PERSONAL FINANCE

Manuel S. Enverga University Foundation

College of Business and Accountancy
Lucena City

PERSONAL FINANCIAL PLANNING

IN ACTION

PERSONAL FINANCIAL PLANNING PROCESS

Kapoor, Dlabay, Hughes

RALYN E BERMUDEZ
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The Financial Planning
Process
1. Determine the 2. Develop your
. Current Financial Financial Goals
Situation

6. Revise and review 3. Identify alternative

the financial plan courses of action

5. Create and 4. Evaluate your

Implement your alternatives
Financial Plan
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1. Determine the current financial situation

💰 sources of funds: income, allowances, etc.

💰 saving
💰 current assets [cash, cash equivalents (near money), cash
receivables, accounts receivables

🛒 - living expenses
🛒 - debts
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2. Develop your financial goals

• periodically analyze your financial goals and values

• To differentiate the wants from needs

• Specify your financial goals

• Prioritize: Decide on which goal to pursue
• Note: your financial can range from spending all your current
income to developing an extensive savings and investment
program for your financial security.
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3. Identify Alternative courses of action

developing alternatives is crucial when making decisions

possible courses of action to take

Ø continue the same course of action
Ø expand the current situation
Ø Change the current situation
Ø take a new course of action
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4. Evaluate your
alternatives
• Consequences of
choices
• Opportunity cost/trades
offs – what you give up
by making a choice
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4. Evaluate your alternatives

• Evaluate the risks
• Uncertainties in every decision
• Common risks to consider:
📌 Inflation risk – due to rising prices
📌 Interest rate risk – result from change in cost of
money
📌 Income risk – result from loss of job
📌 Personal risk – health risks – tangible & intangible
factors
📌 Liquidity risk – investments that have potential for
higher earnings are difficult to convert into cash
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4. Evaluate your alternatives

• Financial Planning Information sources

📚 internet
📚 Financial institutions – banks, credit unions,
investment companies
📚 Media resources – newspaper, magazines,
televisions, radio
📚 Financial specialists – financial planner,
insurance agents, investment advisers, credit
counselors, lawyers, accountants, etc
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5. Create and Implement your financial action plan

Now More than a year

Within a year
from now
Assess your current Short Term Financial Long Term Financial
situation Strategies Strategies

- Create and implement - Invest in financial

Develop Financial a budget instrument for long
- Pay off debts/loans term growth
Plan
- Obtain adequate - Pay off consumer debts
insurance and home mortgage
- Establish a regular
Select Appropriate savings program
plans of action
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Process

6. Review and Revise your Plan.

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