William Saito

1
Understanding
the Financial
Planning
Process
LEARNING OUTCOMES

1 Identify the benefits of using personal

financial planning techniques to manage
your finances
2 Describe the personal financial process and
define your goals
3 Explain the life cycle of financial plans, the
role they play in achieving your financial
goals, how to deal with special planning
concerns, and the use of professional
financial planners

2
LEARNING OUTCOMES (continued)

4 Examine the economic environment’s

influence on personal financial planning
5 Evaluate the impact of age, education, and
geographic location on personal income
6 Understand the importance of career choices
and their relationship to personal financial
planning

3
Rewards of Sound Financial Planning

• Improving your standard of living

• Spending money wisely
• Accumulating wealth

4
Exhibit 1.1 Organizational Planning Model

5
Personal Financial Planning

• Systematic process that considers important

elements of an individual’s financial affairs to
fulfill financial goals

6
Exhibit 1.3 The Six-Step Financial Planning
Process

7
Financial Goals

• Results that an individual wants to attain

• Utility and cost are to be considered when
evaluating alternative qualities of life,
spending patterns, and forms of wealth
accumulation
• Money and utility are linked to psychological
concepts of values, emotion, and personality
• Financial planning is an important part of the
conflict resolution process

8
Target Dates on Financial Goals

• Goal dates: Target dates in the future when

certain financial objectives are expected to
be completed
• Long-term goals
• Indicates wants and desires for a period covering
about 6 years out to the next 30 or 40 years
• Short-term financial goals
• Set each year and cover a 12-month period
• Intermediate goals
• Bridge the gap between short- and long-term
goals 9
Exhibit 1.4 The Personal Financial Planning
Life Cycle

10
Types of Financial Planning

• Asset acquisition
• Liability and insurance
• Savings and investment
• Employee benefit
• Tax
• Retirement and estate

11
Exhibit 1.5 How a $1,000 Investment
Grows Over Time

12
 Financial Planning Concerns

• Managing two incomes

• Managing employee benefits
• Managing finances in tough economic times

Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly acce ssible website, in whole or in part. PFIN4 | CH1 13
Financial Planning Players

• Government
• Source of revenue for business and wages for
consumers
• Business
• Important part of the circular flow of income
that sustains a free enterprise system
• Consumers
• Consumer choices determine the kinds of goods
and services that businesses provide

14
Exhibit 1.6 The Financial Planning
Environment

15
Phases of Economic Cycles

Expansion

• Real GDP increases until it hits a peak

Peak

• Expansion ends and a contraction begins

Contraction

• Real GDP falls

Trough

• Contraction ends and an expansion begins

16
Exhibit 1.7 The Business Cycle

Source: Adapted from William Boyes and Michael Melvin, Economics, 8th ed. (Cengage, 2011), p. 135.

17
Economy

Inflation

• General price level is increasing

Consumer price index (CPI)

• Measure of inflation based on changes in the

cost of consumer goods and services

Purchasing power

• Amount of goods and services that each dollar

buys at a given time

18
Factors that Determine the Personal Income

• Place of residence
• Difference in salaries earned
• Difference in living costs
• Career
• Social, demographic, economic, and
technological trends influence decisions
regarding the fields that offer best opportunities
for future

19
Steps for Career Planning

• Identify interests, skills, needs, and values

• Set specific long- and short-term career
goals
• Develop and use an action plan to achieve
those goals
• Review and revise career plans as the
situation changes

20
 KEY TERMS

• Standard of living • Peak

• Average propensity to • Contraction
consume • Trough
• Wealth • Inflation
• Tangible assets • Consumer price index
• Personal financial • Purchasing power
planning • Expansion
• Utility • Flexible-benefit
• Goal dates (cafeteria) plans

21
 SUMMARY

• Sound financial planning is necessary for

achieving financial objectives
• Planning what to do with one’s money and
spending and investing it wisely involves
personal financial planning
• Financial goals help in achieving financial
goals
• Financial planning constitutes a dynamic
environment including business and
consumers
22
 https://jp.linkedin.com/in/whsaito
https://www.youtube.com/watch?v=ANaXo4MH34E
https://govinsider.asia/innovation/william-saito-japan-
cybersecurity-talent-tokyo-2020-olympics/
https://www.ft.com/content/1f92e6da-37b7-11e2-a97e-
00144feabdc0
https://www.securityroundtable.org/tag/william-saito
https://cyberstability.org/commissioners/william-saito