cycle of financial planning note taking guide · 2. what stage of the financial life cycle is sally...

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© Family Economics & Financial Education – Revised May 2011 – Introduction to Finance Unit – Life Cycle of Financial Planning Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona

By educators… for educators

Life Cycle of Financial Planning Note Taking Guide

Total Points Earned Name

Total Points Possible Date

Percentage Class

Many people follow a ____________________________________ during their life

BUT

Everyone has a(n) ________________________________________.

What is financial planning?

What are examples of lifestyle conditions that may

affect a person’s financial plan?

Financial goals should be SMART goals!

S A R TM

What are financial goals?

What influences a person's financial plan?

1.

2.

3.

4.

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•1

•2

High School Ages 13‐17

•1

•2

Young Adult Ages 18‐24

•1

•2

Adult With or Without

Children Ages 25‐34

•1

•2

Working Parent or Adult Ages

35‐44

•1

•2

Midlife Ages 45‐54

•1

•2

Pre‐Retirement Ages 55‐64

•1

•2

Retired Ages 65 and older

What is a life cycle?

Label and describe each financial life cycle stage:

List two life cycle needs for each age group below:

LIFE CYC

LE NEEDS

FINANCIAL LIFE CYC

LE Stage 1:

Stage 2:

Stage 3:

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Life with Sally

Total Points Earned Name

59 Total Points Possible Date

Percentage Class

Part 1: Life with Sally as a High School Student Directions: Read the following scenario and answer the questions that follow to help Sally develop a personal financial plan. Sally Smith is a 16 year‐old high school junior. She values her family and dreams of having a family of her own. She is very focused on having a successful career in the future. Sally has a part‐time job as a lifeguard at the local pool. She makes $250 per month at this job, and her only expense is paying for personal entertainment, such as going to movies with friends. She has not made any plans for after she graduates high school, but she has been saving money from her job to use for her undecided plans after graduation. Sally’s mom has helped her manage her money, and she has been able to save $1000 to use for plans after high school. Sally enjoys staying busy, so she is a member of her school’s swimming team, orchestra, and choir. Sally enjoys making music and has considered being a music teacher. However, Sally also enjoys taking woodworking classes and has considered a career in woodworking or carpentry.

1. What are three of Sally’s values that will affect her personal financial plan? (3 points)

2. What stage of the financial life cycle is Sally currently in (stage 1: basic wealth protection, stage 2: wealth accumulation, or stage 3: wealth distribution)? How will this affect Sally’s financial plan? (2 points)

3. Identify three of Sally’s current financial life cycle needs. (3 points)

4. How do Sally’s current financial life cycle needs affect her personal financial plan? (1 point)

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5. Use the information above to help Sally begin developing a financial plan by writing two SMART financial goals for her. (10 points‐ 5 points for each goal)

a. Goal 1

b. Goal 2

6. List a resource that is available to Sally to help her achieve each of her financial goals. (2 points) a. Resource for Goal 1

b. Resource for Goal 2

7. Why is it important for Sally to start her financial planning today? (1 point)

8. Identify three personal values, goals, and/or personal choices which can affect a high school student’s financial plan. (3 points)

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Part 2: Life with Sally as a Young Adult Directions: Sally is now 23 years old. After high school, she chose to attend college to become a music teacher. Sally graduated from college last month and has now accepted a full‐time job as the Choir director at a local high school. The personal choices she made during college are now affecting her financial plan. Below are two scenarios that reflect the choices Sally could have made during her years in college. Read each scenario and answer the questions that follow to examine how financial planning is influenced by personal choices. Scenario 1: During college, Sally decided to put all of her focus into school. She did not have a part‐time job, so she used her student loans and credit cards to pay for her living expenses. By the time Sally graduated college she had a very large amount of credit card debt and student loans that she now has to pay back. By only making the minimum payments, she calculated that it will take her ten years to pay back her student loans and credit card debt. With the salary from her new job as a teacher, she has no money left to use for entertainment, savings, or retirement investing after her living expenses, student loans, and credit cards have been paid for each month. Sally decided to take a second job working a few evenings per week, so she can at least have some extra money every month to use for entertainment. She has calculated that she will earn an extra $200 per month that can be used for entertainment, savings, or additional debt repayment.

