Personal Finance

• There are different types of investments such as stocks, bonds, mutual funds, real estate, and commodities.
• The study guide for Module No. 1 of Personal Finance 101: The Environment for Financial Decision Making, covers the prerequisites for managing finances, steps to financial planning, understanding how social and economic influences affect personal financial goals and decisions, developing personal financial goals, implementing a plan for making personal financial decisions, and understanding the 10 Axioms of Finance.
• The study guide also discusses the foundations of financial decision making, the risk-return trade-off, the time value of money, cash is king, incremental cash flows, the curse of competitive markets, efficient capital markets, the agency problem, taxes bias business decisions, all risk is not equal, and ethical behavior means doing the right thing.
• The study guide also discusses financial literacy, which is the knowledge of facts, concepts, principles, and technological tools that are fundamental to being smart about money.
• Economics is the study of how wealth is created and distributed.
• Personal finance is the study of personal and family resources considered important in achieving financial success, involving how people spend, save, protect, and invest their financial resources.
• Studying personal finance can help avoid financial mistakes and show you how to take advantage of financial opportunities.
• Global influences, such as the global economy, can affect financial activities.
• Financial happiness encompasses a lot more than just making money, it is the satisfaction you feel about money matters.
• Financial responsibility means you are accountable for your future financial well-being and strive to make it better.
• Financial literacy empowers individuals, improves their ability to handle day-to-day financial matters, helps them avoid the consequences of poor financial decisions that could take years to overcome, and helps them make informed and confident personal money decisions.
• Bridging the gap between one’s level of living and one’s desired standard of living involves learning about how to achieve financial success.
• Financial planning in an economy involves daily economic transactions that facilitate financial planning activities.
• Financial success is the achievement of financial aspirations that are desired, planned, or attempted.
• Financial decisions need to be regularly assessed.
• There are several keys to achieve financial success, starting with spending less to save and invest.
• The factors affecting the economy also affect financial planning.
• The 10 axioms of finance serve as a guide to financial management study.
• Setting short-, intermediate-, and long-term goals must be SMART.
• Changing personal, social, and economic factors may require more frequent assessments.
• An action plan is developed to identify ways to achieve financial goals.
• Specific financial goals are vital to financial planning.
• The financial planning process can be viewed as a six-step procedure that can be adapted to any life situation.
• In the first step of the financial planning process, determine your current financial situation regarding income, savings, living expenses, and debts.
• Common sources available to help with financial decisions include the Internet, financial institutions, media sources, financial specialists, and others.
• Financial planning involves gathering information based on experience and the experiences of others, and using financial planning information sources.
• You should periodically analyze your financial values and goals to differentiate your needs from your wants.
• A complete review of finances should be done at least once a year.
• Although many factors will influence the available alternatives, possible courses of action usually fall into these categories: continue the same course of action, expand the current situation, change the current situation, or take a new course of action.
• Financial planning activities include obtaining, planning, saving, borrowing, spending, managing risk, investing and retirement and estate planning.
• Common risks to consider include inflation risk, interest rate risk, income risk, personal risk, and liquidity risk.
• Financial planning is a dynamic process that does not end when a particular action is taken.
• Relevant information is required at each stage of the decision-making process.
• Preparing a list of current asset and debt balances and amounts spent for various items gives you a foundation for financial planning activities.
• Identifying and evaluating risk are difficult in many financial decisions.
• Financial literacy and responsibility are important to achieve personal financial success.
• In the fourth step of the financial planning process, evaluate your alternatives, taking into consideration your life situation, personal values, and current economic conditions.
• The purpose of the second step of the financial planning process is to develop your financial goals.
• Uncertainty is also part of every decision.
• Your financial goals can range from spending all of your current income to developing an extensive savings and investment program for your future financial security.