HACE 3200 1nd Edition Lecture 2Outline of Last Lecture I. Why Do We Care About Money?II. What Does Money Equal?III. The Impact of MoneyIV. 6 Types of Spending Personalities Outline of Current Lecture I. Financial Planninga. Why Should You Develop a Financial Plan?II. Life Cycle of Financial PlanningIII. Personal Financial Planning ProcessCurrent Lecture- Financial Planning: The Binds That Tieo Achieve your financial goalso Achieve financial intelligence Research the companies you invest your money ino Invest intelligently After researching several companies; choose the one with the best credentialso Minimize your payments to Uncle Sam Taxeso Cover your assets Insurance- The Life Cycle of Financial Planningo Stage 1: The Early Years: A Time of Wealth Accumulationo Stage 2: The Golden Yearso Stage 3: The Retirement Years- Stage 1: The Early Yearso Develop your savings plano Set your initial goals of all lengthso Establish your long-range investment strategyo Through the age 54These 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 Yearso Realize intermediate-term goals o Re-evaluate the plan to match current goalso Plan for retirement o Ages 55-64- Stage 3: The Retirement Yearso Reduce investment risko Concentrate on preservation rather than growth of assetso Plan for the transfer of your estate Your personal will- leaving belongings to loved oneso Ages 65+- The Personal Financial Planning Processo Step 1: Evaluate your financial healtho Step 2: Define your financial goalso Step 3: Develop a Plan of Actiono Step 4: Implement your plano Step 5: Review your progress, Reevaluate, and Revise your plan- Step 1: Evaluateo Evaluate your current situation: income, spending, wealtho Assess your whole financial picture- Step 2: Define Your Financial Goalso Specifically define and write down your financial goals to reflect your financial and life situationo Attach a cost to each goalo Set a date for when the money is needed to accomplish the goal- Step 3: Develop a Plano Protection- your ability to meet the unexpected large expenses without destroying your plano Minimization of taxes – your ability to pay as little as possible to the government- Step 4: Implement Your Plano Your plan is your road mapo Use common sense and moderation; don’t force yourself to track every pennyo Remain positive about your plano Stay on track after the detours- Step 5: Revise Your Plano Review your progresso Match your plans to your goalso Be prepared to start over if your plan no longer meets your needs Divorce- Goals: The Cornerstone of a Financial Plano Goals keep the future in mind by reminding you of the rewardso Goals entice you to keep the plan in effecto Goals provide tangibility for the question, “why?”- Time Horizons for Financial Goalso Short-term goals can be accomplished within a 1-year periodo Intermediate-term goals take 1-10 years to accomplisho 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 livingo Education is the key factor in determining income levelo 70% of wealthy householders finished
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