HDFS 357 1st Edition Lecture 2 Outline of Last Lecture I II III The Financial Planning Process and Advantages The Six Step Procedure for Financial Planning Influences on Personal Financial Planning Outline of Current Lecture IV V Continuation of Personal Financial Planning Time Value of Money Chapter 3 I Personal Financial Records a File b Safe c Computer Current Lecture 3 Economic Factors o 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 Angeles o Housing Market o Interest Rates o Unemployment o 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 money o 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 00 o 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 Value o The amount to which current savings will increase based on a certain interest rate and a certain time period o Compounding earning interest on previously earned interest Present Value o 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 Records o Design a system for maintaining personal financial records o 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 buying o File have paper copies of Employment Records Tax Records Financial service records bank statements Consumer purchase receipts o o Credit Records Housing Records Insurance Records Investment Records Estate planning and retirement records 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 collectibles 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 copy