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HECOL321 (3)
Chapter 2

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Human Ecology
Patricia French

Planning for Successful Money Mangement Money Management: Day-to-day financial activities necessary to manage current personal economic resources while working toward long-term financial security. Daily spending and saving decisions are at the centre of financial planning Coordinate these decisions with your needs, goals and personal situation Maintaining financial records and planning your spending are essential to success Opportunity Costs & Money Management Spending money reduces the amount you can save and invest. Saving and investing reduces the amount you can spend now. Buying on credit ties up future income. Using savings for purchases results in lost interest earnings - savings can’t be used for other purposes. Comparison shopping can save you money but uses up valuable time Major Money ManagementActivities Learning Objective # 2 Create a system for maintaining personal financial records. Why Keep Financial Records? An organized system of financial records provides a basis for: Handling daily business affairs, including paying of bills on time Planning and measuring financial progress Completing required tax reports Making effective investing decisions Determining available resources for current and future buying Many records are kept permanently (birth certificates, wills) Property / Investment records are kept for as long as you own the asset Keep tax records for a minimum of 6 years What to Keep in Your Home File Items you refer to often such as; Personal and employment records. Tax records. Financial services records. Money management records. Credit records. Consumer purchase and automobile records. Insurance records. Investment records. Housing records. Estate planning and retirement records. What to Keep in a Safe Deposit Box Safe deposit box is a private storage area at a financial institution with maximum security for valuables Use it to keep records and items that would be hard to replace. Birth, marriage and death certificates. Citizenship and military papers. Adoption and custody papers. Serial numbers and photos of valuables. GIC’s and bank account numbers. Mortgage papers and titles. List of insurance policy numbers. Stock and bond certificates. Coins and collectibles. Copy of will. Other Places to Keep Records Automobile. Vehicle registration. Lawyer. Original of your will and living will. Doctor and hospital. Copy of your living will. Home computer. Current and past budgets. Chequing account records. Wills, estate plans, investments. Past income tax returns. Learning Objective # 3 Develop a personal balance sheet and cash flow statement. Purpose of Personal Financial Statements Summarize the value of the items you own and the amounts that you owe Track your cash inflows by source and your outflows by type Identify strengths and weaknesses in your current financial situation Measure progress towards your financial goals Provide data for use in filing your income tax return or applying for credit Personal Balance Sheet Afinancial statement that reports what an individual or family owns or owes; also called a net worth statement Net Worth Statement AKABalance Sheet Components of a Balance Sheet (Net Worth Statement) Step 1: Listing Items of Value Assets– Cash and other property with a monetary value Liquid assets: cash and items of value easily converted to cash Real estate: home, condo, vacation property or other land owned Personal possessions: automobiles and other personal possessions Investment assets: funds set aside for long term financial needs Components of a Balance Sheet (Net Worth Statement) Step 2: DeterminingAmount Owed Liabilities – amounts owed to others Current liabilities: debts to be paid within short time, usually less than one year Long term liabilities: do not have to pay in full until more than a year from now Step 3: Computing Net Worth Net Worth – the difference between total assets and total liabilities Components of a Balance Sheet (Net Worth Statement) Aperson with a high net worth may still have financial difficulties No liquid cash available to pay current expenses Insolvency is the inability to pay debts when they are due because liabilities far exceed the value of assets You can increase your net worth by; Increasing your savings Reducing your spending Increasing the value of your investments and other possessions Reducing the amounts you owe Net Worth is not money available for use but an indication of your financial position on a given date Cash Flow Statement Afinancial statement that summarizes cash receipts and payments for a given period of time + + = Components of a Cash Flow Statement Step 1: Record income Income from employment; wages, salaries and commission or self-employment income Take-home pay: earnings after deductions for taxes and other items, also called disposable income Discretionary Income: money left over after paying for housing, food and other expenses Savings and investment income Gif
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