Personal finance is the study of personal and family resources considered important in achieving financial success. It involves how people spend, save, protect, and invest there financial resources. It includes budgeting, tax management, cash management , use of credit cards, borrowing, major expenditures, risk management, investments, retirement planning, and estate planning.
Chapter one says personal financial planning is the development and implementation of coordinated and integrated long range plans to achieve financial success. Most people learn finance from there bad experiences, therefore they have unhealthy habits. A trade-off is giving up one thing for another. Financial objectives are rarely achieved with out fore going or sacrificing current consumption. By investing your money in savings you can invest for long-term goals.
Most people need to assume some form of financial planning to achieve their financial objectives. Financial planning should reflect an individual’s or family’s values and life-cycle circumstances and include appropriate objectives in three broad areas. Plan for spending, plan to counter risk, and plan for capital accumulation. Success in financial planning requires an understanding of one’s values, explicitly stated financial goals, certain assumptions about the economy, and logical and consistent financial strategies.
The Business plan on Life Cycle Financial Planning
... to be achieved in China) * Finalizing estate plans| Source: Family Economics & Financial Education, Revised May 2010, Personal Finance Unit, Life Cycle of Financial Planning, Page ... can help Chinese people to achieve financial goals and I have found a theory called “life cycle financial planning”, which is designing the financial plan by different ...
Financial statements are compilations of personal financial data designed to furnish information about the way in which money has been used and about the financial condition of the individual or family. The balance sheet provides information on what you own, what you owe, and what the net result would be if you paid off all of your debts. The cash-flow statement lists income and expenditures over a specific period of time, such as the previous month or year.
Your personal values are the starting point in financial planning and budgeting. Budgeting is a process of projecting, organizing, monitoring, and controlling future income and expenditures. The purpose of budgeting is to reach financial goals. In the goal-setting phase of budgeting, goals must be specific. In particular, they should contain dollar amounts and target dates for achievement.
In the organization phase of budgeting, which focuses on the structural and mechanical aspects of budgeting choose a recording format, select either the cash or accrual basis of accounting, choose various budget classifications, and select the time period for the budget. It is important to maintain a positive attitude toward budgeting and to maintain flexibility.
The decision-making phase of budgeting requires you to make realistic budget estimates for income and expenditures as well as to resolve conflicting needs and wants by revising estimates as needed. In the implementation phase of budgeting, you put the budget into effect, primarily by recording actual income and expenditures. You then manage cash flow and calculate time-period totals. The control phase of budgeting includes the potential use of seven means of control. Using a checking account, checking accuracy, and monitoring unexpended balances are popular controls. Formal budgeting controls include the credit control sheet and the envelope system. In the evaluation phase of budgeting, you compare actual amounts with budgeted amounts, decide how to handle balances, and assess progress made toward your goals. Many people find it difficult to talk with others about money and the tough financial decisions they must make
Taxes are compulsory charges imposed by a government on its citizens and their property. The Internal Revenue Service issues various regulations, which are its interpretations of the laws passed by Congress, that have the force and effect of law. The most important concept in personal finance is the marginal tax rate-the tax rate applied to your last dollar of earnings. Your effective marginal tax rate is even higher.
The Business plan on Manage Budget And Financial Plans
Planning a Budget Davis Service Group is a large public limited company employing around 17,000 people. Its shares are quoted on the London Stock Exchange.The business is based on service contracts to source, clean and maintain industrial textiles, such as protective clothing and linens. This is across four key sectors: workwear, healthcare, hotels and restaurants, and general facilities, such as ...
Monetary asset management is the task of maximizing interest earnings and minimizing fees on all of your funds kept readily available for day-to-day living expenses, emergencies, and savings and investment opportunities. The four major tools of monetary asset management include an interest-earning checking account, a savings account at a local financial institution, a money market account, and various longer-term savings instruments. The four primary providers of monetary asset management services are depository institutions, mutual funds, stock brokerage firms, and financial services companies.
Electronic banking occurs whenever banking transactions are conducted via computers without the customer using paper documents or having face-to-face contact with financial services personnel. The most widely recognized forms of electronic banking are automatic teller machines, point-of-sale terminals using debit cards, smart cards, and direct deposits and preauthorized payments. The Electronic Funds Transfer Act protects consumers who use debit and ATM cards.
People borrow for a variety of reasons-for example, to deal with financial emergencies, to have goods immediately, and to obtain discounts in the future. Perhaps the greatest disadvantage of using credit is the ensuing loss of financial flexibility in personal money management. The annual percentage rate provides the best approximation of the true cost of credit.
In the process of opening a credit account, the lender investigates your credit history, obtains a credit score, from a credit bureau, and then determines whether to grant credit and under what conditions.
