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*102BF > Lesson 2: Life Cycle of Financial Planning and Personal Finance > Flashcards

Lesson 2: Life Cycle of Financial Planning and Personal Finance Flashcards

1
Q

how many stages are there in the life cycle of financial planning

A

4

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2
Q

who proposed the life cycle of financial planning

A

brown and reilly

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3
Q

stages in the life cycle of financial planning

A

early career, mid-career, late career, retirement stage

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4
Q

early career stage is also known as

A

accumulation phase

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5
Q

mid career stage is also known as

A

consolidation phase

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6
Q

late career stage is also known as

A

spending phase

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7
Q

retirement stage is also known as

A

distribution phase

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8
Q

in this stage, individuals are typically starting their careers, possibly still in school or early in their professional life

A

early career stage

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9
Q

financial priorities in early career stage

A

paying off student loans, start saving for retirement, establsihing emergency fund, buying first home

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10
Q

the emphasis is on laying the foundation for future financial security

A

early career stage

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11
Q

during this stage, individuals are typically in the middle of their careers, possibly with increased income and more financial responsibilities

A

mid-career stage

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12
Q

financial goals in mid-career stage

A

saving for children’s education, advancing careers, paying off larger debts (e.g. mortgage), continue saving for retirement

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13
Q

this stage often involves balancing current financial needs with long-term goals

A

mid-career stage

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14
Q

as individuals approach the retirement age, they enter the

A

late career stage

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15
Q

financial priorities of late career stage

A

maximizing retirement savings, planning healthcare costs in retirement, downsizing/transitioning to more flexible work arrangement

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16
Q

this stage is crucial for ensuring that retirement savings are sufficient to support a comfortable retirement lifestyle

A

late career stage

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17
Q

once individuals retire, they enter the

A

retirement stage

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18
Q

focus in the retirement stage

A

managing retirement income, healthcare costs, leaving a legacy for heirs

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19
Q

this stage requires careful planning to ensure that retirement savings last throughout retirement and that individuals can maintain their desired standard of living

A

retirement stage

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20
Q

It is a term that covers managing your
money as well as saving and investing.

A

personal finance

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21
Q

Personal finance is about

A

personal financial goals (short or long term)

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22
Q

Financially free =

A

successful

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23
Q

This refers to a source of cash
inflow that an individual receives
and then uses to support
themselves and their family.

A

income

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24
Q

Common sources of income are

A

salaries, bonuses, hourly wages, pensions, and dividends

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25
Q

These sources of income all
generate cash that an individual can
use to either

A

spend, save, invest

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26
Q

It includes all types of expenses an
individual incurs related to buying
goods and services or anything
that is consumable

A

spending

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27
Q

two categories of spending

A

cash or credit

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28
Q

spending paid for with cash on hand

A

cash

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29
Q

spending paid for with borrowing money

A

credit

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30
Q

The majority of
most people’s income is allocated to

A

spending

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31
Q

Common sources of spending are:

A

rent, mortgage payment, taxes, food, entertainment, travel, credit card payments

32
Q

If expenses are greater
than income, the
individual has a

A

deficit

33
Q

It refers to excess cash that is retained
for future investing or spending.

A

saving

34
Q

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

A

savings or investments

35
Q

Common forms of savings include:

A

physical cash, savings bank acc, checking bank acc, money market securities

36
Q

Most people keep at least some
savings to

A

manage their cash flow and the short-term difference between their income and expenses

37
Q

Having too much savings, however,
can actually be viewed as a bad
thing since

A

it earns little to no return compared to investments

38
Q

It 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.

A

investing

39
Q

investing carries

A

risk

40
Q

not all assets actually
end up producing a positive rate of return.

A

risk

41
Q

This is where we see the relationship between
risk and return

A

investing

42
Q

Common forms of investing include

A

stocks, bonds, mutual funds, real estate, private companies, commodities, art

43
Q

the most complicated area of
personal finance and is one of the areas
where people get the most professional
advice.

A

investing

44
Q

There are vast differences in risk and reward
between different investments, and most
people seek help with this area of their
financial plan

A

investing

45
Q

refers to a wide
range of products that can be used
to guard against an unforeseen and
adverse event.

