MODULE 1 Flashcards
Finance came from 2 concepts:
Accounting and Economics
Main aim of economics
allocation of limited resources
Types of Finance
- Corporate
- Public
- Personal
Objective of Corporate Finance
- maximize the profit
- maximize the shareholders’ wealth
Objective of Public Finance
Acquisition of Funds from
1. Taxes
2. GOCC
3. Borrowing
Objective of Personal Finance
Manage finances well and make own financial plan
Personal Finance Meaning
*encompasses the
management of financial sources of an individual
*covers budgeting, banking,
insurance etc.
*deals with giving of advises about various financial opportunities to the
households
3 goals of personal finance
*come up with a plan that would meet the financial challenges
*maximize the income and savings
*make informed financial decisions
Importance of Personal Finance
*The understanding of how to manage finances, without financial
discipline it is difficult to achieve financial goals.
*The short term and long
term goals are realized and attained when a person is knowledgeable of
managing their finances.
*Other financial opportunities may also be explored and exploited such as saving, investing and insurance
Areas of Personal Finance
- income
- saving
- spending
- investing
- protection
Income.
This is the financial resource that is allocated to various financial activities.
This includes salaries, wages, and other form of returns.
Spending.
This is the process of using the financial resources particularly cash in
nature. The utilization is either on the needs or wants— food or travel.
Saving.
*income that is left after spending. *usually being
allocated to cover expenses primarily to meet emergency
*an individual is encouraged to have between three to 12 months of the usual expenses
Investing.
*includes purchasing of assets
*aim: increase the wealth of a person from the amount they invested however, one
should also take considerations of the risks
*Studying and readings can help a
person in investing their money.
Protection.
*During unexpected events, one should be prepared to protect themselves.
*can include life and health insurance and estate and others.
Some companies offer financial services
WRITE CHRIB L
- Wealth Management
- Loans and Debt
- Budgeting
- Retirement
- Taxes
- Risk Management
- Estate Planning
- Investments
- Insurance
- Credit Cards
- Home and Mortgage
Personal Financial Strategies
Some practices for personal finance
finance
- Knowing income
- Devise a Budget
- Pay Yourself First
- Limit and Reduce Debt
- Only Borrow What You can Repay
- Monitor your Credit Score
- Plan for Your Future
- Buy Insurance
- Maximize Tax Breaks
10.Give Yourself a Break
Personal Finance Skills
Financial Prioritization.
Assessing Costs and Benefits.
Restraining Your Spending.
Financial Prioritization.
This refers to your ability to check on your finances and evaluate your
cash flows particularly on the inflows.
Assessing Costs and Benefits.
It simply means that you should treat your finances as business.
You should always think of the costs and benefits.
Restraining Your Spending.
One should learn how to restrain from spending on non-earning
assets.
________ goal setting for short term, midterm and long term is an important step
toward in being secured financially.
Fontinelle (2024)
Short Term Financial Goals
provide a boost enable to achieve greater goals in the future.
Short Term Financial Goals
3 Examples
Establish a Budget
Create an Emergency Fund
Payoff Credit Cards
Midterm Financial Goals
serves as a bridge between the short and long term goals.
Midterm Financial Goals (3)
Get Life Insurance and Disability Income Insurance
Pay Off Loans
Consider Your Dreams
Long-term Financial Goals
is saving enough to retire.
Long-term Financial Goals
2 Examples
Estimate Your Retirement Needs
Increase Retirement Savings
Financial Values
Drivers for behaviors are personal values, it is also considered as lens to filter
financial decisions.
Drivers for behaviors are personal values, it is also considered as ______
lens to filter
financial decisions.
3 Financial Values
Intentional Spending
Informed Charitable Giving
Impact Investing
Intentional Spending
In intentional spending, always think about the decisions that actually matters to you. You
should be more conscious of spending. Company that have the causes you support, you can shop
with that establishment.
Informed Charitable Giving
Aside from being conscious on spending, one should also be conscious on allocating
dollars to a certain cause or organization. You should also look into how the organizations are
being run.
Impact Investing
When investing, a person can look at the ESG (environmental, social and governance) scores. This is aligning investing decisions with personal values.
Financial Planning
*is the process of taking a comprehensive look at your financial situation and building a specific financial plan to reach your goals. (Geier, 2024)
*also referred as practice of planning your future focusing on managing finance
and be able to be ready with all of the potential costs and challenges that may
arise.
*considered as holistic and broad as it can cover variety of services.
*is not synonymous with asset management.
Types of Financial Planning
Tax planning
Estate planning
Retirement planning
Philanthropic planning
Education funding planning
Investment planning
Insurance planning
Budgeting
Tax planning-
preparation and filing of taxes
Estate Planning
making it easier for loved ones after the person die
Retirement planning
saving enough money to live lifestyle a person wants in retirement
Philanthropic planning-
giving something to people who need help
Education funding planning-
helping a person’s child/ ren pursue higher education
Investment planning
mapping out the amount and type of investments
Insurance planning
evaluating needs and insurance types
Budgeting-
making sure that the person would spend based on the income and not able
to get into debt
Basic Steps in Making Financial Plan
Gauge the net worth
Establish financial goals
Monitor Cash Flow
Create pathways to each of financial goals
SUMMARY
Personal Finance considers
individual personality, goals
and plans to maximize the
resources they have not
only for short period of time but for the future.
