– is the heart of financial planning to ensure your values line up where you want to be in the future.
How you spend and save
– helps define your financial goals and set appropriate strategies to reach them.
Personal financial planning
the necessities, comforts, and luxuries enjoyed or desired by an individual or family.
Standard of living
the percentage of each dollar of income, on average, that a person spends for current needs rather than savings.
Average propensity to consume
total value of all items owned by an individual such as savings accounts, stocks, bonds, home, and automobiles.
are intangible paper assets such as savings accounts and securities, that are acquired for some promised future return.
physical assets such as real estate and automobiles that can be held for either consumption or investment purposes.
cash, savings accounts, and money market funds; used to pay everyday expenses.
stocks, bonds, and mutual funds are acquired to earn a return on our money
movable property such as cars, household furnishings, appliances, clothing, jewelry, home electronics, and similar items.
immovable property; land and anything fixed to it like a house.
results that an individual wants to attain such as buying a home, building a college fund, or achieving financial independence.
the medium of exchange used as a measure of value in financial transactions
the amount of satisfaction received from purchasing certain types or quantities of goods and services.
target dates in the future when certain financial objectives are expected to be completed.
6 years or more goal
next 2-5 years goal
In the next year goal
- is a lifelong process that includes short and long-term goals.
- Can improve your work situation and help you gain greater personal and professional satisfaction.
– is something we owe measured by the amount of debt we incur.
employer allocates a certain amount of money to each employee and then lets the employee “spend” that money on the benefits that suit his/her age, marital status, number of dependent children, and level of income.
Flexible-benefit (cafeteria) plans
- plays a major role in regulating the level of economic activity
constrain personal financial planning
Taxation and regulation
- controls money supply
- used to stimulate or contract economic growth
controls levels of taxation.
Sets levels of government spending
- Stages related to employment and production levels
- Growth measured by changes in GDP
when real GDP increases until it hits a peak.
when an expansion ends and a contraction begins.
when real GDP falls
when a contraction ends and an expansion begins.
- A state of the economy in which the general price level is increasing
- Measured by changes by CPI
- Affects purchasing power and interest rates
- Affects financial plans and goals
a measure of inflation based on changes in the cost of consumer goods and services.
Consumer price index (CPI)
- the amount of goods and services that each dollar buys at a given time.