Finance mid term 2 25 15
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Transcript of Finance mid term 2 25 15
Finance e-magazineChapters 1 - 6
FINANCE MAGAZINE This magazine will show you in a very funny and descriptive way everything you need to know in order to be organized when talking about finance
Juanpi Murua RubioFinance
Personal financial planning
Financial decisions and goals
What’s personal financial
planning?
Arranging to spend, safe and invest money in order to live comfortable, have
financial security and achieve goals
6steps of financial planning
1. Determine your current financial situation
2. Develop your financial goals
3. Identify your options
4. Evaluate your alternatives
5. Create and use your financial plan of action
6. Review and revise your plan
FACTORS THAT INFLUENCE ON YOUR PERSONAL FINANCIAL
PLANNING
There are some factors which can influence
Life situations
Personal values
Economic factors
Opportunity costs and strategies
WHAT IS THE RELATION BETWEEN OPPORTUNITY COST
AND PERSONAL FFINANCIAL DECISIONS?
The relation is the spent of money but the difference between these two major things is that financial opportunity cost is based on your necessities, your health. You must spend that money on your health. Financial opportunity cost is based on your wants instead of your needs.
8 strategies for achieving financial goals at different stages of life
Obtaino Obtain financial
resources by working Plan
o Plan how you’ll spend your money
Spend wiselyo Spend less than what
you earn Save
o Make a savings plan Borrow wisely
o Only when necessary Invest
o Invest either to increase your current income or to achieve long-term growth
Employment and career development
Finances and career planning
IDENTIFY THE PERSONAL ISSUES TO CONSIDER WHEN CHOOSING AND
PLANNING YOUR CAREER
You’ll need to be able to answer all
this questions
What do I do best?
What do I enjoy?
The right fit
There are also stages in order to
4 steps in order to develop a career plan of action
Personal and career interests
Career skills
Career training and education
Employment position
There are 4 main steps to develop a career plan of action, they are listed below
Learn effective strategies to help you get the job or career that meets your personal and financial goals
Obtaining employment experience
Career information sources
Employment and career development
Learn effective strategies to help you get the job or career that meets your personal and financial goals
Obtaining employment experience
Career information sources
Such as working in a Part-time Work
Such as working in a Volunteer work
Internship and cooperative education
Mass media Professional organizations
The internet School guidance office
Community organizations contacts
IDENTIFYING JOB OPORTUNITIES
Job advertisement
Job fairs
Employment agencies
Visit the company
Call the companies
Use the internet to search for one job
Money management strategies
Applying for a job offer
You must make your resume
o Which is a one or two page summary of your education
You must send a cover letter
o Which is a the personal letter that you present along with your resume
o This letter includes all your abilities on writing and presenting yourself as the best person eligible for this work
Considering a job offer
Which factors are the most important considering a job offer?
The work environment
Factors affecting salary
Making employee benefits
ORGANIZING FINANCIAL RECORDSRelationship between opportunity costs and money managementMoney management is the planning of how to get the most from your money.
Opportunity costs is how well are you in your opportunities of earning money.
Different types of relations…
You may be with a high opportunity costs and you may be able to manage your money wisely.
You may be with a high opportunity costs and you may not be able to manage your money wisely.
You may be with a low opportunity costs and you may be able to manage your money wisely.
You may be with a low opportunity costs and you may not be able to manage your money wisely
Simple to set up
Keep important document
s
Not all documents
can be stored
Does not take
much space
It’s a small box rented in a bank
One benefit is that it’s in your home
It’s not protected
against fire,
water or theft
It’s protected
against fire, water and theft
It’s not protected
against fire, water
or theft
ComputerHome files
Benefits of keeping financial records and documents
Safe-deposit box
PERSONAL FINANCIAL STATEMENT
Personal balance sheet
It’s a financial statement that lists items of value owned, debts owed, and a person’s net worth
Cash flow statement
The money that actually goes into and out of your wallet and bank accounts
To find your current worth, you must use a personal balance sheet
There are steps to follow in order to find your current worth…
Step 1
Determine your assets
Types of assets
Liquid assets
Real state
Personal possessions
Investment assets
Step 2
Determine your liabilities
Types of liabilities
Current
Long-term
Step 3
Calculate your net worth
Step 4
Evaluate your financial situation
CASH FLOW STATEMENT: INCOME VS EXPENSES
Record your income Determine your net cash flow
Record your expenses
In order to make a good cash flow statement you must follow some
steps
BUDGETING FOR FINANCIAL GOALSConsumer purchasing and protection
Steps for creating a personal budget
Step 1
Set your financial goal
Step 2
Estimate your income
Step 3
Budget for unexpected expenses
Step 4
Budget for fixed expenses
Step 5
Budget for variable expenses
Step 6
Record what you spend
Step 7
Review spending and saving patterns
A good budget is carefully planned
A good budget is practical
A good budget is flexible
A good budget must be written and easily accessible
Ways to budget
successfully
Factors that influence buying decisionsIt’s divided into 3 main factors
Economic factors
Prices Interest rates Product quality Supply and demand Convenience Product safety Brand name Maintenance costs Warranty
Social factors
Lifestyle Interests Hobbies Friends Culture Advertisements Media (magazines, radio,
television, newspaper)
Personal factors
Gender Age Occupation Income Education Family size Geographic region Ethnic background Religion
Phases in order to buy the best product in the best storeThere are 4 phases in order to buy the best product in the best store
1. Before you shop
2. Weighing alternatives
3. Making the purchase
4. After the purchase
It’s simple
Make a wise decision when it’s about buying a product, especially if it’s
an important or very expensive one
CONSUMER PURCHASING
Resolving
consumer
complaints
Most used complaints by consumers are because
Products that are defective
Unexpected costs
Deceptive pricing
Unsatisfactory repair service
Best way to resolve a
dispute over goods and services?
