MCS 2100 Lecture 1: Unit 1 Chapter 1 and 2

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Unit 1 – Personal Financial Planning
August 1, 2016
Chapter 1 – Personal Financial Planning Introduction:
Personal Financial Planning: The process of managing your money to achieve personal
economic satisfaction.
-More effective in obtaining, using and protecting financial resources
-Increased control
-Sense of freedom from financial worries
-Improved personal relationships
6 Step Financial Planning Process:
1. Determine current situation: Income, savings, living expenses and debts
2. Develop financial goals: Values and attitudes towards money
3. Identify alternative course of action: Continue same course of action, expand
current situation, change current situation, and take new course of action
4. Evaluate alternatives: Evaluate opportunity cost
5. Create and implement a financial action plan: How to achieve your goal
specifically, i.e. increase savings, decrease spending
6. Re evaluate and revise plan
Timing of goals:
Short term, within
the next year.
Intermediate, next
2-5 years, Long
term, more than 5
years off.
product goals:
Usually occur on a
periodic basis and
involve items that
are used up
quickly, such as food, clothing, and entertainment.
Durable-product goals: Infrequently purchased, expensive items such as appliances,
cars and other tangible items.
Goals should be: (SMART – specific, measurable, action-oriented, realistic and timely)
-Specific and measurable
-Have a time frame
-Should indicate type of action to be taken.
High demand for money pushes interest rates up
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