1 / 15

Chapter 4 Financial Decisions and Planning

Learn about needs and wants, measuring income and wealth, creating cash flow and net worth statements, making good financial choices, personal financial planning, and budgeting.

mconnors
Download Presentation

Chapter 4 Financial Decisions and Planning

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Chapter 4 Financial Decisions and Planning

  2. What Are Needs and Wants? • Needs are things you must have. • Examples: • Wants are things people desire. • Examples: • Financial resources are used to acquire goods and services. 4-1 Resources and Choices Slide 2

  3. How Are Income and Wealth Measured? • Personal cash flow statement: cash inflows and outflows • Inflows = income • Outflows = expenses • Inflows > Outflows • Outflows > Inflows 4-1 Resources and Choices Slide 3

  4. Personal Cash Flow Statement Cash Inflows Total cash inflows _______ Cash Outflows Total cash outflows _______ ____________ Net Cash Flow ________ Slide 4

  5. How Are Income and Wealth Measured? • Personal net worth statement: based on assets and liabilities • Assets = money or items of value • Liabilities = debts • Assets – Liabilities = Net Worth Slide 5

  6. How Is Wealth Measured? Net Worth 4-1 Resources and Choices Slide 6

  7. Personal Net Worth Statement • Create your own! • Use page 120 as a reference Slide 7

  8. How Can You Make Good Financial Choices? Decision-Making Process • Define the need. • List options for meeting the need. • Compare the options. • Consider the opportunity cost—the value of your next best option. • Make a decision. • Take action based on your decision. • Reevaluate your choice. 4-1 Resources and Choices Slide 8

  9. What Is Financial Planning? • Financial planning is a process of looking at your current financial situation and thinking about your future. • A financial plan has personal and financial goals along with steps and a timeline. 4-3 Personal Financial Planning Slide 9

  10. Steps of a Financial Plan • Step 1: Gather financial information • Step 2: Analyze information • Step 3: Set goals • Step 4: Develop a timeline and benchmarks • Step 5: Implement and evaluate the plan 4-3 Personal Financial Planning Slide 10

  11. Financial Plan (One Goal) 4-3 Personal Financial Planning Slide 11

  12. What Is the Purpose of Budgeting? • A budgetis a spending and saving plan. • It is based on estimated income and expenses. 4-2 Basics of Budgeting Slide 12

  13. How Do You Prepare a Budget? • Step 1: Estimate income • Step 2: Plan savings • Step 3: Estimate expenses • Variable expenses • Fixed expenses • Charitable giving • Step 4: Balance the budget 4-2 Basics of Budgeting Slide 13

  14. Personal Budget 4-2 Basics of Budgeting Slide 14

  15. Analyzing Your Budget • Variances: Differences between planned amounts and actual amounts • Reasons for variances? • Why should you analyze your budget? • Analyze budget on page 130 Slide 15

More Related