Chapter 1: Financial planning and the ties that bind
Chapter 1: Financial planning and the ties that bind AAEC 2104
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This 3 page Class Notes was uploaded by Jennifer Cartwright on Sunday February 7, 2016. The Class Notes belongs to AAEC 2104 at Virginia Polytechnic Institute and State University taught by Dr. White in Spring 2016. Since its upload, it has received 50 views. For similar materials see Personal Financial Planning in Agricultural & Resource Econ at Virginia Polytechnic Institute and State University.
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Date Created: 02/07/16
Cornell Notes Lecture, reading/chapter/novel/article Name: ___________________________________ to collect info.)er point, movies (if need Class: _________________ Period: ________ 0 TopicChapter 1: Financial Planning: The Ties that Bind Date: ____________________________ Essential Question: What are the building blocks to financial planning? Questions/Main Ideas: Notes: Why Personal Financial - money doesn’t have instructions Planning - much easier to spend than it is to save - learn to control finances, before they take over your life - helps to achieve goals - planning reduces stress What can be - better ability to handle the unexpected accomplished? - Find extra cash that can be saved - start investing for retirement - save for big items, special expenses, and goals - maximize your after tax income Planning Process - Evaluate financial condition - Define goals - Develop plan of action - Implement plan - Review and change if needed How to Evaluate - Look at four things: - What you own? - What you owe? - What you earn? - What you spend? Defining your goals - Less than a year is call short term - Between 1 and 10 years is an intermediate goal - Over ten years is a long term goal - SMART goals Specific, Measurable, Attainable, Rewarding, and Time frame Developing your plan - Make sure you have three plans, always have a backup - Key Characteristics of a good goal: Written, organized, and flexible Implementing - Put plans into action, they aren’t good if they are never used. - Make them real to you. Review - review and revise Life Stages of Financial - Early Years: expenses are greater than income Planning - Earning years: just starting into the work force - Golden Years: majority of the earning is done here - Retirement years: expenses are more than income (mostly because of medical expenses) Principle 1: Best - Stay up to date on your financial status Protection = Knowledge Principle 2: Nothing - Money is usually spent without thinking, however happens without a plan saving needs thinking - Start with a modest and uncomplicated plan, change it as you go. - Emphasis on pay yourself first, make sure some of your check goes towards savings Principle 3: Time Value - Risk, inflation, and opportunity cost means money of Money have time value Principle 4: Takes Affect - Taxes influence earnings Personal Finance - Maximize after tax return Decisions - Death tax: 2% of personal estate tax Principle 5: Stuff - Liquidity Happens - have funds available for emergencies (3-6 months of savings) - Without Liquidity: o Investments must be liquidated o Things sold for a lower price, tax consequences, missed opportunities - With nothing to sell means having higher interest Principle 6: Waste not, - Reduce spending want not - Consider wants vs. needs - Comparison shop Principle 7: Protect - Right insurance before insurance against Emergencies - Know your policy Principle 8: Risk- Return - Low risk means low return, high risk means high Trade off return Principle 9: - Avoid putting everything into one thing Diversification Reduces - Reduces risk exposure Risk Principle 10: Just do it - Make the commitment - Time is an asset - Take action now
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