Personal Finance Placement Examination Reviewer PDF

PERSONAL FINANCE PLACEMENT EXAMINATION REVIEWER FINANCE - salaries - management of money, and financial - wages activities - commission - earning, borrowi...

PERSONAL FINANCE PLACEMENT EXAMINATION REVIEWER FINANCE - salaries - management of money, and financial - wages activities - commission - earning, borrowing, spending - bonus PERSONAL FINANCE 2. Passive Income - financial management of individual or - Business household - royalties - rental 3 MAIN TYPES OF FINANCE: - affliate marketing 1. personal finance - multi-level marketing 2. corporate finance 3. public or government finance 3. Portfolio Income - capital gains FINANCIAL PYRAMID - shares 1. Increasing Income -stocks - increasing your income through various - collectibles means - currency exchange 2. Debt Management INCOME - paying off any outstanding debts - money that you can earn from working or gain from investment 3. Protection - having insurance to protect against potential STRATEGIES FOR INCREASING INCOME financial losses 1. Getting A Raise - Know your worth 4. Emergency Fund - Prepare a case - the money set aside for unexpected - Choose the right time expenses or emergencies - Be confident 5. Investment 2. Starting a Side Hustle - setting aside money for short term and long - Identify your skills term goal - Create a plan - Build a website INCREASING INCOME - Network - the starting point of financial planning - Be persistent process and a source of cashflow that an individual receives. 3. Find a Higher- Paying Job - update your resume SOURCE OF INCOME: - network salaries - research wages - be flexible wealth - prepare for interviews investment dividends CASHFLOW QUADRANT 1. The Employee Quadrant (E) 3 TYPES OF INCOME: 2. The Business Owner (B) 1. Active Income 3. The Self- Employed Quadrant (S) PERSONAL FINANCE PLACEMENT EXAMINATION REVIEWER 4. The Investor Quadrants (I) - Short-term Disability (STD) insurance - Long-term Disability (LTD) Insurance DEBT MANAGEMENT - critical aspect of personal finance 3. Health Insurance - Health Maintenance Organization (HMOs) DEBT - Preferred Provider Organization (PPOs) - a money borrowed by an individual or - Point of Service (POS) Plans organization - High-Deductible Health Plans (HDHPs) 2 TYPES OF DEBTS 4. Property Insurance 1. good debt - Homeowners Insurance 2. bad debt - Renters Insurance - Condo Insurance 4 FORMS OF DEBTS - Flood & Earthquake Insurance 1. secured debt 2. unsecured debt EMERGENCY FUND 3. short-term debt - cover unexpected expenses or emergencies 4. long-term debt that may arise in your life COST OF DEBT DIFFERENT TYPES OF EMERGENCY interest rate medical emergency origination fees job loss closing costs family emergency late fees home and car engines natural disasters STRATEGIES FOR DEBT MANAGEMENT legal and tax emergency Snow Ball Method Avalanche Method IMPORTANCE OF EMERGENCY FUND Financial security STEPS TO MANAGE DEBT Avoiding debt Assess your debt protecting credit score Create a budget protecting long-term investment Choose your strategy flexibility and control Create a debt repayment plan THE AMOUNT OF EMERGENCY FUND PROTECTION monthly expenses - measures taken to safeguard oneself and income stability one's family against financial losses due to financial obligations unfortunate events lifestyle and risk 1. Life Insurance 6 STRATEGIES FOR BUILDING EMERGENCY FUND - Term Life Insurance 1. Set a savings goal - Whole Life Insurance 2. Create a budget - Universal Life Insurance 3. Automate savings - Variable Life Insurance 4. Prioritize savings - Indexed Universal Life Insurance 5. Use windfalls 6. Start small 2. Disability Insurance PERSONAL FINANCE PLACEMENT EXAMINATION REVIEWER INVESTMENT PERSONAL FINANCIAL PLANNING - the act of committing money or capital to - an individual maximizes financial resources purchase assets, securities, or other through management of one’s finances to financial instruments with the expectation of achieve financial goal. earning a return or profit. STEPS IN FINANCIAL PLANNING 1. Assess your current financial situation IMPORTANCE OF INVESTING 2. set financial goals Building wealth 3. create a budget Diversification 4. implement the budget Compound interest 5. review and adjust Retirement planning 6. seek professional advice Beat inflation BUDGETING 8 TYPES OF INVESTMENTS - the process of creating a plan to spend your 1. Stocks money 2. Bonds 3. Mutual funds BUDGET 4. Real estate - estimation of revenue and expenses over a 5. UITFs specied future period of time 6. ETFs 7. Government saving bonds PERSONAL BUDGETING 8. Small business investment - understand the equation between an individual’s income and expenses to regulate 8 RISKS AND CHALLENGES IN INVESTING usage of money. 1. Market risk 2. Inflation risk STEPS IN PREPARING PERSONAL BUDGET 3. Liquidity risk 1. Determine how to track the budgetary 4. Emotional bias information 5. Interest rate risk 2. determine your income from different 6. Fraud & scams sources 7. Concentration risk 3. Determine your expenses by dividing into 3 8. Tax considerations categories: a. Fixed category FINANCIAL PLANNING b. Variable category - a tool used to achieve financial success c. discretionary category based upon the development and 4. Average out & track expenses in 2-3 months implementation of financial goals 5. Compare a. Income > Expenses FINANCIAL PLAN b. Income < Expenses - a formalized report the summarize your c. Income = Expenses current financial situation 6. Determine your goals Financial Success 7. Improve your situation by increasing income Financial Security 8. Review and evaluate your progress PERSONAL FINANCE PLACEMENT EXAMINATION REVIEWER NET WORTH STATEMENT - the difference between all of your assets (things your own) and liabilities (debts you owe) TOTAL ASSET - TOTAL LIABILITIES = NET WORTH FINANCIAL GOAL - a target to aim for when managing your money GOALS - the end result of something a persons intend to a acquire, achieve, do, reach, or accomplish SETTING GOAL - creating a path and provides guidance for your future 5 TYPES OF GOALS 1. Financial goals 2. Education goals 3. Short-term goals 4. Mid-term goals 5. long-term goals ELEMENTS OF SUCCESSFUL GOAL Smart Measurable Attainable Realistic Time-bound