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Module 4 Notes

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11 views

Module 4 Notes

Uploaded by

reeyanpeekaboo69
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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MR ZIRKLE VIDEOS

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Start investing early, as it can make a huge difference
The higher degree of education gained, the larger income is

Money goals - What one wants to accomplish with their money


First, identify values, which are deep-rooted positive beliefs that guide in a beneficial way
throughout life.
Goals should reflect the values.

Build goals with the SMART method:


Specific - Having a specific goal that targets the plan
Measurable - Progress can be tracked
Attainable - It should be possible to perform
Relevant - Align with core values so it brings meaning
Time-bound - Create a deadline and hold yourself accountable for it
Next, assign a dollar value to each goal.
IT IS IMPORTANT TO WRITE DOWN THE GOAL, IT INCREASES CHANCES OF REACHING
IT

Ways to achieve goals:


1. Open several accounts
2. Set up direct deposit
3. Find an accountability partner
4. Celebrate your wins

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BOOK
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Liquidity - The relative ease and speed to convert noncash assets into cash

Ten principles of personal finance:


1. The best protection is knowledge: Not being able to differentiate between good
and bad advice can lead to disaster
2. Nothing happens without a plan: Financial planning doesn’t happen without a
plan, so start by measuring where you stand, set goals, put together a plan of
action, and put that plan into play with a budget
3. Time value of money - Because interest can be earned on money, money now is
worth more than money given later
4. Taxes affect personal finance decisions - All financial plans must take taxes into
account
5. Stuff happens, importance of liquidity - Having the funds readily available for any
unexpected situations
6. Waste not, want not - Smart spending matters and it is important not to waste
money
7. Protect yourself against major catastrophes - Get insurance to protect yourself
against major catastrophes
8. Risk and return go hand in hand - The greater the risk, the higher the chance one
won’t receive their expected income since nothing is guaranteed, which is why
diversification can allow people to spread their money across several investments
to be safer
9. Mind games, financial personality, and your money - Behavioral biases can lead to
big financial mistakes, mental accounting impacts financial decisions, and “sunk
cost” effect pours good money after bad money due to bias
10. Just do it - The first step is the hardest step, save first then spend, and saving
early can make a big difference

Personal finance is important, since it can help with financial planning and keep one
afloat from going into debt and spending too much money. Personal finance can help
one reach their financial goals. It can help save for retirement, minimize payments to
Uncle Sam, manage the unplanned, cover your assets, and invest intelligently.

Five basic steps of personal finance planning:


1. Evaluate your financial health: Keep track of transactions and purchases
throughout the day, which may be tedious, but also revealing.
2. Define your goals: Define the goals by formalizing them (writing them down),
attaching costs to them, and determining when the money to accomplish those
goals will be needed,
3. Develop a plan of action: Create a solid financial plan that includes an informed
and controlled budget, determines investment strategy, and reflects unique
personal goals.
I. Flexibility - The plan must be flexible enough to respond to changes in life and
unexpected events
II. Liquidity - Having the ability to access cash at any given moment
III. Protection - Being able to be protected by insurance in serious unexpected
events, insurance should be owned at reasonable rates
IV. Minimization of taxes - Keeping in mind a chunk of money goes to government,
and the goal isn’t to minimize taxes, but maximize amount of money after taxes
4. Implement the plan - Stick to the plan, keep track of income, spending, and
progress towards long-term goals. The plan should be a map that can lead out of
bad financial situations, and keep goals in mind
5. Review, reevaluate, and revise the plan - As time passes by and the situation
changes, it is important to review and revise the plan. It may be beneficial to
formulate a new plan
Financial goals cover three time horizons, short term (up to 1 year), intermediate term
(1-10 years), and long term (10+ years).
The financial life cycle allows people to see possible financial needs and plan ahead.
The first 17 or 18 years of our lives involved negative income, called the prenatal stage.
The first stage is until 54 and focuses on accumulating wealth, the second is around
55-64, and involves managing the wealth and estate planning, and the third and final
stage is retirement.

Choosing a major and career: Do a self-assessment and develop an understanding of


what you want, look at educational record and work experiences. Afterwards, decide a
career that fits interests and is realistically achievable. Also have an idea about wages
the job pays on average.

The higher level of education one has, the more wage they tend to get. Investing
resources to accomplish future career goals can also determine income level. Managing
good finance can also help land the job one wants.

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