Financial Planning PDF

Your financial plan is the tool used to PART 1: achieve goals. FINANCIAL PLANNING Keep goals in mind and work towards them. Chapter 1 Step 5: Review Your Progress, Reeval...

Your financial plan is the tool used to PART 1: achieve goals. FINANCIAL PLANNING Keep goals in mind and work towards them. Chapter 1 Step 5: Review Your Progress, Reevaluate, and Financial Planning Revise Your Plan Why Personal Financial Planning? Review progress and be prepared to formulate a different plan. Easier to spend than to save. No plan is fixed. Helps achieve financial goals. Allows you to control your finances. Establishing Your Financial Goals Here’s What You Can Accomplish Financial Goals Cover 3 Time Horizons: Manage the unplanned. Short-term — within 1 year. Accumulate wealth for special expenses. Intermediate-term — 1 to 10 years. Save for retirement. Long-term — more than 10 years. "Cover your assets." Invest intelligently. Short-Term Goals Minimize tax payments. Accumulate emergency funds equaling 3 The Personal Financial Planning Process months’ living expenses. Pay off bills and credit cards. 5 basic steps to personal financial planning: Purchase insurance. Purchase a major item. Evaluate your financial health. Finance a vacation or entertainment item. Define your financial goals. Develop a plan of action. Intermediate-Term Goals Implement your plan. Review your progress, reevaluate, and Save for oldest child’s college. revise your plan. Save for a down payment or a major home improvement. Step 1: Evaluate Your Financial Health Pay off major debt. Finance large items (weddings). Examine your current financial situation. Purchase a vacation home. Keep accurate records. Long-Term Goals Step 2: Define Your Financial Goals Save for younger child’s college. Short-term goals. Purchase retirement home. Intermediate-term goals. Create a retirement fund to maintain current Long-term goals. standard of living. Goals change over time. Take care of elderly family members. Start a business. Step 3: Develop a Plan of Action Stage 1: The Early Years — A Time of Wealth Flexibility Accumulation Liquidity Protection Prior to age 54: Minimizing Taxes Purchase a home. Step 4: Implement Your Plan Prepare for child-rearing costs. Save for a child’s education. Stick to it. Develop a regular pattern of saving. Start retirement savings.  Establish an emergency fund. ○ Non-graduates earn $18,826. Stage 2: Approaching Retirement — The Golden Fifteen Principles of Personal Finance Years They form the foundation of personal finance. Transition years between ages 55-64. They will provide you with: Retirement goals are very important. Continuously review your financial an excellent grasp of your own personal decisions, insurance protection, and estate finance. planning. a better chance of attaining wealth and Unplanned events have dramatic effects on achieving financial goals. your goals. Principle 1: The Risk–Return Trade-Off Stage 3: The Retirement Years Savings allow for more future purchases. After age 65, live off savings. Borrowers pay for using your savings. Retirement age depends on savings. Investors demand a minimum return to Less risky investment strategy. delay consumption — above anticipated Preserving rather than creating wealth. inflation. Review insurance, consider extended Investors demand higher return for added nursing home protection. risk. Estate planning decisions are critical. Trim estate tax bills, have wills, living wills, Principle 2: The Time Value of Money and health proxies. Money has a time value. Thinking About Your Career Money received today is worth more than money received in the future. Choosing a major and a career. Compound interest — interest paid on Getting a job. interest. Making it a successful career. You’ll work for at least 3 different Principle 3: Diversification Reduces Risk companies, have over 10 different jobs. Job security is a thing of the past. "Don’t put all your eggs in one basket." To diversify, place money in several Being Successful in Your Career investments, not just one. Diversification reduces risk without affecting Have a marketable skill, be well educated, expected return. and keep up with technology. Won’t experience great returns or great Do good work. losses—receive an average return. Project the right image. Understand and work within the power Principle 4: All Risk Is Not Equal structure. Gain visibility. Some risk cannot be diversified away. Take new assignments. If stocks move in opposite directions, Acquire new skills. combining them can eliminate variability. Develop a strong network. If stocks move in the same direction, not all Be ethical. variability can be diversified away. What Determines Your Income? Principle 5: The Curse of Competitive Investment Markets Specialized skills receive higher pay. Education is a key determinant of salary. In efficient markets, information is instantly ○ Advanced degrees earn $72,824. reflected in prices. ○ Bachelor’s degrees earn $51,194. Cannot earn higher than expected profits ○ High school graduates earn from public information. $27,280.  