Finance Reviewer - Take time to budget your income vs.

- Take time to budget your income vs. expenses, so - If you do have money left over each week
Why knowing your net worth is Important you can spend within your means and manage or each month after paying for things
net worth lifestyle expectations. you really need, put that extra income in
- The amount by which your assets exceed your - Successful financial planning entails being your savings account.
liabilities. mindful of spending regardless of your income 4. Start saving early
- The difference between what you own and what level or of what you want but don't need. - The sooner you start to save, the better
you owe. 5 Rules to improve financial health off you'll likely be during your retirement
- If assets exceed your liabilities, you have a 1. Do the maths years.
positive net worth. If your liabilities are greater - Rather than ignoring your finances and - The sooner you start, the easier it is to
than your assets, you have a negative net worth. leaving them to chance, a bit of number reach your long-term financial goals.
- Provides a snapshot of your financial situation. crunching can help you evaluate your You will need to save less each month
- Can be viewed as a financial report card that current financial health and determine and contribute less overall, to reach the
allows you to evaluate your current financial how to reach your short - and long-term same goal in the future.
status. financial goals. Compounding
- What you have versus what you need to pay off. 2. Recognize and manage lifestyle inflation - Involves the reinvestment of earnings, and its
- It's important to make conservative estimates Lifestyle inflation most successful overtime.
when placing value on certain assets in order to - Refers to an increase in spending when an - The longer earnings are reinvested, the greater
avoid inflating your net worth individual's income goes up. the value of the investment, and the larger the
- Assets are anything of value that you own that - Tend to become greater everytime an individual earnings will be.
can be converted into cash. gets a raise and can make it difficult to get out of Compound interest
- Assets include your mortgage, loans, credit card debt, save for retirement, or meet oher - An interest revenue earned off previously earned
debt, student loans and any other debt. big-picture financial goals. interest revenue.
Liquid Net worth - Causes people to get stuck in a cycle of living - By saving money at an earlier age, your money is
- The portion of your net worth that could be easily paycheck to paycheck where they have just more likely to grow faster due to compounding.
converted to cash in a day if need be. enough money to pay bills every month. 5. Build and maintain and emergency fund
3. Recognize needs vs. wants and spend mindfully Emergency fund
- Be mindful of the difference between - Money that has been set aside for emergency
needs and wants. purposes.
How to improve your financial Health - Needs are things you have to have in - Fund is intended to help you pay for things that
Personal Finance order to survive. wouldn’t normally be included in your personal
- Refers to how you manage your money and plan - Wants are things you would like to have budget.
for your future. but dont require for survival. - Unexpected expense
- Often an intimidating term that causes people to - Needs should get top priority in your - Can help you pay your regular expenses if your
avoid planning, which leads to bad decisions and personal budget. After your needs have income is interrupted.
poor outcomes. been met should you allocate any - Traditional guidelines save three to six month’s
discretionary income toward wants. worth of living expenses in an emergency fund.
 - Aim for this generation is to save at least six 7. Get advice from a credit counselor ( but avoid the - Occurs when expenses exceed revenue
months worth of living expenses. ones who charge fat fees )
- An ongoing mission. 8. Consider renegotiating your agreement with one Financial Planning
How do I create a budget ? or two lenders to ease the pressure. - Is an ongoing process to help you make sensible
- Create a budget, start by listing all your income Two ways to tackle debt decisions about money that can help you achieve
streams and how much you bring in each month. 1. Avalanche method your goals in life
Then make a list of everything you spend money - Means you pay off your loans or credit - Process of meeting your life goals through the
on and those amounts. Be mindful that some cards with the highest interest rates first. proper management of your finances
months may be different than others, so it may - You throw as much money as you can at - The ever changing socio economic environment
be helpful to create a monthly budget for the them, and pay only the minimum on all make it mandatory for everyone to have a sound
entire year. your other loans. financial plan
The beauty of budgeting 2. Snowball method - It is your choice to do it by yourself or get it done
- Successful business around the world have one - Tackle the lowest amount of debt first, by a financial planner.
thing in common “ they budget their money “ pay it off, and then the next loan until you 6 step process of planning
Fixed income reach the highest debt. 1. Establish your goals
- Refers to those types of investment security that Debt avalanche 2. Gather data
pay investors fixed interest or dividend - Double up on payments on your highest-interest 3. Evaluate your current position
payments until their maturity date. debt. It can speed up the payback period. Once 4. Develop a plan
- Bring in certain amount of money each month, you've eliminated the highest interest debt, 5. Implement your plan
and when its gone, its gone double up payments on the next highest debt. 6. Monitor and regularly review
Dig your way out of debts in 8 steps - You'll be consistently increasing the overall rate Content
1. Total up all of your bills and all of your income at which your debt diminishes and getting closer 1. Planning
sources to find out what's left every month. If it's to the magic number the bank is looking for - Means looking ahead and chalking out
less than nothing, take drastic steps to downsize before granting a consolidation loan. future courses of action to be followed.
your lifestyle. Credit counselor
2. Use every free dollar to start paying off your - Will provide many helpful tips and make sure Financial planning pyramid
debts starting with the highest-interest that you're on the right track with your
obligations repayment plans.
3. Check your credit rating from all three credit
unions and handle the dings first
4. Consolidate debt if possible. Use a low-interest
home equity line of credit if you can. The best retirement plan to build
5. Double up on monthly high-interest payments Budget Deficit
whenever possible. - Occurs when expenses exceed revenue and can
6. Review every day-to-day expenditure to find indicate the financial health of a country.
ways to cut back. - Used to refer to government spending rather
than businesses or individuals
Financial planning Process
a. Meet
- Data collection
- Goal setting
- Current analysis
b. Plan
- Draft plan
- Final plan
- Product suggestions
c. Implement
- Execution
- Follow up
d. Review
- Monitoring
- Follow ups
- Query solving
Financial Planning concepts
Financial advice
- Process of engaging in the business of advising
others with respect to the planning and/or the
execution of advice in respect of selecting,
purchasing, or selling financial products to meet
investment, risk management, or risk mitigation
objectives.
Financial Advisor
- Helps you monitor and reassess the investment
performance as you may not always have the
time to do it.