A

personal protection

46
Q

Common protection products
include:

A

life & health insurance; estate planning

47
Q

This is another area of personal finance
where people typically seek professional
advice and which can become quite
complicated.

A

protection

48
Q

There is a whole series of analysis that
needs to be done to properly assess an
individual’s insurance and estate
planning needs.

A

protection

49
Q

refers to the management of an individuals financial decisions, activities, and resources

A

personal finance

50
Q

it involves budgeting, saving, investing, and planning for the future

A

personal finance

51
Q

6 steps for personal financial planning

A

income mgmt; expense mgmt; risk mgmt and insurance; savings and investments; debt mgmt, retirement planning

52
Q

Involves understanding and
effectively managing various
sources of income.

A

income managemnt

53
Q

This includes optimizing
your main salary, exploring
additional income streams,
and ensuring a stable cash
flow for financial planning.

A

income managemnt

54
Q

Focuses on tracking,
controlling, and
optimizing spending
habits.

A

expense managemnet

55
Q

Developing a detailed
budget helps identify
discretionary and nondiscretionary expenses,
allowing for strategic
allocation of funds
towards savings and
investments.

A

expense managemnt

56
Q

Involves protecting against
unexpected events through
insurance coverage.

A

risk management and insurance

57
Q

dequate insurance, such as
health, life, and property
insurance, safeguards against
financial setbacks, providing a
sense of security.

A

risk management and insurance

58
Q

-Encompasses setting
aside money for shortterm needs (savings) and
long-term goals
(investments).

A

savings and investment

59
Q

short-term needs =
long term needs =

A

savings
investment

60
Q

Balancing risk,
diversifying investments,
and aligning strategies
with financial goals are
crucial for wealth
accumulation and growth

A

savings and investments

61
Q

Involves handling and
repaying debts responsibly.

A

debt management

62
Q

Prioritizing high-interest
debts, exploring debt
consolidation options, and
maintaining a healthy debt-toincome ratio contribute to
financial well-being.

A

debt management

63
Q

Focuses on preparing
for financial needs
during retirement
through savings and
investments.

A

retirement planning

64
Q

Evaluating retirement
goals, estimating
expenses, and selecting
appropriate retirement
accounts are key
components of ensuring
a comfortable and
secure retirement.

A

retirement planning

65
Q

10 basic principles of personal finances

A

set clear financial goals; create and follow a budget; emergency fund; debt managemnet; save and invest regularly, diversification in investments; insurance coverage; retirement planning; continuous learning; review and adjust

66
Q

Establishing specific
and achievable shortterm and long-term
financial objectives
provides a roadmap
for effective financial
planning.

A

set clear financial goals

67
Q

helps track
income, control
expenses, and
allocate funds wisely,
ensuring financial
resources are used
efficiently

A

create and follow a budget

68
Q

Building a reserve for
unexpected expenses
provides a financial
safety net, reducing the
impact of unforeseen
events on your overall
financial health.

A

emergency fund

69
Q

Responsible handling
of debt, prioritizing highinterest loans, and
avoiding unnecessary
debt contribute to longterm financial stability.

A

debt management

70
Q

Consistent savings and
investments, aligned with
financial goals and risk
tolerance, promote wealth
accumulation and
financial growth over time

A

save and invest regularly

71
Q

Spreading investments
across various asset
classes helps manage
risk, ensuring that the
performance of one
investment doesn’t
disproportionately affect
your overall portfolio.

A

diversification in investments

72
Q

Adequate insurance,
including health, life,
and property
insurance, protects
against unexpected
financial burdens,
providing peace of
mind.

A

insurance coverage

73
Q

Planning for retirement
early, estimating future
expenses, and
contributing to
retirement accounts
ensure financial
security during your
post-working years.

A

retirement planning

74
Q

Staying informed about
financial trends,
investment options, and
economic changes
empowers individuals to
make informed and
strategic financial
decisions

A

continuous learning

75
Q

Regularly reviewing your
financial plan, adjusting
goals based on life
changes, and adapting
strategies to economic
conditions contribute to a
dynamic and effective
personal finance approach.

A

review and adjust

*102BF (2 decks)

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