9. Have Sally’s values and goals changed since she was 16 years old? Explain. (2 points)

10. Is Sally in a different financial life cycle stage at this point in her life than she was at 16? If so, how will this affect Sally’s current financial plan? (2 points)

11. Have Sally’s life cycle needs changed since she was 16? (1 point)

12. Use the information above to create new SMART financial goals for Sally at this point in her life. (10 points‐ 5 points for each goal)

a. Goal 1

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b. Goal 2

13. How has Sally’s financial plan changed since she was 16? (1 point)

14. How have Sally’s personal choices affected her financial plan? (1 point) Scenario 2: Sally used the lifeguarding skills she obtained during high school to get a part‐time job at the recreational center at her college. She started working as a lifeguard and was soon promoted to assistant manager because of her work ethic and excellent grades in her college courses. As assistant manager of the recreational center, Sally received a scholarship every semester to help pay for her school, and she was able to graduate with no student loan debt. With her new job as a teacher, she is able to pay all of her living expenses, as well as put money into savings and her retirement plan every month. She has given herself a budget of $100 per month for entertainment and other personal expenses.

15. Have Sally’s values and goals changed since she was 16 years old? Explain. (2 points)

16. Is Sally in a different financial life cycle stage at this point in her life than she was at 16? If so, how will this affect Sally’s current financial plan? (2 points)

17. Have Sally’s life cycle needs changed since she was 16? (1 point)

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18. Use the information above to create new SMART financial goals for Sally at this point in her life. (10 points‐ 5 points for each goal)

a. Goal 1

b. Goal 2

19. How has Sally’s financial plan changed since she was 16? (1 point)

20. How have Sally’s personal choices affected her financial plan? (1 point)

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Life Cycle PhotoView Directions: Interview an adult family member or friend to collect information about their personal financial life

cycle. In addition to collecting information, collect pictures of the interviewee throughout various points in their

life cycle. The pictures collected should depict events, values, goals, life cycle needs, and lifestyle conditions that

had an impact on the interviewee’s financial plan throughout their life. If pictures are not available, then clip art

and/or symbols that represent the adult’s life cycle story can be used instead. If the poster option is used, pictures

could also be drawn by hand. After the interview is completed, use the information and pictures collected to

create a poster or a PowerPoint presentation summarizing the interviewees financial life cycle. The Life Cycle

PhotoView Rubric 1.11.2.B1 is used to grade the poster and PowerPoint presentation. The poster or PowerPoint

presentation should include:

1. A short biography of the interviewee. This could be integrated throughout the poster or PowerPoint presentation. Make sure to include the interviewee’s age and relationship to the interviewer.

2. A minimum of five graphics (pictures, clipart, symbols, drawings). 3. A caption for every graphic describing its significance to the interviewee’s financial life cycle.

Possible Interview Questions:

1. How have your financial needs changed throughout your life? 2. What events in your life do you believe have had the greatest impact on your financial plan? 3. How did these events specifically affect your financial plan? 4. How have your values and goals affected your financial plan? 5. What are your current financial needs?

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Life Cycle PhotoView Rubric Name: Date:

Exemplary ‐ 3 Satisfactory ‐ 2 Unsatisfactory ‐ 1 Rating Weight Score

Participation

Participant used time well throughout the project. Participant focused on getting the project done and never distracted others during class.

Participant did not use time well throughout the project and was not focused on getting the project done. Participant never distracted others during class.

Participant did not use time well throughout the project and was not focused on getting the project done. Participant distracted others during class.

3

Content The project completes the objective of using graphics to tell the interviewee’s financial life cycle story. The project includes a short biography of the interviewee.

The project does not complete the objective of using graphics to tell the interviewee’s financial life cycle story. The project includes a short biography of the interviewee.

The project does not complete the objective of using graphics to tell the interviewee’s financial life cycle story. The project did not include a short biography of the interviewee.

3

Graphics At least five graphics are used in the project.

Only four graphics are used in the project.

Three or less graphics are used in the project.

3

Captions Each graphic contains a caption explaining its significance to the interviewee’s financial life cycle.

Some graphics contain a caption explaining its significance to the interviewee’s financial life cycle.

Few graphics contain a caption explaining its significance to the interviewee’s financial life cycle.

3

Quality of Work

The final product is high‐quality and reflects the participant’s best work and effort.

Participant made an effort to make a quality product.

Participant made little effort to create a quality final product.

3

Total Points Earned

Total Points Available 45

Percentage

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Personal Financial Plan Total Points Earned

Name

36 Total Points Possible

Date

Percentage

Class

Directions: Answer the following questions regarding your present and future personal financial plan.

