Managing Your Personal Finances Chapter 22 22 Chapter

Learning Goals 1 How does the financial-planning process facilitate successful personal financial management? 2

Learning Goals 6 What personal goals are important when making investment decisions? 7 How

1 Learning Goal 1 Chapter 22 How does the financial-planning process facilitate successful personal

1 Financial Planning: The First Steps 6. Monitor your plan 5. Implement the plan

2 Learning Goal 2 Chapter 22 How do cash flow planning and management of

Cash Management: Cash Flow Plan Chapter 22 2 § Establish goals and calculate the

Chapter 22 2 Balancing Your Checkbook Copyright © 2005 by South-Western, a division of

3 Learning Goal 3 Chapter 22 What are the advantages and disadvantages of using

Using Consumer Credit 3 Cons Chapter 22 Pros § Convenience § Easy to overspend

Tips to Pay Off Credit Cards Chapter 22 3 § Don’t wait until the

Chapter 22 3 Minimum Payments Don’t Pay Copyright © 2005 by South-Western, a division

Loans Chapter 22 3 § Principal is the total amount borrowed § Prepayment penalties

4 Learning Goal 4 Chapter 22 What types of taxes are individuals responsible for?

Managing Taxes 4 Income Types of Taxes Social Security & Medicare Sales Chapter 22

5 Learning Goal 5 Chapter 22 What factors should you consider in deciding what

Selecting Insurance 5 Property and Liability Insurance Health Insurance • Automobile • Indemnity Plans

6 Learning Goal 6 Chapter 22 What personal goals are important when making investment

Chapter 22 6 Investment Risk Pyramid Copyright © 2005 by South-Western, a division of

Investment Goals Chapter 22 6 Goals Choices Income Low-risk securities: Treasury issues, corporate bonds,

6 Developing an Investment Strategy 4. Invest regularly 3. Diversify 2. Start early Chapter

7 Learning Goal 7 Chapter 22 How do investors open a brokerage account and

7 Securities Transaction Basics § Basic accounts at brokerage firm – Cash accounts –

8 Learning Goal 8 Chapter 22 What emerging trends affect the way you manage

Trends 8 Increase in Identity Theft Chapter 22 Debt Load of Gen-X Copyright ©

Identify Theft Chapter 22 8 Copyright © 2005 by South-Western, a division of Thomson

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Managing Your Personal Finances Chapter 22 22 Chapter THE FUTURE OF BUSINESS Gitman & Mc. Daniel 5 th Edition Prepared by Deborah Baker Texas Christian University Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved

Learning Goals 1 How does the financial-planning process facilitate successful personal financial management? 2 How do cash flow planning and management of liquid assets contribute to your financial goals? 3 What are the advantages and disadvantages of using consumer credit? 4 What types of taxes are individuals responsible for? Chapter 22 5 What factors should you consider in deciding what insurance to purchase? Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved 2

Learning Goals 6 What personal goals are important when making investment decisions? 7 How do investors open a brokerage account and make securities transactions? Chapter 22 8 What emerging trends affect the way you manage your personal finances? Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved 3

1 Learning Goal 1 Chapter 22 How does the financial-planning process facilitate successful personal financial management? Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved 4

1 Financial Planning: The First Steps 6. Monitor your plan 5. Implement the plan 4. Develop a plan 3. Analyze the information 2. Gather information Chapter 22 1. Establish financial goals Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved 5

2 Learning Goal 2 Chapter 22 How do cash flow planning and management of liquid assets contribute to your financial goals? Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved 6

Cash Management: Cash Flow Plan Chapter 22 2 § Establish goals and calculate the savings you need to meet them. § Estimate your income and expenses, including savings contributions. § Track actual income and expenses for a onemonth period. § Compare planned and actual income and expenses. § Modify estimates for the next month and repeat the process. Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved 7

Using Consumer Credit 3 Cons Chapter 22 Pros § Convenience § Easy to overspend § Immediate use of good § § Bargain prices on sale merchandise Costs money in interest charges § § Establish a credit rating Merchandise may cost more § Convenient record keeping § § Financial emergencies Legal commitment to repay debt reduces future discretionary income § Perks Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved 10

Tips to Pay Off Credit Cards Chapter 22 3 § Don’t wait until the last minute to pay. § Talk back. Ask for a lower interest rate and removal of any fees § Check your statement. Credit-card fraud is widespread! Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved 11

Loans Chapter 22 3 § Principal is the total amount borrowed § Prepayment penalties are additional fees that may be owed if a loan is repaid early § Security requirements are provisions that allow a lender to take back the collateral if a loan is not repaid according to the terms of the agreement § Credit life insurance is insurance that will repay a loan if the borrower dies while the loan is still outstanding Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved 13

Selecting Insurance 5 Property and Liability Insurance Health Insurance • Automobile • Indemnity Plans • Homeowners/renters • Managed Care Plans Disability Income Insurance Life Insurance Chapter 22 • Term Life • Whole Life • Universal life Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved 17

Investment Goals Chapter 22 6 Goals Choices Income Low-risk securities: Treasury issues, corporate bonds, preferred stock, and income stocks. Growth stocks with above-average rates of growth in earnings and price. Safety Government and high-grade corporate bonds, preferred stocks, and mutual funds. Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved 20

6 Developing an Investment Strategy 4. Invest regularly 3. Diversify 2. Start early Chapter 22 1. Establish an emergency fund Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved 21

7 Securities Transaction Basics § Basic accounts at brokerage firm – Cash accounts – Margin accounts § Three types of orders – Market order – Limit order Chapter 22 – Stop-loss order Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved 23