Textbook Notes (363,103)
Canada (158,195)
Finance (361)
FIN 502 (69)
Joan Lobo (33)
Chapter 3

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Ryerson University
FIN 502
Joan Lobo

Chapter 3: Setting Goals and the Financial Planning Process Learning Objectives Distinguish b/ fin desire and fin goal Learn process of setting goals Learn process of fin planning to achieve goals Desires and Goals Financial goals 1. goals outcome can be measured in dollars 2. deadline for completion How to Set Financial Goals 1. brainstorm → write desires and goals o goals = s-t (vacation), l-t (buy house in 5 yrs) 2. convert desire to fin goal The Fundamental Financial Goals - goal of early retirement → accum savings, pension support level of consumption after retirement - goal of early retirement: PV of desired level of consumption f/ date of retirement to expected death The Financial Planning Process Financial planning process - system of setting goals, devising action plans and monitoring progress req contin changing and monitoring 1. Goal setting - specific fin goal w/ time for completion a) invest money in the right investment → generate return so goal achieved; b) rate of return high  Compound FV:  FV interest factor of annuity:  FV of goal setting:  k = min rate of return 2. Action plan - find investment w/ expected rate of return of __% w/ 3 possibilities a) finds investment and happy w/ risk involved b) cant fin investment that generate high return → revise fin goal or revise action plan c) find some invested expected to generate req rate of return but find all incur more risk than like → revise fin goal or revise action plan o risk preferences, indiv val std, ethical attitude prevent acting to action plan → revise fin goal or revise action plan 3. Take action 4. Feedback (Monitoring progress) Formal Model for Analysis - - t = future yr - n =
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