Personal Financial Plan: Present

1. List three personal values which affect your current financial planning. (3 points)

2. What stage of the financial life cycle are you currently in (stage 1: basic wealth protection, stage 2: wealth accumulation, or stage 3: wealth distribution)? How will this affect your personal financial plan? (2 points)

3. What are three financial needs that you have at this point in your life cycle? (3 points)

4. How do your current financial needs affect your personal financial plan? (1 point)

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Personal Financial Plan: Future

5. Determine what goals you would like to achieve throughout your entire life. Write three of these goals as SMART goals below. To create a comprehensive future financial plan, consider every stage of the financial life cycle when writing your goals. (5 points per goal)

a. Goal 1

b. Goal 2

c. Goal 3

6. Consider the goals written in question 5. What financial tasks would you need to complete throughout your life to help you reach these goals? On the timeline provided, map out these financial needs indicating which age or age range the financial task would need to occur. Include at least six financial needs throughout the timeline. Examples of financial life cycle needs include developing and maintaining a spending plan, establishing savings, upgrading career training, investing in retirement, developing a will, etc. (6 points)

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6. Choose two of the financial needs indicated on your timeline. Explain how completing these financial tasks would help you reach your goals. (2 points)

7. Identify three events that could occur in your life in the next five years that could alter the personal financial plan you outlined for your future. (3 points)

8. Why do financial plans change throughout a person’s life cycle? (1 point)

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AGE 10 20 30 40 50 60 70

©Family Economics & Financial Educa on—Revised May 2011—Introduc on to Finance Unit—Life Cycle of Financial Planning—Page 1Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Ins tute at The University of Arizona

1.11.2.F1

Financial Planning

Life Cycle of Financial Planning

“Take Charge of Your Finances” Advanced Level

Financial needs con nually change throughout an individual’s life me. Many people

follow similar financial pa erns during their lives. However, everyone has an

individualized financial plan that is dependent on many di erent factors. Financial

planning is a tool used to achieve financial success based upon the development

and implementa on of financial goals. Financial goals are specific objec ves to be

accomplished through financial planning. It is important to use financial planning to

help a person avoid financial di cul es. By having well wri en financial goals and

implemen ng them into a financial plan, a person will have the means to achieve

the standard of living they desire. Financial goals should be SMART goals. SMART

goals include the following elements.

Factors that Influence Financial Planning

State exactly

what is to be

done with money

involved

Write the exact

dollar amount

Determine how it

can be reached

Do not set the goal

for something

una ainable or

unrealis c

Specifically state

when the goal

needs to be

reached

Specific Measureable A ainable Realis c Time Bound

An example of a SMART financial goal is: I will set aside $100 from every paycheck before using that money for

spending for the next year to develop an emergency savings fund worth $1200. This goal includes all aspects of a well

wri en SMART goal.

Many people follow a

similar financial pa ern

during their life, but

everyone has an

individualized financial

plan.

An individual’s values, goals, personal choices, major life events, lifestyle

condi ons, and life cycle needs work together to determine the details of an

individual’s financial plan. As these factors change, so does an individual’s

financial plan. Financial planning is an ongoing process that is a ected by

expected as well as unexpected events.

How can the choices you make today a ect your future

financial plan?

©Family Economics & Financial Educa on—Revised May 2011—Introduc on to Finance Unit—Life Cycle of Financial Planning—Page 2Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Ins tute at The University of Arizona

1.11.2.F1

Lifestyle condi ons are a ected by an individual’s values, goals, personal choices, major life events, and life cycle

needs. Any lifestyle condi on changes may require an individual to re evaluate their financial plan. People may

change careers, start careers, or start families late in life. For example, a single 40 year old with no children will be

focusing on di erent financial plans than a married 40 year old with 2 children. Lifestyle condi ons include:

Marital status – single, married, divorced, widowed

Employment status – employed, unemployed

Income – amount of income

Age – age of family members

Typical Financial Life Cycle and Life Cycle Needs

Although everyone has a specific financial

plan, there is a typical financial life cycle

pa ern that applies to most people.A life

cycle is defined as a series of stages

through which an individual passes during

his or her life me. This financial life cycle

pa ern includes three stages. The amount

of me it takes to move through the

financial life cycle varies for every

individual or household.

Stage 1: Basic Wealth Protec on

The beginning of the curve is when a person is protec ng their future. An individual may be

beginning to earn money, con nuing their educa on, star ng a job or career, and/or star ng a

family. The individual should be focusing on building financial security.

Stage 2: Wealth Accumula on

The second stage goes beyond financial security and is when a person is “giving the money to

self.” The head of household has reached peak earning years and is accumula ng wealth.

Stage 3: Wealth Distribu on

The last stage involves “giving the money to your chosen ones.” This stage involves the

consump on of wealth, usually during re rement.

Lifestyle Condi ons

Number of dependents – children, spouse, parents

Economic outlook – interest rates, salary rates

Educa on – educa on level of family members

Health status – health of all family members

Financial needs change throughout an individual’s life cycle. Specific financial life cycle needs are a ected

by an individual’s values, goals, personal choices, life events, and lifestyle condi ons. However, people in

certain age groups tend to have similar financial needs. For example, most high school students are

preparing for a career, and most people in re rement are finalizing their estate plans.

cycle of financial planning note taking guide · 2. what stage of the financial life cycle is sally...

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