Learning Module 6

Subject : Business Finance

Grade Level : Grade 12-ABM
Quarter/week : Quarter 1 /weeks 11-12
Subject Teacher : Rowella C. Dela Cruz
Mobile No. : 0906 7635 927

I. INTRODUCTION: This Chapter introduces the concept of personal finance which includes the
personal financial planning process and the six key areas of personal financial planning.

II. STANDARDS:
Lesson Content Standards Most essential K to 12 CG Objective
Learning Code
competencies

The learners The learner….

demonstrate an
understanding of…. The learners are able
to…

The philosophy and Enumerate money ABM_BF12- ● Identify money

practices in management IVo-p-26 management
personal finance philosophies philosophies

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Illustrate the money ABM_BF12-
management cycle and IVo-p-27
gives examples of
sound practices in
● Apply basic personal
finance
and
earning,
principles
practices in
spending,
saving and investing
earning, spending, money.
saving, and investing
money

III. TRANSFER: At the end of the lesson the students are able to define personal finance and identify
the personal financing planning process.

IV. DISCUSSION:

Personal finance
● Includes all financial decisions and activities of an individual including budgeting, insurance,
mortgage planning, savings, and retirement planning.
● It involves analyzing current financial positions, projecting short-term and long-term funding
needs, and executing a plan to fulfill those needs considering individual financial constraints.
● It is primarily dependent on one’s earnings, cost of living, and personal goals and wants.

Personal financial planning process.

A. Objective Setting
● Quantify monetary objectives with definite time frames.
● Prioritize objectives.
● Examine these objectives with an individual’s resources and limitations.
Example: A mom wants to havePHP1 million after 10 years for her daughter’s education.

B. Data gathering
● Use surveys, questionnaires, and interviews to gather quantitative and qualitative information
from the individual.
● Quantitative – for assessing financial status (i.e. investments, cash flow, liabilities, etc.)
● Qualitative – to identify individual’s goals and objectives, lifestyle, risk-tolerance, etc.
Example: Interview the mom to know how much savings she has and her current sources of income.

C. Data Analysis
● Analyze the individual’s financial position and cash flows.
● Review legal papers (i.e. insurance policies, trust agreements, wills, etc.).
● Evaluate objectives vis-à-vis the individual’s resources and economic conditions.
Example: Map the mom’s net cash flows and compute her required return to reach her target of
PHP1 million after 10 years.

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D. Financial Plan Recommendation

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● Propose financial products.

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● At this point, the individual can comment on the proposed solutions.
Example: Identify stocks, mutual funds or other assets which can generate the mom’s required
return.

E. Plan Implementation
● Assist the individual in the execution of the recommended financial plan.
● Implementation may involve other entities so assist the individual in dealing with the parties
involved in the execution of the financial plan.
Example: Help the mom open an account so she can invest in the recommended financial plan.

F. Plan Monitoring
● Review the financial plan periodically to evaluate changing market conditions (i.e. economic
conditions, taxes, interest rates, etc.).
● Evaluate the financial plan regularly to see if it effectively meets the individual’s goals and
objectives.
Example: Check regularly whether the fund is growing as planned. Consider other alternative assets
if performance is not good.

Six Key Areas of Personal Financial Planning

A. Financial Position
● Understanding of personal resources by checking an individual’s net worth and cash flow.
● Net worth = assets less liabilities at a point in time
● Cash flow = expected sources of income less expected expenses within a period (i.e. year)
● Helps in determining the time frame to which personal goals can realistically be met.
● May need to answer the following questions:
● Do they have a clear understanding of their goals?
● How do they track their income, expenses, and net worth?
● What financial benefits do they get from their employer?

