Solution Manual for Personal Finance, 9ce Kapoor Chapter 1-15
SECTION B CHAPTER TEACHING MATERIALS FINANCIAL PLANNING: AN INTRODUCTION CHAPTER OVERVIEW This chapter provides the foundation for Personal Finance and the study of financial planning. The chapter starts with a discussion of an overview of the financial planning process. This is followed by coverage of the person‘s life situation, personal values, and economic factors that make up the financial planning environment. Next, the opportunity costs, or trade-offs, of decisions are considered in relation to personal and financial resources. Subsequently, the main components of financial planning (obtaining, planning, saving, borrowing, spending, managing risk, investing, and retirement and estate planning) are discussed. Finally, strategies for creating and using a financial plan are introduced. LEARNING OBJECTIVES
CHAPTER SUMMARY
After studying this chapter, students will be able to: Obj. 1
Analyze the process for making personal financial decisions.
Personal financial planning involves the following process: (1) determine your current financial situation; (2) develop financial goals; (3) identify alternative courses of action; (4) evaluate alternatives; (5) create and implement a financial action plan; and (6) re-evaluate and revise the financial plan.
Obj. 2
Develop personal financial goals.
Financial goals should (1) be realistic; (2) be stated in specific, measurable terms; (3) have a time frame; (4) indicate the type of action to be taken.
Obj. 3
Assess personal and economic factors that influence personal financial planning.
Financial decisions are affected by a person‘s life situation (income, age, household size, health), personal values, and economic factors (prices, interest rates, and employment opportunities).
Obj. 4
Determine personal and financial opportunity costs associated with personal financial decisions.
Financial opportunity costs are based on the time value of money. Future value and present value calculations enable you to measure the increased value (or lost interest) that results from a saving, investing, borrowing, or purchasing decision. 31
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