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Class 2

Class 2. Turn off cell phones and do not text. This classroom is your place of employment! Translators can be used in class, HOWEVER, dictionary books are be more accurate. Announcements. Always come to class with your Notebook Textbook Financial calculator

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Class 2

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  1. Class 2 • Turn off cell phones and do not text. This classroom is your place of employment! • Translators can be used in class, HOWEVER, dictionary books are be more accurate

  2. Announcements • Always come to class with your • Notebook • Textbook • Financial calculator • Collect group info. Student #, Name, Emails. • Hook – distribute it. • Frayer Concept Model – Financial Planning

  3. REMINDERAssigned Readings: Personal Financial Planning (1) Chapter 1 Pages: 2,3,4 Page: 6 Start reading at: Going Beyond This Book, Keeping Up to Date. Pages 7 – 12. Chapter 2 Pages 15 – 40.

  4. Review of Assignments FIN 401 Printed Copies of deadlines and details will be distributed next week. TESTS: 50% There will be two tests, each worth 25% of the final grade. Tests will include: comprehension of the readings, lecture material, homework and group exercises. IN-CLASS QUIZZES: 25% and will be unannounced (15% quiz + 10% participation = 25%) GROUP WORK: 25%(15% group assignments + 10% quality of notebooks as described in the syllabus) The formula used in the Markbook is on the next slide.

  5. Markbook

  6. STUDENT = SELF EMPLOYMENT If you work for someone else and you do not do the work, you get FIRED. If you get fired, you may go hungry. If you learn the financial skills to manage and grow your money over time, you will be a stronger citizen.

  7. Definition: Budgeting An estimate of costs, revenues and resources over a specified period, reflecting a reading of future financial conditions and goals. A budget allows us to, • Make a plan of action to achieve quantified objectives

  8. Is a standard for measuring performance, and • A device for coping with foreseeable and challenging financial situations. Can a budget help to cope with unforeseeable challenging situations?

  9. Definition: Personal Financial Planner What does a personal financial planner do? This individual, • Helps clients handle management and responsibility of their own financial portfolio.

  10. Investments in an assortment or range of securities, or other investment vehicles, to spread the risk of possible loss due to below expectations performance of one or a few of them. • Invests in securities that are intended for financial gain only and does not create a lasting interest in or effective management control over an enterprise.

  11. What is the difference between a personal financial planner and a stock broker?

  12. A stock broker usually takes control of your financial investments, with your permission, and earns an income from your investments for as long you have entrusted him to manage your money.

  13. Examples: PFP Personal Financial Planning: Living within your means. Spending less $ than you earn so that you can put some $ to work (investment may earn a profit / income. No investments = No future income. Analogy: “Short term pain = long term gain”

  14. Growth over time. Like a plant grows over the years. A small wheat field can feed a few families. If some seed is save and kept for planting in additional fields next season, the size of the yield of the harvest can gradually increase.

  15. In 15-20 years, there will more fields. When the farmer is older and ready to retire (no longer work in the fields) he can sell pieces of his productive land and the revenue used to purchase his food, shelter and utilities during his retirement.

  16. Compound InterestandFuture Values

  17. Example 2 contributed an extra 78,000 but earned has an additional 294,000 after 20 years. 294,000 – 78,000 = 216,827 investment income over 20 years by contributing an extra 50 Y each week. Can you see the power of compound interest? Is it worth it?

  18. Instead of paying 100,000 RMB for a new car, I buy a used car for 60,000 RMB and invest the balance (40,000 RMB) and earn, on average 5% each year. If I make financial decisions every year, similar to this one, “my money will begin to work for me” When will I be able to survive on the profit? (think) How long will the profit last once I start withdrawing it? How do I decide when to start investing and when to take from it? Do I keep the same investments for my entire life? When do I change the type of investments and risks?

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