Step 3 - _____ Money to Each Category

43. Spending Plan Guide What variables may cause these percentages to be different?

44. Net Gain or Net Loss? • Add more money to savings or another expense • Increase income • Decrease expenses • Both

45. Summary Step 1 - Track Current Income and Expense Step 5 - Evaluate and Make Adjustments • A spending plan is an important financial planning tool • Helps achieve goals • Make your spending plan work for you • Make sure to control, evaluate, and adjust your spending plan Step 4 - Implement and Control Step 2 - Personalize Your Spending Plan Step 3 - Allocate Money to Each Category