FIN 502 : CHAPTER 3 setting goals and the financial planning process.docx
Document Summary
Chapter 3 setting goals and the financial planning process. Financial goal: must possess two attributes (1) goals outcome can be measured precisely in dollars and (2) there is a deadline for its completion. To set a financial goal, brainstorm all desires and goals both short term and long term, then examine each item carefully and convert every desire into a financial goal. Financial planning process: system of setting goals, devising action plans and monitoring process. Process has four main steps: goal setting, action plan, take action, feedback (monitoring process) Financial goal (at time n) = existing savings + investment income for n years on existing saving + (earnings consumption/year) + investment income on annual savings, n. W0 = current amount of money that can be dedicated to future goal. Et = money earn in year t, other than investment income. Ct = money consume or spent in year t, other than used to purchase investment.
