Personal Financial Planning
Calculating time value of money
1. Formula calculation 2. Time value of money tables 3. Financial calculator 4. Spreadsheet software 5. Websites and apps
Intermediate financial goal
2-5 years
Long term financial goal
5 or more years
Financial plan
A formalized report that summarizes your current finanical situation, analyzes your finanical needs and recommends future financial activities
Annuity
A series of equal deposits or payments
Bankruptcy
A set of federal laws allowing you to either re-structuring your debts or remove certain debts
Financial goal step four
Action to be taken
Durable product goal
Appliances cars sporting equipment
Consumer price index (CPI)
Computed and published by the Bureau of Labor Statistics is a measure of the average change in prices urban consumers pay for a fixed basket of goods and services
Financial goal step three
Determine timeframe
Consumable product goals
Food clothing entertainment
Values
Ideas and principles that a person considers correct desirable and important
Time value of money
Increase in an amount of money as a result of interest earned
Personal financial planning
Is the process of managing your money to achieve personal economic satisfaction
Economics
Is the study of how Will is created and distributed
Opportunity cost
Is what you give up by making a choice
Hidden inflation exist when the cost of________ rise at a higher rate than ______ items
Necessities/nonessential
Intangible purchase goals
Personal relationship health education community service leisure
Financial goal step one
Realistic goals for your life situation
The __________ premium represents the extra amount that you can expect to receive for investing in an instrument due to factors such as expected inflation in the uncertainty of getting your money back
Risk
Financial goal step two
State goals in measurable terms
Future value
The amount of money that will be available at a later date. Also referred to as compounding
Present value
The current value for a future amount based on a certain interest rate and a certain time period also referred to as discounting
Present value
The current value of an amount desired in the future
Adult life cycle
The stages in the family situation and financial needs of an adult
An important personal opportunity cost involves _________
Time
Short term financial goal
Year or less