1
Overview
of a
Financial
Plan
1-1
Chapter Objectives
Explain how you benefit from
personal financial planning
Identify the key components of a
financial plan
Outline the steps involved in
developing your financial plan
1-2
Definitions
Personal Finance: the process of
planning your spending, financing,
and investing activities, while
taking into account uncontrollable
events such as death or disability,
in order to optimize your financial
situation over time.
1-3
Definitions (contd)
Personal Financial Plan: a plan that
specifies your financial goals,
describes the spending, financing,
and investing activities that are
intended to achieve those goals over
time, and uses the risk management
strategies that are required to
protect against uncontrollable
events such as death or disability.
2011 Pearson Education Canada
1-4
Benefits of Understanding
Personal Finance
Make Your Own Financial Decisions
Know there is an opportunity cost to your
decisions
Opportunity cost: what you give up as a
result of a decision
1-5
Benefits of Understanding
Personal Finance (contd)
Become a Financial Advisor
Take courses to gain the education and
experience you would need to become a
financial adviser
1-6
Components of a Financial
Plan
Budgeting and tax planning
Managing your liquidity
Financing your large purchases
Protecting your assets and income
(insurance)
Investing your money
Planning your retirement and estate
2011 Pearson Education Canada
1-7
1-8
1-9
Age Group
Pre-Career
Early Earning
23 to 30
Mid Earning
31 to 44
Prime Earning
45 to 59
Retirement
60 to 74
Post-Retirement
2011 Pearson Education Canada
0 to 22
75+
1-10
1-11
1-12
1-13
1-14
1-15
1-16
1-17
1-18
1-19
1-20
1-21
1-22
1-23
1-24
1-25
1-26
1-27
1-28
1-29
1-30
1-31
1-32
1-33
1-34
1-35
1-36
1-37
1-38
1-39
1-40