COPYRIGHT © 2008 by Nelson, a division of Thomson Canada Ltd

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Chapter 1 – Understanding the Financial Planning Process

Chapter 1 – Understanding the Financial Planning Process

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Chapter 1 - Learning Goals

LG 1 - Identify the benefits of using personal financial planning techniques to manage your finances.

LG 2 - Describe the personal financial planning process and define your financial goals.

LG 3 - Explain why personal financial plans should be flexible and responsive to your life situation.

LG 4 - Examine the external factors that can influence personal financial planning.

LG 5 - Evaluate the impact of age, marital state, education and geographic location on personal income.

LG 6 - Understand the importance of career choices and their relationship to personal financial planning.

Learning Goals

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Internet Links and On-line Resources

Online

• Price Canada• Price Grabber• Investors Group Polls• Insurance Canada• Canadian Life Health Insuran

ce Association• Forbes Best on the Web• Stockhouse• Globeinvestor• Canoe Money• Office of the Superintendent

of Bankruptcy Canada• Statistics Canada• Inflation calendar• Online calculator• Kiersey temperament test

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Key Chapter Terms and Definitions Standard of living Average propensity

to consume

Wealth Financial assets Tangible assets Personal Financial

Planning Financial Goals Money Utility

Expansion Recession Depression Recovery Gross Domestic

Product Inflation

Terms

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DefinitionsStandard of Living

The necessities, comforts and luxuries enjoyed or desired by an individual or group.

Also known as quality of life.

Terms

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DefinitionsAverage propensity to consume

The percentage of each dollar of income, on average, that a person spends for current consumption.

Terms

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DefinitionsWealth

The total value of all items owned by an individual, such as savings accounts, stocks, bonds, home and automobiles.

Terms

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DefinitionsFinancial assets

Intangible assets, such as savings accounts and securities, that are acquired for some promised future return.

Terms

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DefinitionsTangible assets

Physical assets, such as real estate and automobiles, that can be held for either consumption or investment purposes.

Terms

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DefinitionsPersonal Financial Planning

Planning the covers the important elements of an individual’s financial affairs and is aimed at fulfilling his or her financial goals.

Terms

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DefinitionsFinancial goals

Short-, intermediate-, and long-term results that an individuals wants to attain, such as controlling living expenses, managing taxes, establishing savings and investment programs, and meeting retirement needs.

Terms

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DefinitionsMoney

The medium of exchange used as a measure of value in financial transactions.

Terms

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DefinitionsUtility

The amount of satisfaction an individual receives from purchasing certain types or quantities of goods and services.

Terms

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DefinitionsEconomic Expansion

The phase of the economic cycle during which the level of employment and growth of economic activity are both high: generally accompanied by rising prices for goods and services.

Terms

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DefinitionsEconomic Recession

The phase of the economic cycle during which the level of employment falls and growth in economic activity slows.

Terms

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DefinitionsEconomic Depression

The phase of the economic cycle during which the employment level is low and economic growth is at a virtual standstill.

Terms

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DefinitionsEconomic Recovery

The phase of the economic cycle during which the employment level is improving and the economy is experiencing increased activity and growth.

Terms

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DefinitionsGross Domestic Product (GDP)

The total of all goods and services produced by workers located within a country; used to monitor economic growth.

Terms

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DefinitionsInflation

A state of the economy in which the general price level is rising due to excessive demand or rapidly rising production costs; usually occurs during the recovery and expansion phases of the economic cycle.

Terms

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In Summary you have Learned that…

Financial planning can make a significant improvement in the standard of living of people from all walks of life.

The financial planning process starts with identifying financial goals.

There are six steps in the financial planning process.

Tools such as knowledge, the time value of money and the computer, can be applied to personal financial problems.

Financial planning takes place in a changing economic environment.

Personal income is determined through factors such as: age, marital status, education, location, career.

Summary

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THE END!