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Personal Financial Planning

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... with debt, often due to impulsive or compulsive spending and credit cards. ... Uncontrolled use of credit cards. Medical expenses ... – PowerPoint PPT presentation

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Title: Personal Financial Planning


1
Personal Financial Planning
  • Chapter 1, Taking Charge of your Finances

2
Introduction to Financial Planning
  • Why do financial planning? It requires that you
  • Define ___________
  • Make decisions about ______________
  • Know where your money goes
  • Financial planning gives you ______________
    creates __________________ for the future

3
Take Charge of the Finl Planning Process
  • Steps
  • Determine where you are
  • Set goals
  • Develop a plan
  • Keep simple records
  • Make a budget
  • Deal with shortfalls, credit debt
  • Review your progress

4
Step 1 Where You Are Financially
  • There are two parts to where you are
    financially
  • ___________________________
  • ___________________________

5
Step 1 Where You Are Financially
  • Calculating net worth (personal balance sheet)
  • To calculate net worth, identify
  • Assets (_at_ _____________________ value)
  • Liabilities (debts)
  • Net worth assets - liabilities

6
Step 1 Where You Are Financially
  • Analyzing cash flow has two parts
  • ____________________
  • ____________________

7
Step 2 Set Goals
  • Your goals should be based on what is important
    to you.

8
Step 3 Develop a Plan
  • Primary concerns
  • Flexibility
  • Liquidity
  • Tax reduction

9
Steps 45 Records Budget
  • Records Find a ______________ system you will
    use.
  • Budget Establish _________________ on spending,
    by category.

10
Step 6 Deal With shortfalls, Credit Debt
  • Many people get into trouble with debt, often due
    to impulsive or compulsive spending and credit
    cards.

11
Step 6 Deal With shortfalls, Credit Debt
  • Before buying with credit, think
  • Can I pay it off?
  • Is it consistent with my goals?

12
Step 6 Deal With shortfalls, Credit Debt
  • In 2005 2,039,214 Americans declared bankruptcy.
  • More Americans declare bankruptcy each year than
    graduate from college.

13
Step 6 Deal With shortfalls, Credit Debt
  • Most bankruptcies result from
  • Uncontrolled use of credit cards
  • Medical expenses
  • Unexpected setback (loss of job, personal injury,
    etc)

14
Step 7 Review Progress
  • Review your situation at least annually.
  • Have goals changed?
  • Are you meeting your budget?
  • Progress toward goals?

15
Personal Financial Planning
  • Chapter 2, Building Wealth

16
Investing for Retirement
  • Will you be able to retire?
  • When?
  • At what standard of living?
  • How much will you need to retire?
  • Will social security be there for you?

17
Investing for Retirement
  • Employer-sponsored retirement
  • In 1980, 70 of full-time employees worked for
    employers with a defined ___________________
    retirement program.
  • After working 10 to 20 years for the same
    employer, you qualified (were vested) for a
    pension based on years of service and your
    salary.

18
Defined Benefit Retirement Program
  • Defined benefit your pension is based on a fixed
    formula.
  • Once vested in a defined benefit retirement
    program, your pension upon retirement (after 20
    years of employment, say) might be
  • Annual pmt 20 x 2.5 x highest years salary

19
Investing for Retirement
  • Most people retiring now worked much of their
    lives for employers that offered defined benefit
    retirement pensions.
  • However, few retirees qualify for a pension.
  • For those who retired last year, only
    _________ of income comes from defined benefit
    pensions.

20
Investing for Retirement
  • In 2008, most employers offer a defined
    ___________________________ plan
  • A portion of your salary is withheld
  • Employers sometimes match your contributions
  • Participation is often voluntary
  • _______________ decide how your funds are
    invested

21
Investing for Retirement
  • Median U.S. income
  • All married couples 50,000
  • Newly retired couples 29,000
  • Approximately 19,000 from Social Security
  • Approximately 10,000 from all other sources
    (largely part-time employment)

22
Investing for Retirement
  • Of U.S. households headed by someone 75 or older,
    43 have annual income less than 15,650.

23
Investing for Retirement
  • Do Americans save enough for retirement?
  • NO!

24
Investing for Retirement
  • The median amount of total savings and
    investments (including retirement accounts) that
    U.S. adults have is less than _________.
  • Less than 25 of working adults are very
    confident of having enough money to retire.
  • Only 42 have tried to calculate how much they
    need for retirement

25
Investing for Retirement
  • To save and invest for retirement
  • Use Payroll deduction
  • Among the benefits of payroll deduction
  • Easy
  • Employers often match your contributions
  • Uses tax shelters (401k, 403b, IRA)
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