chapter 22 the future of business gitman & mcdaniel 5 th edition the future of business gitman...
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THE FUTURE OF BUSINESSGitman & McDaniel
5th Edition
THE FUTURE OF BUSINESSGitman & McDaniel
5th Edition
Chapter
Managing YourPersonal FinancesManaging Your
Personal Finances
Prepared byDeborah Baker
Texas Christian University
Prepared byDeborah Baker
Texas Christian University
22
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1 How does the financial-planning process facilitate successful personal financial management?
2 How do cash flow planning and management of liquid assets contribute to your financial goals?
3 What are the advantages and disadvantages of using consumer credit?
4 What types of taxes are individuals responsible for?
5 What factors should you consider in deciding what insurance to purchase?
Learning Goals
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6 What personal goals are important when making investment decisions?
7 How do investors open a brokerage account and make securities transactions?
8 What emerging trends affect the way you manage your personal finances?
Learning Goals
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Learning Goal 1
How does the financial-planningprocess facilitate successful
personal financial management?
1
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Financial Planning: The First Steps1
1. Establish financial goals1. Establish financial goals
2. Gather information2. Gather information
3. Analyze the information3. Analyze the information
4. Develop a plan4. Develop a plan
5. Implement the plan5. Implement the plan
6. Monitor your plan6. Monitor your plan
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2 Learning Goal 2
How do cash flow planning and management of liquid assets
contribute to your financial goals?
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2Cash Management: Cash Flow
Plan
Establish goals and calculate the savings you need to meet them.
Estimate your income and expenses, including savings contributions.
Track actual income and expenses for a one-month period.
Compare planned and actual income and expenses.
Modify estimates for the next month and repeat the process.
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2 Balancing Your Checkbook
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3 Learning Goal 3
What are the advantages anddisadvantages of using
consumer credit?
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3 Using Consumer Credit
ProsProsProsPros
Convenience
Immediate use of good
Bargain prices on sale merchandise
Establish a credit rating
Convenient record keeping
Financial emergencies
Perks
ConsConsConsCons
Easy to overspend
Costs money in interest charges
Merchandise may cost more
Legal commitment to repay debt reduces future discretionary income
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3 Tips to Pay Off Credit Cards
Don’t wait until the last minute to pay.
Talk back.Ask for a lower interest rate and removal of any fees
Check your statement. Credit-card fraud is widespread!
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3 Minimum Payments Don’t Pay
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3 Loans
Principal is the total amount borrowed
Prepayment penalties are additional fees that may be owed if a loan is repaid early
Security requirements are provisions that allow a lender to take back the collateral if a loan is not repaid according to the terms of the agreement
Credit life insurance is insurance that will repay a loan if the borrower dies while the loan is still outstanding
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4
What types of taxes areindividuals responsible for?
Learning Goal 4
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4 Managing Taxes
PropertyProperty
SalesSales
Social Security & MedicareSocial Security & Medicare
Income Income
Types Types of Taxesof TaxesTypes Types
of Taxesof Taxes
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What factors should you considerWhat factors should you considerin deciding what insurancein deciding what insurance
to purchase?to purchase?
What factors should you considerWhat factors should you considerin deciding what insurancein deciding what insurance
to purchase?to purchase?
5 Learning Goal 5
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5
Property and Liability Insurance
Property and Liability Insurance Health InsuranceHealth Insurance
Disability Income Insurance
Disability Income Insurance Life InsuranceLife Insurance
•Automobile
•Homeowners/renters
•Indemnity Plans
•Managed Care Plans
•Term Life
•Whole Life
•Universal life
Selecting Insurance
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6
What personal goals are importantWhat personal goals are importantwhen making investment decisions?when making investment decisions?What personal goals are importantWhat personal goals are important
when making investment decisions?when making investment decisions?
Learning Goal 6
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6 Investment Risk Pyramid
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6
SafetySafety
GrowthGrowth
Income Income
Government and high-gradecorporate bonds, preferred stocks, and mutual funds.
Government and high-gradecorporate bonds, preferred stocks, and mutual funds.
Growth stocks with above-average rates of growth
in earnings and price.
Growth stocks with above-average rates of growth
in earnings and price.
Low-risk securities: Treasury issues, corporate
bonds, preferred stock, and income stocks.
Low-risk securities: Treasury issues, corporate
bonds, preferred stock, and income stocks.
Goals Goals Choices Choices
Investment Goals
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6
4. Invest regularly4. Invest regularly
3. Diversify3. Diversify
2. Start early 2. Start early
1. Establish an emergency fund1. Establish an emergency fund
Developing an Investment Strategy
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7
How do investors open a How do investors open a brokerage account and makebrokerage account and make
securities transactions?securities transactions?
How do investors open a How do investors open a brokerage account and makebrokerage account and make
securities transactions?securities transactions?
Learning Goal 7
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7
Basic accounts at brokerage firm
– Cash accounts
– Margin accounts
Three types of orders
– Market order
– Limit order
– Stop-loss order
Securities Transaction Basics
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8
What emerging trends affect What emerging trends affect the way you manage your the way you manage your
personal finances?personal finances?
What emerging trends affect What emerging trends affect the way you manage your the way you manage your
personal finances?personal finances?
Learning Goal 8
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8
Increase inIdentity TheftIncrease in
Identity Theft
Debt Load ofGen-X
Debt Load ofGen-X
Trends
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8 Identify Theft