Unit 7:Managing Personal Finance

7.1. Personal Finance

Questions to Ponder
1. What can you do with your own money?
Answers may vary. With my own money, I can buy food, pay for my fare, buy a prepaid
load, and save whatever is left.

2. As a student, what is your financial responsibility?

Answers may vary. My financial responsibility as a student is to budget my allowance
according to my needs. My allowance should cover my daily expenses in school like
photocopy expenses, food, drinks, load, and student fare. I should also try to save money
for some merchandise or items I want.

3. How can personal finance help you in every stage of an individual's life cycle?
Answers may vary. Personal finance can help me ensure that my current needs are met
while preparing for my next life stage. Right now, my money is mostly from my parents. It
is meant to be used for the most important things. I should learn to manage my finances
now so that when I become an earning adult, I will know how to plan my finances
effectively.

Check Your Progress

1. When managing his or her finances, can an individual do without one of the areas of
personal finance? Why or why not?
An individual can not do without one of the areas of personal finance. All of these are
necessary to ensure financial security and stability. For instance, income is vital so that
one can plan to spend. Savings are essential so that there will be funds to invest and be
used to acquire financial protection. However, the relative focus may change depending
on an individual's life stage.

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2. Give one example of a financial decision under the young adulthood stage and
explain.
Answers may vary. One of the financial decisions during the young adulthood stage
might be purchasing a car or vehicle that will be used for transportation and leisure.
Another decision may be to lease or buy an apartment. These expenses are necessary to
gain independence.

Try This
True or False. Write true if the statement is correct. Otherwise, write false.

false 1. Income and investing are both cash inflows.

true 2. Insurance is protection needed to avoid financial losses.

false 3. Personal finance only deals with a person's spending.

true 4. Individuals aged 26 to 45 years old tend to prioritize the needs of their
families.

false 5. An individual's net worth is computed by deducting total liabilities from

total assets and adding equity.

true 6. Young adulthood is a stage where financial independence is the primary

goal.

true 7. If an individual has excess funds, the right financial decision is to invest
them.

true 8. If an individual has a cash shortage, the right financial decision is to sell an
asset or obtain a loan.

false 9. Individuals aged 46 to 64 have the lowest income since their physical
health is already declining.

true 10. Retirement can mean increased expenses because of the increasing
vulnerability of an older person's health.

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Practice Your Skills
Examine the list of individuals given. Apply the concepts learned in personal finance by
identifying the following:
● financial life stage
● financial needs
● focus of personal finance management
Write your answer in the space provided.

1. Pablo, a retired Engineer

Pablo is in his retirement years, whose primary source of funds is his pension and
investments. This stage is when he can enjoy the returns of his investments and
retirement fund. At this stage, most of his financial decisions comprise spending and
protection. His spending decisions cover his daily living needs, vitamins, medicines, and
the like. The focus of personal finance management is to maintain financial
independence.

2. Carlo, a recent college graduate

Carlo is currently in the young adulthood stage, whose priority lies in his professional
career development. His financial decisions cover all areas of finance, such as income,
spending, savings, investing, and protection. At this stage, Carlo is establishing the
fundamentals of his financial independence, including spending on food and getting his
own place.

3. Maria, a long-time bank manager

Maria is currently in the stage of planning for retirement because of her long service in
the bank. Most of her financial decisions comprise the areas of spending, saving,
investing, and protection. At this stage, Maria now has the highest income and is also
reaping the returns of some investments in her prime years.

4. John, a senior high school student

John is currently in his teenage years, whose priority is to graduate at the secondary
level. Most of his financial decisions are from the area of spending and saving since his

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primary source of funds is limited to the allowance given by his parents. Financial
management focuses on developing healthy spending and saving habits.

5. Lisa, a newly wedded wife, and a mother

Lisa is currently in the stage of starting her own family. Her priority is to obtain the
necessary funds to finance her children's needs. Since children's health is vulnerable, she
also needs to prepare an emergency fund in case her children get sick.

Challenge Yourself
It is time to evaluate your own personal financial needs in relation to your personal goals.
Create a list of your personal short-term goals (one year period) and provide an action you
intend to take to achieve these goals.

1. Areas of Personal Finance: Income

Answers may vary. The following is a sample answer only.

Short-term goal (1 year or less):

To increase the source of funds by 30%.

Actions to be taken:
● Start an online business
● Apply for a part-time job
● Sell the things you no longer use

2. Areas of Personal Finance: Spending

Answers may vary. The following is a sample answer only.

Short-term goal (1 year or less):

To cut unnecessary expenses by 20%

Actions to be taken:
● Create a spending budget for a week
● Follow the budget and track expenses

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3. Areas of Personal Finance: Saving
Answers may vary. The following is a sample answer only.

Short-term goal (1 year or less):

To start saving money at least 10% of the total source of fund or income

Actions to be taken:
● Open a bank account online
● Set a percentage of income/source of funds for savings

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