Chapter 1 (practice quiz)
identify some common actions taken to achieve financial goals.
- well conceived spending plan - appropriate insurance - informed about taxes and investments
What are the main components of personal financial planning?
1. planning your personal finances 2. managing personal finances 3. making your purchasing decisions 4. insuring your resources 5. investing your financial resources 6. controlling your financial future
Use a financial calculator or the time value of money table to calculate the following: a. future value of $100 at 7% in 10 years b. the value of $100 a year for 6 years earning 6% c. the present value of $500 received in 8 years with an interest rate of 8%
a. $197.72 b. $697.53 c. $270.13
How do age, marital status, household size, employment situation, and other personal factors affect financial planning?
different lifestyles influence spending and saving habits
how can you use future value and present value computations to measure the opportunity cost of a financial decision?
figure out what a value now will be in the future (viseversa) and decide whether the money is needed now or if you would be better off investing
How might the uncertainty of inflation make personal financial planning difficult?
if consumer prices increase faster than income, you are not able to purchase the same amounts of goods and services; higher interest rates
what are some common risks associated with financial decisions?
inflation, interest rate, income, personal, and liquidity
why should you reevaluate your actions after making a personal financial decision?
make priority adjustments that will bring your financial goals and activities in line with your current life situation
what are common sources of financial planning information?
media, financial institutions, financial specialists
What are examples of long-term goals?
owning a house, paying off student loans
What are the main elements of every decision we make?
situation and values
what are the 5 main characteristics of useful financial goals?
specific, measurable, action oriented, realistic, time-based
What is the purpose of a financial plan?
summarize you current financial situation, analyze financial needs, recommend future financial activities
what factors influence the levels of interest rates?
supply and demand