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Business and
Personal Finance
Chapter 1
Personal Finance Planning
Section 1.1
Decisions and Goals
in Personal Finance
Decisions and Goals
in Personal Finance
In This Section . . .
What is personal finance planning?
It means spending, saving, and investing
your
money so you can have the kinds of
life you
want as well as financial security. This section
discusses:
 Making Personal Financial Decisions
 Developing Personal Financial Goals
 Influences on Personal Financial Planning
Decisions and Goals
in Personal Finance
What You’ll Learn
 How to create a financial plan
 How to develop your financial goals
 How to evaluate the economic factors
that will affect your financial decisions
Decisions and Goals
in Personal Finance
Why It’s Important
Learning the steps in the financial
planning process will give you a solid
foundation for making all your financial
decisions, big and small, now and in the
future.
Decisions and Goals
in Personal Finance
Video Clip: Why Have a Financial Plan?
Decisions and Goals
in Personal Finance
Why Plan?
Some of the benefits of planning are:
 You have more money, know how to use
money to achieve your goals, and are
financially secure;
 You have less chance of going into debt you
can’t handle;
 You can help your partner and support
your children.
Decisions and Goals
in Personal Finance
Create a Financial Plan
The financial planning process has six steps:
Step 1
Step 2
Step 3
Step 4
Step 5
Step 6
Determine your current financial
situation
Develop your financial goals
Identify alternative courses of action
Evaluate your alternatives
Create and use your financial plan
of action
Review and revise your plan
Decisions and Goals
in Personal Finance
Common Cents
Pay Yourself First
List your income (from
your allowance or a
part-time job). Set an
amount to put aside
every month and
calculate how much you
will save up in a year.
Decisions and Goals
in Personal Finance
Types of Goals
Goals can be defined by the time it takes
to achieve them:
 Short-term goals are those that you’ll reach in
one year or less (saving to buy a computer).
 Intermediate goals take two to five years to
reach (saving for a down payment on a house).
 Long-term goals take more than five years to
reach (planning for retirement).
Decisions and Goals
in Personal Finance
Guidelines for Setting Goals
Your financial goals should:
 be realistic
 be specific
 have a clear time frame
 help you decide what type of action to take
Decisions and Goals
in Personal Finance
Write it Down
Studies show that people who write down
their goals are three times more likely to
achieve them.
Decisions and Goals
in Personal Finance
Influences on Personal Financial
Planning
Many influences affect your day-to-day
decisions. The three most important
 Life situations
 Personal values
 Economic factors
are:
Decisions and Goals
in Personal Finance
Financial Goals and Activities
for Various Life Situations
Decisions and Goals
in Personal Finance
Economic Conditions and
Financial Planning
Decisions and Goals
in Personal Finance
Check Your Understanding
1) Name the six steps used to create a financial
plan.
2) What is the relationship between the timing
of your goals and the type of good or service
that you seek?
3) Describe two economic factors that affect
financial decisions. How might these factors
influence your financial planning?
Decisions and Goals
in Personal Finance
Think Critically
Why is it important to distinguish between
your needs and your wants?
Decisions and Goals
in Personal Finance
End of Section 1.1