Difficult to "beat the market" — "bargains" Principle 11: The Time Dimension of Investing don’t remain so for very long. Take more risk on long-term investments. Principle 6: Taxes Affect Personal Finance Large-company stock prices up 10.4% Decisions annually over the past 78 years. 20-year-olds investing retirement money will Taxes influence the realized return of likely earn more in the stock market than investments. other investment alternatives. Maximize after-tax return. Compare investment alternatives on an Principle 12: The Agency Problem — Beware of after-tax basis. the Sales Pitch Principle 7: Stuff Happens, or the Importance of The agency problem — those who act as Liquidity your agent may actually act in their own interests. Have funds available for the unexpected. Insurance salespeople, financial advisors, Without liquid funds: and stockbrokers receive commissions, so ○ Long-term investments must be select them carefully. liquidated. Find an advisor who fits your needs, is ○ Results in lower price, tax ethical, and effective. consequences, or missed opportunities. Principle 13: Pay Yourself First With nothing to sell: ○ Pay higher interest to borrow money For most people, savings are residual. quickly. Spend what you like, save what is left. Pay yourself first so what you spend Principle 8: Nothing Happens Without a Plan becomes the residual. Reinforce the importance of long-term People spend money without thinking, but goals, ensuring goals get funded. you can’t save without thinking about it. Saving must be planned. Principle 14: Money Isn’t Everything Start off with a modest, uncomplicated plan. Later modify and expand your plan. Extend financial plans to achieve future Remember — financial plans cannot be goals. postponed. See more than just $$$ — know what is important in life. Principle 9: The Best Protection Is Knowledge Money doesn’t bring happiness, but facing expenses without the funding brings on Take responsibility for your financial affairs: anxiety. ○ Protect yourself from incompetent advisors. Principle 15: Just Do It! ○ Take advantage of changes in the economy and interest rates. Making the commitment to get started is ○ Understand personal finance, then difficult, but the following steps will be apply it. easier. One of your investment allies — TIME — is Principle 10: Protect Yourself Against Major stronger now than it ever will be. Catastrophes Take investment action now — just do it! Have the right insurance before a tragedy occurs. Know your policy coverage. Insurance focus should be on major catastrophes, which can be financially devastating. Chapter 1 Credit management: Decisions regarding Overview of a Financial Plan how much credit to obtain to support your spending and which sources of credit to use Definitions A Plan for Your Financing Personal finance: The process of planning your spending, financing, and investing to Loans are often needed for large optimize your financial situation expenditures Personal financial plan: A plan that ○ College tuition, car, house specifies your financial goals and describes Managing loans the spending, financing, and investing plans ○ How much can you afford to borrow? intended to achieve those goals ○ Determining the maturity of the loan Opportunity cost: What you give up as a ○ Selecting a loan with a competitive result of a decision interest rate How You Benefit From an Understanding of A Plan for Your Investing Personal Finance Funds not needed for liquidity can be Make your own financial decisions invested ○ Every spending decision has an ○ Stocks, bonds, mutual funds, real opportunity cost estate Judge the advice of financial advisors All investments carry some level of risk ○ Make informed decisions ○ Risk: Uncertainty surrounding the Become a financial advisor potential return on an investment ○ Many career opportunities available A Plan for Your Retirement and Estate Components of a Financial Plan This includes insurance planning, retirement Budgeting and tax planning planning, and estate planning Managing your liquidity ○ Retirement planning: Determining Financing your large purchases how much money should be set Protecting your assets and income aside each year for retirement and (insurance) how those funds should be invested Investing your money ○ Estate planning: Determining how Planning your retirement and estate your wealth will be distributed before or upon your death A Plan for Your Budgeting and Tax Planning How the Text Organization Relates to the Budget planning: The process of Financial Plan’s Components forecasting future expenses and savings ○ Evaluate your current financial Each of the six parts of the text covers one position specific component of the financial plan Assets: What you own An effective financial plan enhances net Liabilities: What you owe worth and builds wealth Net worth: The value of what Follow the steps to complete a financial plan you own minus the value of by the end of the school term what you owe How the components relate to your cash flows A Plan to Manage Your Liquidity ○ Cash inflows: Cash that you receive ○ Cash outflows: Cash that you spend Liquidity: Access to funds to cover any ○ Budgeting balances income and short-term cash deficiencies spending Money management: Decisions regarding ○ Liquidity deals with cash excesses how much money to retain in liquid form and or shortages how to allocate funds among short-term investment instruments  ○ Financing focuses on obtaining cash Provides updated information on all parts of for large purchases or repaying your financial plan loans ○ Current tax rates and regulations ○ Protect assets and income by using ○ Investment performances cash for insurance and retirement ○ Online calculators ○ Investing uses cash to build wealth Developing the Financial Plan Step 1: Establish Your Financial Goals ○ Types of goals Car, home, college, wealth, charity ○ Set realistic goals Stronger likelihood of reaching goals ○ Timing of goals Short term (within one year) Intermediate (between 1–5 years) Long term (beyond five years) Step 2: Consider Your Current Financial Position ○ How your future financial position is tied to your education Consider your skills, interests, and career paths ○ How your future financial position is tied to your career choice Choose a career that will be enjoyable and suit your skills Step 3: Identify and Evaluate Alternative Plans That Could Achieve Your Goals ○ Plans could be conservative or aggressive Step 4: Select and Implement the Best Plan for Achieving Your Goals ○ The Internet has valuable financial planning information Step 5: Evaluate Your Financial Plan ○ Keep the plan in an accessible place and monitor your progress Step 6: Revise Your Financial Plan ○ Change the plan as financial conditions and goals change How the Internet Facilitates Financial Planning The Internet provides information on all aspects of financial planning ○ Bank deposit rates ○ Prices of cars and homes ○ Financing rates ○ Prices of investments ○ Insurance premiums Chapter 2 Periodically review the budget to see if you Planning with Personal Financial Statements are progressing toward your goals. Look for areas that can be changed to Personal Cash Flow Statement improve the budget over time. Focus on ethics by not becoming overly Personal cash flow statement: a financial dependent on others and sticking to your statement that measures a person’s cash budget. inflows and outflows Cash inflows include salaries, interest, Personal Balance Sheet dividends Cash outflows include all expenses, both A personal balance sheet is a summary of large and small your assets (what you own), liabilities (what Create a statement by recording your you owe), and net worth (assets minus revenues and expenses over a period of liabilities). time A balance sheet reflects your financial Net cash flows: cash inflows minus cash position at a specific point in time. outflows Assets: ○ Liquid assets are financial assets Factors That Affect Cash Flow that can be easily sold without loss in value. Factors affecting cash inflows: ○ Household assets include home, car, ○ Stage in your career path, closely and furniture. Market values should related to your stage in the life cycle be established for these assets. (college, career, retirement). ○ Investments: Bonds (certificates ○ Type of job, based on skill level and issued by borrowers, such as firms demand for those skills. or government agencies), stocks ○ Number of income earners in your (certificates representing partial household. ownership in a firm), mutual funds, Factors affecting cash outflows: and real estate (including rental ○ Size of family. property). ○ Age. Liabilities: ○ Personal consumption behavior; ○ Current liabilities are debts that will some people spend all their income, be paid within a year. while others focus on necessities ○ Long-term liabilities are debts that