Financial Planning

Your Roadmap

What does this mean?

Cheshire Cat, Alice In Wonderland

Values

• The beliefs and The beliefs and practices in your practices in your life that are life that are important to you.important to you.

• Reflect your Reflect your upbringingupbringing

• Change little Change little without constant without constant efforteffort

• FamilyFamily• FriendsFriends• WorkWork• HonestyHonesty• Self-RelianceSelf-Reliance• IndependenceIndependence• ReligionReligion

Values strongly influence our spending habits. We don’t usually spend our money on things we do not feel are important. Typically, the more important something is, the more we are willing to spend on it.

Financial Values

NEEDS vs WANTS

• NEEDS– Essentials…the basics

of life– Food– Clothing– Shelter

NEEDS vs WANTS

• WANTS– Simply increase the

quality of living

What is a goal?

• A written statement of something a person wants or needs to accomplish.– Examples

• Graduate from high school• Earn a college degree• Buy a car• Get a job• Lose 15 pounds

Why Set Goals?

• Would you set out on a cross-country adventure without a road map?

• Setting goals are like a road map– Provide direction– Focus on the important things– Keep end results in mind

Time-bound Goals

• Short Term Goals– Present to 6 months

• Improve grades at school• Make the basketball team

• Long Term Goals– 6 month and longer

• Attending college• Buy a new car

• THIS WILL VARY AMONG RESOURCES

Smart Goals

• SSpecific-pecific- State exactly what is to be done with the money.

• MMeasurableeasurable-Write the exact dollar amount

• AAttainablettainable- How can it be reached

• RRealisticealistic- Do not set goals for something unrealistic

• TTime-boundime-bound- When will the goal be met

What’s Missing?

• Financial Goal #1Financial Goal #1: I plan to save $5,000 for college living expenses in four years.

Measurable

Attainable

Specific

Financial Goal #2Financial Goal #2: I plan to save for a new computer by saving $150 each month for one year.

Financial Goal #3Financial Goal #3: I plan to save $2,500 by saving $105 each month for 2 years

What’s Missing? (continued)

• Financial Goal #4Financial Goal #4: I plan to save $1,500 to buy a used car by saving $75 from each paycheck.

Time Bound

Realistic

Financial Goal #5Financial Goal #5: I plan to save $2,000 to pay for a new computer by saving my whole paycheck for the next 6 months

Decision Making

• The process of gathering and analyzing information in order to make a decision.

Factors that influence Decisions• Values• Peers• Habits• Consequences

• Family• Age• Feelings (love,

rejection, anger)• Risks

Steps for Decision Making

• Set Goals

• Analyze Information

• Create a Plan

• Implement the Plan

• Monitor and Modify the PlanSource: NEFE

The 3 Rs of Money

• RealityReality –Limited amount of time and money to use

• Responsibility-Responsibility- Handle money wisely

• RestraintRestraint – Save your money for a future goal.

Types of Influences on Financial Behavior• CulturalCultural

– Language, the way someone is raised, geographic location.

• SocialSocial– Peer pressure, fads, marketing, advertising

• EmotionalEmotional– Binge spending, comfort shopping, fear of

making a decision

Peer Pressure

• The influence others have on an individual’s personal decisions.

Forms of Peer Pressure as it Relates to Purchasing Decisions

• Friends• Newspapers• Magazines• Telephone

Directories

• Direct Mail• Commercials• Catalogs• Radio

Advertisements

Emotional Factors Related to Peer Pressure

• Gossip• Acceptance• Disapproval• Insecurities• Boyfriend/Girlfriend• Sarcasm

• Fear• Clubs• Athletics• Cliques• Rich/Poor

Scarcity

“Scarcity is an economic principle stating that because of limited resources, an economic system cannot possibly produce all the goods and services that people want; therefore, choices must be made about how the limited resources will be used.”

-Consumer Economics & Education, Glencoe, 2003

Marketing, Advertising and Sales Strategies/Techniques

People who sell products and services are fishing for

customers. They lure them in with sales, coupons, and other enticements. Unlike

fish, consumers can benefit in this situation – if they

know how to take advantage of special

purchasing opportunities.

Examples of Marketing, Advertising and Sales Strategies

• Clearance Sales• Holiday Sales• Coupons• Rebates• Sweepstakes• Contests• Sales People

• Attractive Décor• Background Music• Items purchased

most often are in back of store (bread/milk)

• Most profitable items are given prominent positions.

Opportunity Cost

• Refers to what a person gives up when a decision is made.

• This cost, often called a trade-off, may involve one or more of your resources:

• Time• Money• Effort

Click here to see what Bank High

School says about

opportunity cost.

Financial Planning

• The process of:

• defining goals

• developing a plan to achieve them

• Putting the plan into action

Benefits of Having aFinancial Plan?• You have more money and financial

security.• You know where to use money to achieve

your goals.• You have less chance of going into debt

you cannot handle.• You can help your partner and support

children if you have a family.

How do I make aFinancial Plan?

1. Determine your current financial situation.

Make a list of items that relate to your finances:

• Savings/Investments• Monthly Income (Job Earnings,

Allowance, Gifts, Interest)• Monthly Expenses• Debts

How do I make aFinancial Plan?

2. Develop your financial goals.Consider your attitude toward money.

Ask yourself the following:• How do I determine if it is

more important to spend money now, or save it for the future?

• How do your personal values affect your financial decisions?

How do I make aFinancial Plan?

3. Identify your options.• Expand the current situation.• Change the current situation.• Start something new.• Continue the same course of

action.

How do I make aFinancial Plan?

4. Evaluate your alternatives.

Consider the risks and consequences of each decision you make.

• Be aware of all sources of financial information.

• Evaluate consequences of choices, both good and bad.

• Understand risks involved with choices.

How do I make aFinancial Plan?

5. Create and use your financial plan of action.

How do I make aFinancial Plan?6. Review and revise your plan.

As we get older and our circumstances, our finances, needs, and wants will change, therefore, our financial plan must be flexible as well.