Systemic or Macro Factors That Affect
1. Financial planning has to take into account conditions in the wider economy and in the
markets that make up the economy.
2. The labor market, for example, is where labor is traded throu
Individual or Micro Factors That Affect Financial
1. The circumstances or characteristics of your life influence your financial concerns and
2. What you want and needand how and to what extent you want to protect the
The Planning Process
1. A financial planning process involves figuring out where youd like to be, where you are,
and how to go from here to there.
2. Personal circumstances change, and the economy changes, so your plans must be
flexible enough t
Basic Ideas of Finance
1. Money, says the proverb, makes money.
2. Personal finance addresses the great difficulty of getting a little money.
3. It is about learning to manage income and wealth to satisfy desires in life or to create more income
Accounting and Financial Statements
1. Clay tablets interested Sumerian traders because the records gave them a way to see
their financial situation and to use that insight to measure progress and plan for the
2. The method of accounting
Comparing and Analyzing Financial
1. On common-size statements, each items value is listed as a percentage of another.
2. On the income statement, each income and expense may be listed as a percentage of the total
3. This show
Accounting Software: An Overview
1. Most programs have designed their data input to look like a checkbook, which is what
most people use to keep personal financial records.
2. This type of user interface is
intended to be recognizable and famil
Debt and Equity
1. Buying capital, that is, borrowing enables you to invest without first owning capital.
2. By using other peoples money to finance the investment, you get to use an asset before
actually owning it, free and clear, assuming you
1. As defined earlier in this chapter, an asset is any item with economic value that can be
converted to cash.
2. Assets are resources that can be used to create income or reduce
expenses and to store value.
3. When you sell excess capita
Income and Risk
1. Personal finance is not just about getting what you want; it is also about protecting what
2. Since the way to accumulate assets is to create surplus capital by having an
income larger than expenses, and since you re