HACE 3200 1nd Edition Lecture 2 Outline of Last Lecture I Why Do We Care About Money II What Does Money Equal III The Impact of Money IV 6 Types of Spending Personalities Outline of Current Lecture I Financial Planning a Why Should You Develop a Financial Plan II Life Cycle of Financial Planning III Personal Financial Planning Process Current Lecture Financial Planning The Binds That Tie o Achieve your financial goals o Achieve financial intelligence Research the companies you invest your money in o Invest intelligently After researching several companies choose the one with the best credentials o Minimize your payments to Uncle Sam Taxes o Cover your assets Insurance The Life Cycle of Financial Planning o Stage 1 The Early Years A Time of Wealth Accumulation o Stage 2 The Golden Years o Stage 3 The Retirement Years Stage 1 The Early Years o Develop your savings plan o Set your initial goals of all lengths o Establish your long range investment strategy o Through the age 54 These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute Also a time of Debt Accumulation Good debt vs Bad Debt Good Student loans Bad revolving credit card balance Stage 2 Approaching Retirement The Golden Years o Realize intermediate term goals o Re evaluate the plan to match current goals o Plan for retirement o Ages 55 64 Stage 3 The Retirement Years o Reduce investment risk o Concentrate on preservation rather than growth of assets o Plan for the transfer of your estate Your personal will leaving belongings to loved ones o Ages 65 The Personal Financial Planning Process o Step 1 Evaluate your financial health o Step 2 Define your financial goals o Step 3 Develop a Plan of Action o Step 4 Implement your plan o Step 5 Review your progress Reevaluate and Revise your plan Step 1 Evaluate o Evaluate your current situation income spending wealth o Assess your whole financial picture Step 2 Define Your Financial Goals o Specifically define and write down your financial goals to reflect your financial and life situation o Attach a cost to each goal o Set a date for when the money is needed to accomplish the goal Step 3 Develop a Plan o Protection your ability to meet the unexpected large expenses without destroying your plan o Minimization of taxes your ability to pay as little as possible to the government Step 4 Implement Your Plan o Your plan is your road map o Use common sense and moderation don t force yourself to track every penny o Remain positive about your plan o Stay on track after the detours Step 5 Revise Your Plan o Review your progress o Match your plans to your goals o Be prepared to start over if your plan no longer meets your needs Divorce Goals The Cornerstone of a Financial Plan o Goals keep the future in mind by reminding you of the rewards o Goals entice you to keep the plan in effect o Goals provide tangibility for the question why Time Horizons for Financial Goals o Short term goals can be accomplished within a 1 year period o Intermediate term goals take 1 10 years to accomplish o Long term goals take more than 10 years to achieve Education may be the best single investment you ever make Income What Determines It o Earnings determine standard of living o Education is the key factor in determining income level o 70 of wealthy householders finished college
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