Chapter 1: Overview of Financial Planning - Supplementary Flashcards
the process of planning your opening financing, and investment activities, while taking into account uncontrollable events such as death and disability, in order to optimize your financial situation over time.
Personal Finance.
A plan that specifies your financial goals, describes the spending, financing and investing activities that are intended to achieve those goals and the risk management strategies that are required to protect uncontrollable events such as death or disability.
Personal Financial Plan.
What you give up as a result of decision.
Opportunity costs.
A national professional body working the public interest that is dedicated to championing financial health for all Canadians by certifying professional financial planners and leading the advancement of professional financial planning in Canada.
FP Canada.
What are the key components of a financial plan?
- Budgeting and tax planning
- Managing your financial resources
- Protecting your assets and income (insurance)
- Investing your money
- Planning your retirement and estate
The process of forecasting future income, expenses, and savings goals.
Budget planning.
Access to ready cash, including savings and credit, to cover short-term or unexpected expenses; also, the ease with which an investor can convert an investment into cash without a loss of capital.
Liquidity.
Decisions regarding how much money to retain in liquid form and how to allocate the funds among short-term investment instruments.
Money Management
A portion of savings that you have allocated to short-term needs such as unexpected expenses in order to maintain adequate liquidity.
Emergency Fund.
Decisions regarding how much credit to obtain to support your spending and which sources of credit to use.
Credit Management.
Decisions regarding how much credit to obtain to support your spending and which sources of credit to use.
Credit Management.
Exposure to events (or perils) that can cause a financial loss.
Risk.
Decisions about whether and how to protect against risk.
Risk Management.
Decisions about whether and how to protect against risk.
Risk Management.
Determining the types and amount of insurance needed to protect your assets and/or income.
Insurance Planning.
Uncertainty surrounding the potential return on an investment and its future potential value.
Investment Risk.
A person’s ability to accept risk, usually defined as a potential loss of return and/or loss of capital.
Risk Tolerance.
Determining how much money you should set aside each year for retirement and how you should invest those funds.
Retirement planning.
Determining how your wealth will be distributed before and/or after your death.
Estate planning.
Determining how your wealth will be distributed before and/or after your death.
Estate planning.
SMART GOALS.
Specific, Measurable, Action Orientated, Realistic, Time-bound.
