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Personal Finance Starting Jan 15 ending april 2008

Personal Finance Starting Jan 15 ending april 2008 -...

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Personal Finance Starting Jan 15, 2008 ending April 2008 Mr. Jamison Test Notes January 15, 2008 Quality of life is closely related to standard of living (the necessities, comforts, and luxuries enjoyed or desired.) FINANCIAL PLANING PROCESS pg 7 1. Define financial goals. 2. Develop financial plans and strategies to achieve goals. 3. Implement financial plans and strategies 4. Periodically develop and implement budgets to monitor and control progress toward goals 5. Use financial statements to evaluate results of plans and budgets, (taking corrective action as required) 6. Redefined goals and revise plans and strategies as personal circumstances change (e.g. marriage, new baby, etc. Money = medium of exchange Utility = amount of satisfaction received from purchasing goods and services. UNDERSTANDING THE FINANCILA PLANNING PROCESS Money is NOT only an economic concept; it is also emotional and psychological. We all unique personalities and emotional makeup that determine how we handle money. Personal financial goals must be specifically defined – not I am going to save money. Be specific. I WILL save $100 per month. Three key players in the economic environment are Gov. Business and consumer. NOTE: Gov. levies taxes and sets regulations. A typical economic cycle contains four stages: expansion, recession, depression and recovery. Inflation is an increase in the cost of living over time and is a vital aspect of financial planning. Inflation is too much money chasing to few goods. January 17, 2008 P.E.P Ch1 Know the economic cycles – expansion, recession, depression and recovery (see page 21, Ex. 1.10) Gross domestic product GDP – the total of all the goods and services produced in a country; used to monitor economic growth
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Inflation – state of the economy in which the general process level is increasing Consumer price index CPI – a measure of inflation based on changes in the cost of consumer goods. Purchasing power - the amount of goods and services each dollar buys at a given time. Jan 22, 2008 See pg 31 for interlocking network of financial plans and statements Balance sheet – financial statement describing a person’s financial position at a GIVEN POINT in time (pg 34) Income and expense statement- fin. Statement that measures fin performance OVER TIME (PG 38) Budget – a detailed fin. Report looking FORWARD based on expected income and expenses Assets: What you own Liabilities or debts: What you owe Net Worth: The difference between your assets and liabilities Total assets - Total Liabilities = Net worth (also called equity) Cash surplus - an excess amount of income over expenses that results in increased net worth; a cash deficit is just the opposite, resulting in insufficient funds and in DECREASED net worth. Cash budget – takes into account estimated monthly cash receipts& cash expenses for the coming year.
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