CSM 204 Exam 1 Review Sheet1. Personal Financing- The process of managing your money to achieve personal economic satisfaction. a. Advantages: i. Effective managing of resourcesii. Control of finance affairsiii. Improved personal relationshipsiv. Freedom from financial worry2. Level of living- the way we can afford to live today and make ends meet.Standard of living- how we want to live financially a. We often have to work to bring the two together3. Financial Success- The achievement of financial aspirations that are desired, planned, or attempted. It is defined by the individual who seeks it. 4. Financial Planning process:a. 1. Determine your current financial situation- determine your income, debt, and living expense; prepare a balance sheet and cash flow statement; match financial goals to current income and potential earning powerb. 2. Develop your financial goals- identify your feelings about money; determine the source of your money feelings; determine the effects of economy on your goals and priorities; make sure your goals are your own and are specific to your situation. c. 3. Identify alternative courses of action- possible courses of action can be: continue course of action, expand current situation, change current situation, take new course of action; creativity is vital to effective choices; “do nothing” can be a dangerous alternative.d. 4. Evaluate your alternatives- Consequences of choices: opportunity cost, the cost or tradeoff of a decision cannot always be measured in dollars. Sometimes the cost is your time. ; Evaluating risk: uncertainly is a part of every decision, gather information from financial planning sources.e. 5. Create and implement your financial action plan- develop an action plan that identifies ways to achieve financial goals; possible action plans can be increasing savings, reducing spending, or making provisions for taxes; to implement action plans you may need assistance from others.f. 6. Review and revise your plan- assess decisions regularly; make minor decisions weekly, do an overview review monthly; do a complete review annually. 5. Types of Risk:a. Inflation risk- rising or falling prices cause changes in buying power.b. Interest rate risk-changing interest rates affect your costs and your benefits.c. Income risk-the loss of a job may result from changes in consumer spending or expanded use of technology.d. Personal risk-personal decisions can affect your personal financese. Liquidity risk- how fast you can turn your investments without losingmoney6. Timing of goals:a. Short Term: such as saving for a vacation or paying off small debts, will be achieved within the next yearb. Intermediate: have a time frame from one year to five yearsc. Long Term: involve financial plans that are more than five years off, such as retirement, money for children’s college education, or the purchase of a vacation home. 7. Goal Setting guide lines:a. S- specific: so you know exactly what your goals are so you can create a plan designed to achieve those objectives. b. M- measurable: a specific amountc. A- action- oriented: providing the basis for the personal financial activities you will undertake.d. R- realistic: involving goals based on your income and life situatione. T- time-based; indicating a time frame for achieving the goal, such as three years. This allows you to measure your progress toward your financial goals. 8. Adult Life cycle- the stages in the family and financial needs of an adult- is an important influence on your financial activities and decisions.9. Personal Opportunity Cost: time, effort, healthFinancial Opportunity Cost: interest, liquidity, health10. Financial plan- a formalized report that summarizes your current financial situation, analyzes your financial needs, and recommends future financial activities. 11. Career: a commitment to a profession that requires continuous trainingJob: a position obtained to earn money12. Education and income- tradeoffs13. Competencies of successful people14. Stages of careers planning processa. 1. Assess goals and abilitiesb. 2. Evaluate employment marketc. 3. Develop resume and letterd. 4. Interview and Assess performancee. 5. Evaluate position offeredf. 6. Address career development15. Obtaining Employment Experiencea. Part time employmentb. Volunteer workc. Internshipsd. Full time employmente. Campus projects16. Career Information Sourcesa. Library and Online informationb. U of A career Centerc. Networkingd. References e. Company visitsf. www.occupasionaloutlookhandbook.com17. Opportunity cost and money management:a. Spending reduces savings potential while saving reduces amounts available for spending b. Credit use ties up future incomec. Using savings for purchases depletes savingsd. Comparison-shopping spends time but saves money.18. Financial Records Systema. Facilities handling financial affairsb. Promotes timely bill paying c. Provides benchmarks for successd. Records are available at tax timee. Improves financial and investment decisionsf. Provides a clear record of resources available19. Personal Financial statements and calculationsa. Personal finance statement- the two documents that you create yourself, the personal balance sheet and the cash flow statement. b. Net worth = what you own- amounts you owec. Cash surplus or deficit= total cash received during the time period- cash outflows during the time period20. The Budgeting process:a. 1. Setting goalsb. 2. Estimating incomec. 3. Budgeting emergency fund and savings d. 4. Budgeting fixed expensese. 5. Budgeting variable expensesf. 6. Recording spending amounts g. 7. Review spending and savings patterns21. Savings Techniquesa. Always pay yourself first through payroll deductions into savings accounts or automatic payments from checking into savings accounts or mutual funds.b. Saving regularly in 401(k) plansc. Saving coins and or spending less in certain budget categories and the making periodic deposits to savings. 22. Purpose of taxes- to finance government activities.23. Types of taxes: a. 1. Taxes on purchases- sales tax and exercise taxb. 2. Taxes on property-real estate property tax and personal property taxc. 3. Taxes on wealth- federal estate tax, state inheritance taxesd. 4. Taxes on earnings- income, social security tax24. Tax Information Source:a. The IRS has methods for assistance i. Publications and forms 1-800-tax-formii. www.irs.goviii. Recorded messages 1-800-829-4477iv. Phone hot line 1-800-829-1040v. Walk-in