325 noteschapter 1 - In order to have more money available...

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PATEL 1 CHAPTER 1 Notes Personal finance- area of study that focuses on individual and household financial decisions: budgeting, saving, spending, insurance, and investments. Personal financial planning- developing and implementing an integrated, comprehensive plan to meet financial goals, to improve financial well being, and to prepare for financial emergencies. 5-STEP Personal Financial Planning Process Step 1: Analyze your current financial Position Collect and organize all financial info, create personal financial statements, and quantitatively evaluate your current financial position. o Serves as a baseline to measure improvement Step 2: Develop Short-Term and Long-Term financial goals Identify and prioritize specific goals o Focused on your own needs? Or those of others? Step 3: Identify and Evaluate alternative strategies for achieving your goals
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Unformatted text preview: In order to have more money available in the future you must reduce spending or increase earnings Step 4: Implement a Plan for achieving your goals Decide on the best strategies for achieving your goals so you can implement the plan Step 5: Regularly Reevaluate and revise your plan as necessary Factors that influence personal financial planning decisions: Inflation-your income must rise at a faster rate than the inflation rate Measured by CPI % change in CPI= CPI2 CPI1/ CPI1 Marginal reasoning- Analysis that considers the increased benefit which would result from a particular decision. Sensitivity Analysis-Estimation of the change in outcome that results from a change in assumptions Considering what happens if you are wrong in assumption...
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This note was uploaded on 02/24/2008 for the course HADM 3325 taught by Professor Strebel during the Fall '07 term at Cornell University (Engineering School).

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