Unit 1: Financial plan

1. Unit 1: Financial plan NEFE High School Financial Planning Program

2. Most people don’t plan to fail…They simply fail to plan!”

3. Wants • Have your parents ever refused to buy you some things you really wanted? • New clothes • Tickets to a show • Latest electronics • Maybe you just didn’t have enough money to buy these items yourself

4. Sample Wants and Needs WANTS • An iPod • Video game • Cell phone • Hot car • A mansion • ______________ • ______________ NEEDS • Food for breakfast • Clothes for school • Transportation to school or work • A place to live • ______________ • ______________

5. What Are Your Goals? • Make a list of all the goals you have for yourself – you have one minute • Narrow this list down to six goals – you have 45 seconds • Now pick your top three goals – you have 20 seconds • Last time, pick your number one, top goal – you have 10 seconds

6. Financial Planning • A process of: • Setting goals • Developing a plan to achieve your goals • Putting the plan in action • Creating a roadmap for everything you do with your money • Spending • Saving • Using Credit • Investing

7. Purpose of Financial Planning • To live comfortably • Buy things without getting stressed out • Things that you need • Things that you want

8. 5 Steps of Financial Planning • Set SMART Goals • Specific • Provide the details • Measurable • Put a price on it • Attainable • Within reach • Realistic • Practical • Time Bound • Clear time frame • Analyze information • Create a plan • Implement the plan • Monitor and modify the plan

9. Two Teen Millionaires • Meet Cameron and Ashley • Two teens who set goals and made millions

10. Step 1: Set SMART Financial Goals • Begin with an end in mind • Visualize a picture of your desired outcome • Set priorities in order to make good choices • Should be meaningful • Write them down • Consider needs and wants • Needs • Basic things that we must have to survive • Wants • Things that make life more fun • Can live without them

11. SMART Goals • Are your goals SMART? • Realistic • I want to be a millionaire in two years • I want to lose ten pounds in a week • Attainable • Are these two goals attainable? • Can we reach these goals during our time frame?

12. Examples of SMART Goals • S - Specific • I want to go to Bermuda on vacation this summer • M – Measurable • I will need a total of $2,400 • A – Attainable • I will need to save $400 a month for six months • R – Realistic • List how you can do this • I will cut back on going out to eat for lunch • I won’t go to the movies • I will save my birthday money • I will only buy gifts for my friends that are on sale

13. Examples of SMART Goals (continued) • R – NOT Realistic • I will save my entire paycheck each week • This means you will not pay your cellphone bill, your car insurance and you won’t buy gas for your car • This is NOT realistic • Your plan needs to be Realistic if it isn’t you won’t reach your goal • T – Time • I will need to save by July 2012 in order to plan for an August 1st trip

14. Step 1: Set SMART Financial Goals(Continued) • Needs and Wants are affected by your Values • Beliefs and practices in your life that are very important to you • Influenced by many factors such as family, friends, your way of life, education, and life experiences • Goal • Something that you aim for in your life and gives you direction—set financial goals • Time frames for goals: • Short-term: accomplish within 3 months • Intermediate: accomplish within 3 months to 1 year • Long-term: take longer than 1 year to accomplish • Delayed Gratification • Giving up something now to get something better later

15. Step 2: Analyze Your Information • Take a look at your Cash Flow • Amount you receive or earn • Money you get from allowance, a part-time job, a gift, etc. • Amount you are spending • Amount you are saving • Common dilemma • Need to save more than you receive or earn

16. Step 3: Create a Plan(Your Financial Roadmap) • Items that can affect your spending • Spending log • Values • Habits • Opinions of family and friends • Online activity • Advertisements

17. Are you an Oscar or a Felix? • It is said that we have both an Oscar and a Felix living inside our brains. • Oscar, similar to the Oscar in “The Odd Couple,” is “unstructured, reactive, driven by whims, and lives by the credo, ‘rules are made to be broken.’” • Felix, on the other hand, “loves lists, sets goals, and plans everything he does. He lives by the clock and never deviates from his rules.” • When it comes to working with numbers, who rules your brain — Oscar or Felix? Why?

18. Step 3: Create a Plan (Continued)(Your Financial Roadmap) • Six Steps in the Decision Making Process • Identify your Goal • Establish Criteria (helps to eliminate choices) • What? • When? • How much are you willing to spend? • Examine your Options • Brands, features, capabilities • Weigh the Pros & Cons • Match your options with your criteria • Make your Decision • Which option best meets your criteria? • Evaluate Results • Analyze and reflect

19. Key Terms Related to the Decision Making Process • Opportunity Cost • The value of what is given up when you select one option over another option • Satellite Decisions • Smaller decisions that can result from a major decision

20. Step 4: Implement the Plan • Be a responsible spender • Accountable for your decisions and actions • Guidelines for sticking with your plan • Write your goals on an index card • Post the card somewhere visible • Discuss your goals with someone • Prior to making a purchase, decide how much you are going to spend in advance so you do not spend more

21. Step 5: Monitor and Modify the Plan • Monitor your plan once or twice per month to stay on track • Make any necessary adjustments • Unexpected instances or expenses • Change in goals • Resources change • Life changes

22. Take the Time to Create a Financial Plan