HDFS 357 1st Edition L ecture 1 Outline of Current Lecture I II III The Financial Planning Process and Advantages The Six Step Procedure for Financial Planning Influences on Personal Financial Planning Current 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 debts o Match financial goals to current income and potential earning power 2 Develop your financial goals o Make sure your goals are your own and are specific to your situation o Goal Timing Short term intermediate and long term goals Long term goals should be planned in coordination with short term and intermediate goals o 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 action o 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 alternatives o Need to consider potential outcomes of each option o Opportunity Cost what you give up when you make a choice Sometimes the cost is not financial o Uncertainty is a part of every decision But can minimize risk by gathering information 5 Create and implement your financial action plan o Develop an action plan that identifies ways to achieve financial goals o Follow through with plan 6 Review and revise your plan o Assess plan regularly o Review at times of personal change and when social and economic factors change Influences on Personal Financial Planning 1 Life Situation o Relationship status household type employment o Graduation career change children retirement 2 Values o Influence our priorities o Influence spending and saving decisions 3 Economic Factors