The Financial Planning Process and AdvantagesThe process of managing your money to achieve personal economic satisfaction1. Increased effectiveness in obtaining, using and protecting financial resources2. Increased control of one’s financial affairs3. Improved personal relationships4. Sense of freedom from financial worriesThe Six-step Procedure for Financial Planning1. Determine your current financial situationEvaluate income, savings, living expenses, and debtsMatch financial goals to current income and potential earning power2. Develop your financial goalsMake sure your goals are your own and are specific to your situationGoal TimingShort-term, intermediate and long-term goalsLong-term goals should be planned in coordination with short-term and intermediate goalsGoal Setting Guidelines (SMART)Goals should be:Specific: know what your goals are to create a planMeasureable: with a specific amountAction-oriented: identify the personal financial activitiesRealistic: utilizing your income and life situationTime-based: identify the time frame to achieve the goal3. Identify alternative courses of actionPossible courses of action can be:Continue the same course of actionModify the current actionTake a new course of action“Do nothing” can be a dangerous alternative4. Evaluate your alternativesNeed to consider potential outcomes of each optionOpportunity Cost: what you give up when you make a choiceSometimes the cost is not financialUncertainty is a part of every decisionBut can minimize risk by gathering information5. Create and implement your financial action planDevelop an action plan that identifies ways to achieve financial goalsFollow through with plan6. Review and revise your planAssess plan regularlyReview at times of personal change and when social and economic factors changeInfluences on Personal Financial Planning1. Life SituationRelationship status, household type, employmentGraduation, career change, children, retirement2. ValuesInfluence our prioritiesInfluence spending and saving decisions3. Economic FactorsHDFS 357 1st Edition Lecture 1Outline of Current LectureI. The Financial Planning Process and AdvantagesII. The Six-Step Procedure for Financial PlanningIII. Influences on Personal Financial PlanningCurrent Lecture The Financial Planning Process and Advantages- The process of managing your money to achieve personal economic satisfaction- 1. Increased effectiveness in obtaining, using and protecting financial resources- 2. Increased control of one’s financial affairs- 3. Improved personal relationships- 4. Sense of freedom from financial worries The Six-step Procedure for Financial Planning- 1. Determine your current financial situation o Evaluate income, savings, living expenses, and debtso Match financial goals to current income and potential earning power- 2. Develop your financial goalso Make sure your goals are your own and are specific to your situationo Goal Timing Short-term, intermediate and long-term goals Long-term goals should be planned in coordination with short-term and intermediate goalso Goal Setting Guidelines (SMART) Goals should be: Specific: know what your goals are to create a plan Measureable: with a specific amount Action-oriented: identify the personal financial activities Realistic: utilizing your income and life situation Time-based: identify the time frame to achieve the goal- 3. Identify alternative courses of actiono Possible courses of action can be: Continue the same course of action Modify the current action Take a new course of action “Do nothing” can be a dangerous alternative- 4. Evaluate your alternativeso Need to consider potential outcomes of each optiono Opportunity Cost: what you give up when you make a choice Sometimes the cost is not financialo Uncertainty is a part of every decision But can minimize risk by gathering information- 5. Create and implement your financial action plano Develop an action plan that identifies ways to achieve financial goalso Follow through with plan- 6. Review and revise your plano Assess plan regularlyo Review at times of personal change and when social and economic factors change Influences on Personal Financial Planning- 1. Life Situationo Relationship status, household type, employmento Graduation, career change, children, retirement- 2. Valueso Influence our prioritieso Influence spending and saving decisions- 3. Economic