Lecture Notes - What is financial success Ability for an...

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What is financial success? Ability for an individual to meet their financial goals and it is subjective? All of us are a result of our experiences, thus financial success will be different for all of us. Proactive with finances rather than reactive Identify---Risks--- Financial Exposure----Minimize taxes (NOT I N BOOK) Personal Financial Planning: the process, both artistic and scientific, of formulating, implementing, and monitoring multifunctional decisions that enable an individual or family to achieve financial goals 5 Steps: (1) Evaluate (2) Define (3) Develop (4) Implement (5) Review, reevaluate, Revise How do you evaluate this? (WRITE TH IS DOWN) Over your lifetime your goals will change #2- Define your financial goals financial mission: A broad and enduring statement that identifies your purpose for wanting a financial plan. Financial Objective : Statement of financial desire that contains time and measurement attributes making them more specific than financial goals. EX. Purchase home June 2011 W/ $100,000 down pay. Differences in time: Financial goals cover 3 times horizons Short term – 1 yr Intermediate- 1 to 10yrs Long term- More than 10 years 4 tips for setting and achieving your goals: 1. Less is more 2. Be precise 3. Write down your goals and track them regularly 4. Prioritize and know the time attainments of your goals #2 what is plan of action to achieve goal? How? What tough decisions are you going to make? (GET I N YOUR NOTES) People are more likely to accomplish a goal if it’s written down. Highest priority, what’s next--- Time Frame PG. 8 (1.2) where do I get started? #3—Flexibility—Liquidity—Protection (INS) – Minimizing tax #4 Implementation-carefully and thoughtfully develop a financial plan, stick to it! –Your financial plan is not the goal—it is the tool used to achieve goals. #5- Reviews progress and be prepared to formulate a different plan.—Last step in financial planning often returns to the first, no plan is fixed.
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NOT I N BOOK: Lifecycles Phases Asset accumulation Phase (Purchase 1 st home Prepare for child rearing costs Establishing an emergency plan (start saving for retirement or period) **Ages 20-25 until 55 Has limited access cash flow for investment. High degree of debt Low net worth Conservation Project Phase (Late 30’s TO early 40’s) Increase in cash flow Increase in Net Worth Decrease in proportional use of debt (Debt to Income) What are the biggest risks to this stage? Divorce Sickness Corporate downsizing Distribution/ Gifting Phase Less risky investment strategy (Age 55 – Death) Preserving rather than creating wealth Estate planning-decisions are critical trim estate tax bills, have wills, living wills and health proxies (Consider extended nursing home protection) Well Planning- Excess: Cash flow, low debt, and high net worth 10 principles of personal finance Purpose? --- Build foundation 1. Best protection is knowledge
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This note was uploaded on 11/16/2010 for the course BUS Bus 320 taught by Professor W during the Spring '10 term at American River.

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Lecture Notes - What is financial success Ability for an...

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