Financial Services _Çô Client Services RFC121 Study Guide - Summer 2018, Comprehensive Midterm Notes - Mortgage Loan, Life Insurance, Canada
12 Oct 2018
School
Department
Professor
Financial Services
_Çô Client Services
RFC121
MIDTERM EXAM
STUDY GUIDE
Fall 2018
Chapter 1
Personal Financial Planning: An Introduction
Learning Objectives – Chapter 1
Analyze the process for making personal financial decisions.
Develop personal financial goals.
Assess economic factors that influence personal financial planning.
Determine personal and financial opportunity costs associated with
personal financial decisions.
Identify strategies for achieving personal financial goals for different life
situations
Learning Objective # 1
Analyze the process for making personal financial decisions.
Financial Planning and Its Benefits
▪ Personal financial planning is the process of managing your money to
achieve personal economic satisfaction.
▪ Advantages of personal financial planning;
▪ Increased effectiveness in obtaining, using, and protecting your
financial resources
▪ Increased control of your financial affairs
▪ Improved personal relationships
▪ A sense of freedom from financial worries
The Financial Planning Process
▪ Step 1: Determine your current financial situation.
▪ Prepare a list of current asset and debt balances and amounts spent
for various items
▪ Step 2: Develop financial goals.
▪ Analyze your financial values and attitudes towards money
find more resources at oneclass.com
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▪ What is your financial decision making process?
▪ Step 3: Identify alternative courses of action.
▪ Continue as you are, expand or change the current situation, or take
a new course of action
The Financial Planning Process
▪ Step 4: Evaluate alternatives.
▪ Take into consideration your life situation, personal values and current
economic situation.
▪ Opportunity cost is what you give up by making a choice.
▪ The cost, referred to as the trade-off of a decision, can be measured
in money or time
▪ Consider lost opportunities that will result from your decisions.
▪ Evaluate the risks faced
Types of Risks
Evaluate your Economic or Product Risks
▪ Interest Rate Risk
▪ Changing interest rates affect your costs when you borrow and your
benefits when you invest
▪ Inflation Risk
▪ Rising prices cause lost buying power
▪ Liquidity risk
▪ Some investments may be more difficult to convert to cash or sell
without significant loss in value
▪ Product Risk
▪ Products or services flawed or not meet your expectations
▪ Retailers may not honour their obligations
Types of Risks
Evaluate your Personal Risks
▪ Risk of Death
▪ Premature death can cause financial hardship to family members left
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Analyze the process for making personal financial decisions. Assess economic factors that influence personal financial planning. Determine personal and financial opportunity costs associated with personal financial decisions. Identify strategies for achieving personal financial goals for different life situations. Interest rate risk: changing interest rates affect your costs when you borrow and your benefits when you invest. Inflation risk: rising prices cause lost buying power. Liquidity risk: some investments may be more difficult to convert to cash or sell without significant loss in value, product risk, products or services flawed or not meet your expectations, retailers may not honour their obligations. The financial planning process: step 5: create and implement a financial action plan, choose ways to achieve your goals, may require assistance from others, financial planning information sources; Computer software, world wide web, and on-line information. The financial planning process: step 6: reevaluate and revise your plan, your plan should be reviewed regularly based on your life circumstances.