B. Adequate Protection
● Analysis of protection needed for unforeseen risks.
● Includes risks of liability, property, death, disability, health, and long-term care.
 ●Some insurance plans enjoy some tax benefits.
●May need to answer the following questions:
●What things can they not afford to lose?
●How will they take care of their dependents?
●How have they planned for financial risks such as disability, illness, long-term care, and
death?
C. Tax Planning
● Management of when and how much taxes will be paid.
● Understanding possible tax incentives, deductions, rebates, etc. can have a significant
impact on managing personal finances given the magnitude of taxes paid by an individual.
● May need to answer the following questions:
⮚ How do they manage their taxes?
⮚ How do they plan the timing of income and deductions for tax purposes?
⮚ Are they comfortable with the tax environment applicable to them?

D. Investment and Accumulation Goals

● Planning on wealth accumulation for large purchases such as house, educational expenses,
investments for retirement, etc.
● May need to answer the following questions:
● What are their goals for wealth accumulation? (i.e. education, home, business, retirement
comfort, etc.)
● How are their current investments performing to meet their goals?
● How much will they need? When will they need it?

E. Retirement Planning
● Understanding the cost of retirement.
● Analysis of cash flows to come up with investment plans that will meet the costs of

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retirement in the future.

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● May need to answer the following questions:

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⮚ How are they preparing for their retirement?
⮚ How are their liabilities affecting their retirement objectives?
⮚ Do they think they can maintain their standard of living during their retirement?

F. Estate Planning
● Planning for disposition of one’s assets after death.
● Estate taxes paid to the government are huge, so avoiding these taxes can significantly
impact one’s personal finances.
● May need to answer the following questions:
⮚ How should their assets be distributed upon death?
⮚ How will their intentions be carried out? (i.e. will, trust, power of attorney, etc.)

Four simple habits for personal finance success through the video: “Four Simple Habits for Personal Finance
Success” (Patzer, A. (2009). Four Simple Habits for Personal Finance Success --Mint Featured on ABC News Money
Matters. YouTube. Retrieved 8 May 2016, from https://www.youtube.com/watch?v=R0TznyjIZxA)
1. Save money – spend less than what they earn.
2. Avoid debt – manage their credit and debt wisely.
3. Invest – invest what they save.
4. Don’t lose it – protect their downside by diversification or insurance.

V. GENERALIZATION
● Personal financial planning allows you to manage your finances and achieve lifecycle
financial goals.
● Personal financial planning process : Objective Setting, Data gathering, Data Analysis,
Financial Plan Recommendation, Plan Implementation, Plan Monitoring
● The more educated you are, the more you will earn. An emergency fund can help protect
yourself in the event of an economic downturn.

VI. EVALUATION (FORMATIVE)

A. Match the step in the personal financial planning process in column A with its description in
column B by writing the capital letter on the answer sheet.
 1. Data Gathering A. Periodic review of the financial
plan to evaluate
changing market conditions (i.e. economic
conditions, taxes, interest rates, etc.).

2. Financial Plan Recommendation B. Quantifying monetary objectives with definite

time frames. Prioritizing objectives.

3. Plan Monitoring C. Using surveys, questionnaires and

interviews to
gather quantitative and qualitative information from the
individual.

4. Objective Setting D. Analysis of the individual’s financial

position and
cash flows. Review of legal papers. Evaluation of
objectives vis-à-vis the client’s resources and economic
conditions.

5. Data Analysis E. Financial products will be proposed. At

this point,
the individual can comment on the solutions proposed.

6. Financial Position F. Planning on wealth accumulation for

large
purchases such as house, educational expenses, investments
for retirement, etc.

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7. Tax Planning

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taxes will be paid.

8. Retirement Planning
risks.
G. Management of when and how much

H. Analysis of protection needed for unforeseen

9. Adequate Protection I. Understanding of personal resources by checking

an individual’s net worth and cash flow.

10. Investment and Accumulation J. Understanding the cost of retirement. Analysis of

Goals cash flows to come up with
investment plans that will
meet the costs of retirement in the future.

VII. WORKSHEET
1. Few months from now, you will be in college and you will receive more allowance. Make
your own financial plan based on the process of personal financial planning.
Note: Answer all questions/activities/evaluation intended for you and write your answer/s in a clean yellow pad paper.
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