Borrowers can use both installment and non-installment credit. Open-ended credit is an example of non-installment credit. It permits the customer to gain repeated access to credit without having to fill out a new application every time money is borrowed. The consumer may choose either to repay the debt in a single payment or to make a series of payments of varying amounts. Bank credit card and travel and entertainment credit cards are the most commonly used open ended credit accounts.
The Essay on Credit Card Dangers Cash Payment Month
My credit card bill came today. It was obvious when I looked at the statement that my check had not arrived on time. I was charged twenty five dollars for a late fee. In addition to the late fee, I was charged an extra twenty five dollars because the late fee put me over my credit limit.Developing a monthly budget, and sticking to it, will save you money each month. Keeping track of the money you ...
Credit card statements provide a monthly summary of credit transactions and the calculation of any finance charges. Credit card issuers compute finance charges by multiplying the average daily balance by the periodic interest rate.
It is important to establish your own debt limit. Three methods can be used: the debt payments-to-disposable income method, the ratio of debt-to-equity method, and the continuous-debt method. Consumer loans are classified as either installment or non-installment credit. Borrowers must also distinguish between secured loans, which use collateral or a cosigner, and unsecured loans, which are riskier for the lender and, therefore, carry higher finance charges.
Major sources of consumer loans include depository institutions (, sales finance companies, and consumer finance companies. Loans are also available through insurance companies and stockbrokers. Depository institutions typically offer the best interest rates, although sales finance companies sometimes offer low rates to increase sales of the products being financed. In any case, only those people with high credit scores qualify for the best rates from any source.
Both the simple-interest and add-on methods are used to calculate the interest on installment loans, although the annual percentage rate formula gives the correct rate in all cases. With simple-interest loans, the dollar amount of interest incorporated in each monthly payment declines as the loan balance declines.
You can save money by following the basic rules of planned buying: control buying on impulse, pay cash when possible, buy at the right time, avoid paying extra for a “name,” avoid the high price of convenience, and use life-cycle planning for major purchases. The planned buying process includes three steps that occur prior to interacting with sellers: prioritizing wants, obtaining information during pre-shopping research , and fitting the planned purchase into the budget. These steps represent the homework needed when preparing to buy. To interact effectively with sellers, you should comparison shop to find the best buy. When purchasing vehicles and other high-priced items, this shopping process includes comparing prices, financing arrangements, leasing options, warranties, and service contracts. The next step after comparison shopping is negotiating with the seller, especially with items such as automobiles where haggling on price is generally expected. The final decision should be made at home, however. The final step in planned buying, which occurs after the purchase is made, entails evaluating the decision and seeking redress, if needed.
The Business plan on Term Insurance Life Permanent Policy
Why buy life insurance? Many financial experts consider life insurance to be the cornerstone of sound financial planning. It is generally a cost-effective way to provide for your loved ones after you are gone. It can be an important tool in the following ways: Income replacement For most people, their key economic asset is their ability to earn a living. If you have dependents, then you need to ...
When choosing housing, renters must consider the costs of rent, a security deposit, and related items. Home buyers can choose among single-family dwellings, condominiums, cooperative housing, manufactured housing, and mobile homes. Renters generally pay out less money in terms of cash flow in the short run, whereas owners enjoy tax advantages and generally see an increase in the market values of their homes, making them better off financially in the long run. The home-buying process includes five steps: (1) getting your finances in order, (2) pre-qualifying for a mortgage, (3) negotiating, (4) applying for a mortgage loan, and (5) signing your name on closing day.
Mortgage loans for homes are amortized. Amortization is the process of gradually paying off a mortgage through a series of periodic payments to a lender, with a portion of each payment going toward the principal and another portion going toward the interest owed. Conventional mortgages and adjustable-rate mortgages are the most common types of housing loans. Numerous alternative types of mortgages are available that have reduced the importance of the long-term, fixed-rate mortgage loan and that provide new ways to keep the monthly payment as low as possible.
When selling a home, it is wise to consider the pros and cons of listing with a real estate broker versus selling the home yourself, the extent of selling costs, the dangers of seller financing, and the impact of income taxes.
Personal financial managers practice risk management to protect their present and future assets and income. Risk management entails identifying the sources of risk, evaluating risk and potential losses, selecting the appropriate risk-handling mechanism, implementing and administering the risk-management plan, and evaluating and adjusting the plan periodically.
Insurance is a mechanism for reducing pure risk by having a larger number of individuals share in the financial losses suffered by all members of the group. It is used to protect against pure risk but cannot be used to protect against speculative risk, which carries the potential for gain as well as loss. Likewise, insurance cannot be used to provide payment in excess of the actual financial loss suffered. Insurance consists of two elements: the reduction of pure risk through application of the law of large numbers, and the sharing of losses.
