intro 1 - TTU Personal Finance Concentration PFP 4361...

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TTU – Personal Finance Concentration TTU Personal Finance Concentration PFP 4361 Personal Finance: Advanced Topics and Case Studies Module 1 – Review of Personal Finance Part I
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TTU – Personal Finance Concentration Understanding Personal Finance Module 1 Review of Personal Finance Learning Objectives: Understand how the Personal Finance can be used to make rational investment decisions Review the Time Value of Money and its significance to Personal Finance
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TTU – Personal Finance Concentration Presentation Agenda 1. Introduction: 2. Personal Finance Planning 3. Budgeting and Cash – flow Management 4. Money Management Strategy 5. Financial Ratios
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TTU – Personal Finance Concentration Why Financial Planning Is Beneficial Personal financial planning is the process of managing your money to achieve personal economic satisfaction. There are several advantages of personal financial planning: 1. Increased effectiveness in obtaining, using, and protecting financial resources. 2. Increased control over one’s financial affairs. 3. Improved personal relationships. 4. A sense of freedom from financial worries.
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TTU – Personal Finance Concentration The Financial Planning Process 1. Assess your current financial situation 2. Set financial goals 3. Identify alternative courses of action 4. Evaluate alternatives 5. Create and implement a financial action plan 6. Reevaluate and revise your plan regularly
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TTU – Personal Finance Concentration Personal Finance Terminology The “time value of money” is the increase in an amount of money that results from interest earned on an investment. The time value of money is usually categorized into two components: the present value and the future value. The “future value of money” is a compounding process over time, i.e., the amount to which a sum invested can increase over time based on the number of years invested. The “present value of money” is the reverse of the future value and involves a discounting process that reflects what the investment is worth in current dollars.
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TTU – Personal Finance Concentration Compounding Using Future Value FV = PV(1 + i) n where n = number of years The future value of $100 at an 8% interest rate to be received in 1 year is: FV = 100(1+.08) 1 = $108 Note: to take advantage of the compounding process, present consumption must be sacrificed.
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This note was uploaded on 10/17/2011 for the course PFP 4361 taught by Professor Vickihampton during the Spring '11 term at Texas Tech.

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intro 1 - TTU Personal Finance Concentration PFP 4361...

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