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Unformatted text preview: 1 PERSONAL FINANCIAL PLANNING IN ACTION Developing a Personal Financial Plan Starting Point Go to www.wiley.com/college/bajtelsmit to assess your knowledge of developing a personal financial plan. Determine where you need to concentrate your effort. What Youll Learn in This Chapter Personal financial planning and decision-making strategies Factors that influence financial planning The stages of successful financial planning After Studying This Chapter, Youll Be Able To List the five steps in the personal financial planning process Examine the factors that influence personal financial planning decisions Begin to construct a comprehensive financial plan Consider opportunity costs and marginal effects in making personal finance decisions baj01275_c01_001-021.qxd 2/09/07 02:23am Page 1 2 PERSONAL FINANCIAL PLANNING IN ACTION INTRODUCTION Knowing how to manage your finances can help you be more successful in life. In this chapter, we first look at the five-step financial planning process and then the factors that influence it, and we discuss the elements of a comprehensive finan- cial plan. Finally, we explore strategies for making effective financial decisions. With this framework, you will be able to gain the tools for successful personal financial management. 1.1 The Personal Financial Planning Process In your life, youve probably already faced some financial challenges. For example, maybe youve asked yourself one or more of the following questions: Should I take out a student loan to pay for college expenses? How can I get out from under my credit card debt? Can I afford to replace my cars transmission? Where should I buy my auto insurance? Would graduate school be a good investment for me? How much should I contribute to my 401(k) retirement plan? Should I start a savings plan to fund my childs college education? How do I decide among the employee benefit options that my employer offers? These questions are all related to personal finance a specialized area of study that focuses on individual and household financial decisions, such as budgeting, saving, spending, insurance, and investments. Understanding these topics will help you in many ways. For example, youll make better decisions when you buy an auto, shop for a home mortgage, choose a career, and save for retirement. You may also be able to pay less in taxes and interest. Personal financial planning is the process of devel- oping and implementing an integrated, comprehensive plan designed to meet finan- cial goals, to improve financial well-being, and to prepare for financial emergencies. The primary goal of personal financial planning is to develop and achieve financial goals, such as Buying a first home or a bigger home....
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This note was uploaded on 11/15/2010 for the course FP/101 FP/101 taught by Professor Nicoleramig during the Spring '10 term at University of Phoenix.
- Spring '10