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Understanding The Financial Planning Process
Understanding The Financial Planning Process
Understanding The Financial Planning Process
THE FINANCIAL
PLANNING
PROCESS
The Rewards of
Sound Financial Planning
• Maintain and improve standard of
living.
• Control spending in order to live well
today and tomorrow!
• Accumulate wealth.
Improving Your Standard of
Living
Average Propensity to
Consume
6. Revise plans
Money
• Short-term goals—to be
accomplished within the next year.
• Intermediate-term goals—to be
accomplished in the next 2-5 years.
• Long-term goals—to be accomplished
in time periods greater than 5 years.
From Goals to Plans:
A Lifetime of Planning
• Early childhood
• High school and college
• Family formation
• Career development
• Pre-retirement
• Retirement
Personal Financial Planning Lifecycle
Benefit of Planning
Monetary Policy
Controls money supply
Used to stimulate or contract economic
growth
Fiscal Policy
Controls levels of taxation
Sets levels of government spending on
various programs
Government Policy Decisions
• Economic Cycles
– Stages related to employment and production
levels
– Growth measured by changes in GDP
• Inflation
– Measured by changes in CPI
– Affects purchasing power and interest rates
– Affects financial plans and goals
Economic Cycles
What Determines Your
Personal Income?