There are some steps to follow in order to make this the best way of doing it
1. Return to the place of purchase2. Contact the company head quarters
3. Consumer agency assistance4. Dispute resolution
AS AN ENTREPOENEUR, YOU MUST KNOW ABOUT YOUR LEGAL RIGHTS…
What are your legal rights?
If you are unsatisfied with the steps mentioned before (in the heart) you may be able to send the case to a small claims court. It’s a system to settle minor agreements
Banking Financial
services and
institutions
Borrowing
Most people use credit at some time in their life.
Financial institutions offers many options when it is about borrowing money.
You can borrow money for short term with a credit card or personal loan
You can borrow money for long term like for example a car or house.
Payment services
Transferring money from a personal to a business account.
It is a basic function of day-to-day financial activity at a bank.
The most commonly used payment service is a checking account.
Demand deposit is the money that you put into your checking account.
Savings
Safe storage of funds which are ready for future uses.
It is a basic need for everyone, every person needs to safe money in order to have funds for any problem.
Time deposit is the money that it going to be left in a financial institution for months.
Types of financial services
TYPES OF FINANCIAL INSTITUTIONS
Federal deposit Insurance Corporation
Insures each account in a federally chartered bank
Deposit institutions Many people uses these institutions to keep their money safe
Commercial bankSavings and loan associationsMutual savings bankCredit unions
Non-deposit institutions Companies which offers another service
Life insurance companiesinvestment companiesfinance companies mortgage companies
Regular savings account Ideal if you plan to make frequent deposits and withdrawals
Certificates of deposit Money is left in the deposit for a stated period of time to earn a specific rate of return
Money markets account Requires a minimum balance and earns interest that varies from month to month
U.S Savings bonds When you purchase a bond ant you don’t withdraw the money for the specified time you gain the interest needed and you may gain twice the money you had
Savings plans and
payment
methods
There are also benefits
and drawbacks from each
saving plan
TYPES OF CHECKING ACCOUNTS
Regular checking accounts
Usually don’t require a minimum If your account drops below this minimum you’ll have to pay a monthly charge
Activity accounts
You make only few checks monthly You are unable to maintain your balance
Interest-earning checking accounts
Pays interest if you maintain your balance You’ll pay interest if you don’t
How to write a check
The steps on writing a check are simple
1. Write the current date2. Write the name of the party who will receive
the check3. Record the amount of payment in numerals
4. Write the amount in words5. Sign the check in the same way you signed
your signature card at the bank6. Make a note of the reason for the payment.
Consumer credit What’s consumer
credit?
The use of credit for personal needs.
Indicator of consumer spending and demand
Closed and open-end credit
Closed-end credit
One-time loan that you will pay back over a specified period of time in payments of equal amounts
Open-end credit
Loan with a certain limit on the amount of money you can borrow for a variety of goods and services
Sources of consumer credit
LOANS
A loan is money you borrow from an institution and you continue to pay over a period of time with interests. There are different types of loans…
Inexpensive loans
Medium-priced loans
Expensive loans
Home equity loans
The costs and
methods of
obtaining credit
The 5 C’s
Character
Will you repay the loan?
Capacity
Can you repay the loan?
Capital
What are your assets and Net worth?
Collateral
What if you don’t repay the loan?
Credit history
What is your credit history?
Difference between loan
and credit card
The main difference is the loan is for a longer time, the credit card for a
shorter
Monthly payments have an annual percentage rate table
THE COSTS OF CREDIT
It’s divided into 2 types
Simple interest
Interest computed only in the principal, the amount that you borrowed
Simple interest on the declining balance
When the loan is getting smaller, the interest rate is getting smaller.
The warning signs
You make only the minimum monthly payment on credit cardYou are having trouble even making the minimum monthly Payment on your credit card billsThe total balance on your credit cards increases every monthYou miss loan payments of often pay lateYou used savings to pay for necessities such as food and utilitiesYou receive second or third payment due notices from creditorsYou borrow money to pay off old debts You exceed the credit limits on your credit cardsYou have been denied credit because of a bad credit report
THE COSTS OF CREDIT P. 2
Add-on interest
Interest is calculated on the full amount of the original principal
Cost of open-end credit
The seller contacts the buyer, tells him how the price is going to affect the real value, etc.
Cost of credit and expected inflation
Reduces the buying power of money
The minimum monthly payment trap
Smallest amount you can pay and remain a borrower in good standing.
The best the way to protect yourself from fraud and
identity theftThe best way of protecting
your credit is
Keep track of your credit
Protecting your account
Managing my debts
We must be able to determine whether we are in bankruptcy or not. The US bankruptcy has been increasing since 1970…