The Term Paper on Health Care Reform Matrix
With your learning team, complete the Health Care Reform matrix below. Listed in this matrix are some of the topics addressed by the Patient Protection and Affordable Care Act policy. You are required to describe the issue, in your own words, and list 2-3 points about each topic under each heading in the matrix. Describe the issue: Key concerns regarding the issue: How is this issue addressed in ...
Homeowner’s insurance is designed to protect homeowners and renters from property and liability losses. Six types of homeowner’s insurance are available, including one geared toward renters.
Homeowner’s policies can be purchased on a named-perils or an open-perils basis. Automobile insurance is designed to protect the insured against property and liability losses arising from use of a motor vehicle. These policies typically provide liability insurance, medical payments or personal injury protection insurance, property insurance on your car, and underinsured and uninsured motorist insurance. The most commonly purchased type of automobile insurance is the family automobile policy. The premium for automobile insurance is based on the characteristics of the insured driver, including age, gender, marital status, and driving record.
Health-related losses include the cost of direct medical care, the cost of recuperative care, and the lost income when one is ill or injured. HMOs, traditional health insurance, and the government-sponsored Medicare and Medicaid programs address the need for direct medical care. Long-term care insurance and disability income insurance focus on recuperative care costs and lost income. All of these plans can be obtained on an individual or group basis.
Health care policies contain language that outlines coverage in general and, more importantly, describes the limitations and conditions that determine the level of protection afforded under the plan. Some of the more important plan provisions include definitions of terms used in the plan, identification of who is covered under the plan, and the time period for the coverage. Important limitations include deductibles and co-payments, coinsurance requirements, and restrictions on the types of losses covered.
The Essay on Long-Term Care: The Impact Of The Elderly
Providing accessible, affordable, and high-quality long-term care services to an aging population presents a growing challenge to long-term care providers. As the oldest members of the baby boom generation approach retirement, federal and state policy, makers are exploring policies to care for the increasing number of elderly and to finance expanding long-term care needs. Other concerns include ...
The major benefits provided by health care plans are hospital, surgical, medical expense, major medical expense, comprehensive coverage, dental expense benefits, and vision care benefits. Long-term care insurance provides a per-day dollar reimbursement when the insured person must stay in a nursing home or other long-term care facility. It is not designed to provide medical care protection, as that coverage is available through other plans such as an HMO, private insurance, or Medicare/Medicaid. Disability income insurance replaces a portion of the income lost when you cannot work as a result of illness or injury. By selecting among various policy provisions, you can tailor a policy that fills any gaps in your existing disability protection.
life insurance is designed to provide protection from the financial losses that result from death. The reasons to purchase life insurance change over the life cycle. The need for this type of protection is very small or even nonexistent for children and single adults. Factors affecting life insurance needs include the need to replace income, final-expense needs, readjustment-period needs, debt-repayment needs, college-expense needs, availability of government programs, and ownership of other life insurance and assets.
Two methods to calculate life insurance needs are the multiple-of-earnings approach and the needs approach. The needs approach is the more accurate of the two, and calculations based on this approach should be revisited every three years or whenever your family situation changes. Two basic types of life insurance exist: term life insurance and cash-value life insurance. Variations on term life insurance include decreasing term insurance, guaranteed renewable term insurance, convertible term insurance, and credit life insurance. Variations on cash-value insurance include whole life insurance, limited-pay life insurance, and universal and variable life insurance.
A life insurance policy is a written contract between the insurance purchaser and the insurance company, spelling out in detail the terms of the agreement. When buying life insurance, you should pay special attention to the policy’s general terms and conditions, the special features of cash-value life insurance, and settlement options. Life insurance should be purchased. Your investments should manage the living-too-long problem.
Investing requires understanding why people invest, what they should accomplish before beginning to invest, how to obtain the initial funds for investing, and what types of investment returns are possible. Investor returns come from dividends, interest, rent, and capital gains.
To raise capital and finance its goals, a corporation may issue three types of securities: common stock, preferred stock, and bonds. Stocks are shares of ownership in the assets and earnings of a business corporation. They represent potential income for investors because stockholders own a stake in the future direction and profits of the company. Bonds are interest-bearing, negotiable certificates of long-term debt issued by a corporation, a municipality. Bond investors expect to receive periodic income every six months in the form of interest; in addition, they anticipate receiving the amount originally invested when the bond matures.
Stocks may be categorized as income, growth, or speculative stocks. Other terms used to characterize stocks include blue-chip, value, cyclical, and counter-cyclical stocks. Stocks are described according to their capitalization size as well, such as large-cap and mid-cap stocks.
A bond is a certificate that represents a debt obligation of the bond issuer (a corporation or government) to the bondholder-investor. You lend your money to the bond issuer, and it is paid back with interest. Bonds have certain characteristics that distinguish them from other investments, including being secured or unsecured, registered, in book-entry form, and callable. The three general types of bonds are corporate, U.S. government securities, and municipal government bonds.
