Money Management 金钱管理

Money Management 金钱管理

FIN3001EF Personal Financial Planning

Topic 2Money Management Strategy: Financial Statements and Budgeting

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Money Management 金钱管理

FIN3001EF Personal Financial Planning

Planning for Successful Money Management

Daily spending and saving decisions are the heart of financial planning. Decisions must be coordinated with needs, goals, and personal situations. Money management is the day-to-day financial activities needed to manage personal economic resources, while working toward long-term financial security.2-2

Money Management 金钱管理

FIN3001EF Personal Financial Planning

Opportunity Cost and Money Management

Spending money on current living expenses

reduces the amount you can save and invest. Saving and investing for the future reduces the amount you can spend now. Buying on credit ties up future income. Using savings for purchases results in lost interest and depletes savings. Comparison shopping can save money but takes valuable time.2-3

Money Management 金钱管理

FIN3001EF Personal Financial Planning

Major Money Management Activities

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Money Management 金钱管理

FIN3001EF Personal Financial Planning

Benefits of an Organized System of Financial Records Handling daily business affairs, including

payment of bills on time. Planning and measuring financial progress. Completing required tax reports. Making effective investment decisions. Determining available resources for current and future buying.

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Money Management 金钱管理

FIN3001EF Personal Financial Planning

What to Keep in Your Home File Items you refer to often.Personal and employment records. Money management records. Tax records. Financial services records. Consumer purchase, auto and credit records. Housing records. Insurance records. Investment records. Estate planning and retirement records.2-6

Money Management 金钱管理

FIN3001EF Personal Financial Planning

What to Keep in Your Home File

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Money Management 金钱管理

FIN3001EF Personal Financial Planning

What to Keep in a Safe Deposit Box Safe deposit box is for records that would be hard to replace.Birth, marriage and death certificates, copy of will Citizenship and military papers. Adoption and custody papers. Serial numbers and photos of valuables. CDs and credit and banking account numbers. Mortgage papers and titles. List of insurance policy numbers. Stock and bond certificates. Coins and other collectibles.2-8

Money Management 金钱管理

FIN3001EF Personal Financial Planning

What to Keep in a Safe Deposit Box

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Money Management 金钱管理

FIN3001EF Personal Financial Planning

Records on Personal Computer

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Money Management 金钱管理

FIN3001EF Personal Financial Planning

How Long to Keep Records Birth certificates, wills, and Social Security information should be kept indefinitely. Keep records on personal property and investments as long as you own them. Keep documents related to the purchase and sale of real estate indefinitely. Copies of tax returns and supporting data should be kept seven years.

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Money Management 金钱管理

FIN3001EF Personal Financial Planning

Purpose of Personal Financial Statements Report your current financial position in relation to

the value of t

he items you own and the amounts you owe. Measure your progress toward your financial goals. Maintain information on your financial activities. Provide data you can use when preparing tax forms or applying for credit.

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Money Management 金钱管理

FIN3001EF Personal Financial Planning

Components of a Balance Sheet(net worth statement)

Assets - what you own. Liquid assets. Real estate. Personal possessions. Investment assets. Liabilities - what you owe Current liabilities (< 1 year). Long term liabilities. Compute your net worth. Assets minus liabilities. 2-13

Money Management 金钱管理

FIN3001EF Personal Financial Planning

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Money Management 金钱管理

FIN3001EF Personal Financial Planning

Where Did Your Money Go? Components of a Cash Flow Statement

Shows inflow, outflow for a given time period.

Record inflow. Net income from employment. Savings and investment income. Other sources. Record cash outflows. Fixed and variable expenses. Net cash flow can be a surplus or a deficit. Use this statement as a basis for creating a spending, saving and investment plan.2-15

Money Management 金钱管理

FIN3001EF Personal Financial Planning

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Money Management 金钱管理

FIN3001EF Personal Financial Planning

Ratios for Evaluating Financial Progress Debt ratio = total liabilities/net worth; compares debt to net worth; lower debt ratio is best Current ratio = liquid assets/current liabilities; shows how well short term assets cover short term debt; higher ratio is good Liquidity ratio = liquid assets/monthly expenses; shows # of months that living expenses can be paid; higher ratio is good Debt payments ratio = monthly credit payments/take-home pay; try to keep ratio below 20% Savings ratio = monthly savings/gross income; Americans tend to be poor savers; shoot for at least 10%2-17

Money Management 金钱管理

FIN3001EF Personal Financial Planning

Ratios for Evaluating Financial Progress

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Money Management 金钱管理

FIN3001EF Personal Financial Planning

Ratios for Evaluating Financial ProgressBased on the following information, calculate the ratios requested:

Liabilities $12,000 Liquid assets $2,200 Monthly credit payments $150 Monthly savings $130 Debt ratio: Current ratio: Debt-payments ratio: Savings ratio:

Net worth $36,000 Current liabilities $550 Take-home pay $900 Gross income $1,500

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