Offers protection against costliest events such as flood fire major illness

Offers protection against costliest events such as

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Offers protection against costliest events such as flood, fire, major illness, death Need enough insurance to prevent financial ruin at reasonable rates o Minimization of taxes: ability to pay as little as possible to Uncle Sam Need to have enough even after taxes Goal is to maximize the cash that is available to you after taxes have been paid Creating a budget and investment plan
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Step 4: Implement your plan (the hardest step) o Keep track of income and spending as well as long term goals Use common sense and moderation o Financial plan is a tool, or road map to achieve goals Stay on track after detours; rewards await you o Don’t be afraid to get lost because you laid out a map and will eventually find your way Remain positive o Build your map as you go o Keep goals in mind and drive towards them Takes the most dedication and sacrifice Step 5: Review your progress, reevaluate, and revise your plan o Set up a new map for your goals once you found your way o Review progress and reexamine plan, maybe set up a new map and formulate new plan and see if any fine tuning needs to be done o Road map to your dreams o Life changing events will happen, make sure that your plan still matches your goals o Check where you’re at financially o Things are going to change, so expect to change your plan many times Be prepared to start over if you plan no longer meets your needs Figure 1.1
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Establishing your financial goals Short term o Buying television, taking vacation o All that can be accomplished in 1 year Intermediate term o College tuition money for 12 yr old, accumulating enough money for down payment on new house o 1-10 year to accomplish Long term o Retirement o 10+ years Set up a list of goals, rank them, and be realistic about your goals. Once everything is set in place, it becomes a cornerstone of your personal financial plan The life cycle of financial planning Changes occur due to unexpected events based on financial life cycle patterns Need to plan ahead o After you finish college, you might need to start saving up for your retirement o The first 17 or 18 years we have negative income, rely on parents After high school hits, we start to pay some of our bills with the jobs we have and then attend college First stage is always a long process of saving and accumulating wealth Goal setting, insurance, home buying, family formation
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Figure 1.2 Typical individual’s financial life cycle Financial goals begin to shift during 2 nd and 3 rd stage and continued growth of the wealth that have been accumulated (begins early 50’s) Estate planning – planning for the passage of your wealth to your heirs. (Planning for your eventual death and the passage of your wealth to your heirs. 3 rd and final stage begins in mid-to-late 60’s o No longer saving, but spending during retirement o Must continue the growth in savings to stray away from inflation (an economic condition in which rising prices reduce the purchasing power of money)
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