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NDSU HDFS 357 - Personal Financial Planning, The Time Value of Money, and Personal Financial Records

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3. Economic FactorsForces of Supply and Demand on pricesAs demand increases, so does the priceEx: Rent in Williston, ND tops averages in New York City and Los AngelesHousing MarketInterest RatesUnemploymentWhy do you get paid interest on your savings by a bank?-Time Value of MoneyIncreases in an amount of money as a result of interest earnedThree amounts are required to calculate the time value of money1. Principle (starting dollar amount)2. Interest Rate (usually annual)3. Time(principle) x (interest rate) x (time) = (interest earned)$100 x 5% x 1 year = $5.00In one year, you have original $100 in principle plus $5.00 in interest for a total of $105 at the end of the yearFuture ValueThe amount to which current savings will increase based on a certain interest rate and a certain time periodCompounding- earning interest on previously earned interestPresent ValueThe current value of a future amount based on a certain interest rate and a certain time periodChapter 3: Money Management Strategy: Financial Statements and Budgeting1.) Personal Financial RecordsDesign a system for maintaining personal financial recordsBenefits of:Handling daily business affairs, including payment of bills on timePlanning and measuring financial progressCompleting required tax reportsDetermining available resources for current and future buyingFile (have paper copies of:)Employment RecordsTax RecordsFinancial service records (bank statements)Consumer purchase receiptsCredit RecordsHousing RecordsInsurance RecordsInvestment RecordsEstate planning and retirement recordsSafe (locked container)Things that would be hard or impossible to replaceBirth, marriage and death certificates, copy of willCitizenship documents (Social Security Card)Adoption and custody papersMortgage papersTitles (car, property)Investment certificatesCoins/collectiblesComputerCurrent and past budgetsSummaries and banking transactionsPast income tax returnsComputerized versions of wills, estate plans, and other documentsCan scan in paper documents so you have a “back-up” copyHDFS 357 1st Edition Lecture 2Outline of Last LectureI. The Financial Planning Process and AdvantagesII. The Six-Step Procedure for Financial PlanningIII. Influences on Personal Financial PlanningOutline of Current LectureIV. Continuation of Personal Financial PlanningV. Time Value of MoneyChapter 3:I. Personal Financial Recordsa. Fileb. Safec. ComputerCurrent Lecture- 3. Economic Factorso Forces of Supply and Demand on prices As demand increases, so does the price Ex: Rent in Williston, ND tops averages in New York City and Los Angeleso Housing Marketo Interest Rateso Unemploymento Why do you get paid interest on your savings by a bank? -Time Value of Money- Increases in an amount of money as a result of interest earned- Three amounts are required to calculate the time value of moneyo 1. Principle (starting dollar amount)o 2. Interest Rate (usually annual)o 3. Time o (principle) x (interest rate) x (time) = (interest earned)o $100 x 5% x 1 year = $5.00o In one year, you have original $100 in principle plus $5.00 in interest for a total of $105 at the end of the year- Future Valueo The amount to which current savings will increase based on a certain interest rate and a certain time periodo Compounding- earning interest on previously earned interest- Present Valueo The current value of a future amount based on a certain interest rate and a certain time period Chapter 3: Money Management Strategy: Financial Statements and Budgeting - 1.) Personal Financial Recordso Design a system for maintaining personal financial recordso Benefits of: Handling daily business affairs, including payment of bills on time Planning and measuring financial progress Completing required tax reports Determining available resources for current and future buyingo File (have paper copies of:) Employment Records Tax Records Financial service records (bank statements) Consumer purchase receipts Credit Records Housing Records Insurance Records Investment Records Estate planning and retirement recordso Safe (locked container) Things that would be hard or impossible to replace Birth, marriage and death certificates, copy of will Citizenship documents (Social Security Card) Adoption and custody papers Mortgage papers Titles (car, property) Investment certificates Coins/collectibleso Computer Current and past budgets Summaries and banking transactions Past income tax returns Computerized versions of wills, estate plans, and other documents Can scan in paper documents so you have a “back-up”


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NDSU HDFS 357 - Personal Financial Planning, The Time Value of Money, and Personal Financial Records

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