Lesson 1: Introduction to Personal Finance

• Finance concerns the flow of money from one place to another
• Personal Finances concern your money and what you plan to do with it as it flows in and out of your possession.
• Personal Finance is the application of financial principles to the monetary decisions that you make either for individual benefit or of your family
• Activities of Consumers

  Earning, Spending, Saving, Borrowing
• Gaining money by working, owning a business, or receiving ivestment returns.

  Earning
• Money gaines from earning

  Earnings
• Factors affecting Earnings

  Career Choices, Ability to find employment, Ability to advance
• Involves realizing that career choices greatly affect lifetime earnings & standard of living & considering these factors when making career choices

  Responsible Earning
• Using money to purchase goods and services

  Spending
• The way a person ... money determines the value received and influences the economy

  Spending
• Putting aside money for later use

  Saving
• Money may be .... in a bank accound or wallet

  Saved
• determines the financial return

  form of saving
• Later uses for savings

  • emergencies
  • recurring expenses
  • future purchases
  • financial goals
  • retirement
• These pertain to what?

  *provide moeny for future purchases

  *can be used to earn income

  *increase personal financial security

  *provide growth opportunities for business ventures

  Benefits of Saving
• Forming the habit of saving regularly & finding forms of savings that yield high returns 

  Responsible Saving
• Obtaining money, goods, or services at present in exchange for the promise of future payment

  Borrowing
• Borrowing only what can be paid back when due

  Responsible Borrowing
• Areas of Personal Finance

  Income, Spending, Saving, Investing, Protection
• Source of cash inflow that an individual receives and then uses to support themselves and their families.

  Income
• Starting point for financial planning process

  Income
• A person's career choices, ability to find employment, and ability to advance determine his/her expected earnings and standard of living
• The way a person spends money determines the value received and influences the economy.
• these are examples of what?

  *buying with a credit card

  *buying on installment

  *payday loans

  *cash advances

  *layaway purchases

  Borrowing
• these are reasons for what?

  *major purchases

  *emergencies

  *convenience

  *prepare for future goals

  *take advantage of good sales/sales

  Reasons for Borrowing
• Common sources of income are: salaries, bonuses, hourly wages, pensions, dividends 
• includes all types of expenses an individual incurs related to buying goods and services or anything that is consumble

  Spending
• Two categories of Spending

  Cash / Credit
• majority of people's income is allocated to...

  Spending
• Common sources of Spending: rent, mortgage payments, taxes, food, entertainment, travel, credit card payments
• refers to excess cash that is retained for future investing or spending.

  Savings
• If there is a surplus between what a person earns as income and what they spend, the difference can be directed towards...

  Savings / Investments
• Managing ___ is a critical area of personal finance

  Savings
• Common forms of Savings include: physical cash, savings bank account, checking bank account, money market securities
• relates to the purchase of assets that are expected to generate a rate of return, with the hope that over time the individual will receive back more money than they originally invested.

  Investing
• Common forms of Investing: stocks, bonds, mutual funds, real estate, private companies
• refers to a wide range of products that can be used to guard againts an unforeseen and adverse event

  Protection / Personal Protection
• Common protection products include: Life insurance, health insurance, and estate planning
• The sooner you start financial planning, the better, but it's never too late to create financial goals to give yourself and your family financial security and freedom

  Personal Finance Strategies
• It's all for nothing if you don't know how much you bring home after taxes and withholding.

  Know your income