and savings. will be paid over a period longer than one year. Creating a Budget Net worth is the difference between the value of your assets and liabilities. A budget is a cash flow statement based on forecasted cash flows for a future period. Analysis of the Personal Balance Sheet Budgets are useful for anticipating either cash surpluses or deficiencies. Allows monitoring of liquidity, debt, and Anticipating cash shortages: Small ability to save. shortages can be covered from a checking ○ Liquidity ratio = Liquid account, and budgets provide early warning assets/Current liabilities. A higher of these shortages. result indicates greater liquidity. Assessing the accuracy of the budget: ○ Debt-to-asset ratio = Total Compare predicted cash flows to actual liabilities/Total assets. A higher ratio cash flows and adjust as necessary. indicates higher debt relative to Forecast net cash flows over several assets. months: Use typical month information, ○ Savings rate = Savings during the adjust for unusual expenses, and allow for period/Disposable income during the unexpected costs. period. This measures savings over Create an annual budget by extending the period relative to disposable your budget for longer periods. income. Improving the Budget Relationship Between Cash Flows and Wealth Wealth is built by using net cash flows to invest in assets without increasing liabilities. Net cash flows can be used to decrease liabilities, thereby increasing net worth. Net worth can change even if net cash flows are zero, for example, if the value of an asset or investment increases or decreases. How Budgeting Fits Within Your Financial Plan The key budgeting decisions for building your financial plan are: ○ How can I improve my net cash flows in the near future? ○ How can I improve my net cash flows in the distant future?  ○ The present value of money (PV) is the amount invested, or $5,000. Chapter 3: Applying Time Value Concepts ○ Find the interest rate of 9 percent and a time period of five years on Chapter Objectives the table. Using the information in the example and Calculate the future value of a dollar amount the table, we can determine that, in five that you save today. years, your money will be worth: Calculate the present value of a dollar $5,000 × 1.539 = $7,695. amount that will be received in the future. This can also be determined using a Calculate the future value of an annuity. financial calculator. Calculate the present value of an annuity. Focus on Ethics: Delaying Payments Time Value of Money Investing money while delaying payment Can be applied to a single dollar amount — obligations allows you to earn interest on also called a lump sum. your funds. Can also be applied to an annuity. However, delaying payments may result in ○ Annuity: A series of equal cash flow late fees and penalties that may damage payments that occur at the end of your credit rating. each period. Make use of your money while you can, but ○ An example would be a monthly always make obligatory payments. deposit of $50 into your savings account. Present Value of a Dollar Amount Future Value of a Single Dollar Amount Discounting: The process of obtaining present values. Compounding: The process by which Present values tell you the amount you money accumulates interest. must invest today to accumulate a certain To determine the future value of an amount amount at some future time. of money you deposit today, you must This amount is based on some interest rate know: you could earn over that period. ○ The amount of your deposit today. ○ The interest rate to be earned on the Determining Present Values deposit. ○ The number of years the money will To determine present values, you need to be invested. know: ○ The amount of money to be received Future Value Interest Factor (FVIF) in the future. ○ The interest rate to be earned on the A factor multiplied by today’s savings to deposit. determine how the savings will accumulate ○ The number of years the money will over time. be invested. Can be calculated using the future value table or a financial calculator. Present Value Interest Factor (PVIF) ○ Future value table shows various interest rates (i) and time periods A factor multiplied by a future value to (n). determine the present value of that amount. PVIF decreases as the number of years Example: Future Value of a Single Dollar increases and as the interest rate increases. Amount Can also be calculated using a financial calculator. Suppose you want to know how much money you will have in five years if you Example: Present Value of a Dollar Amount invest $5,000 now and earn an annual return of 9 percent. You would like to accumulate $50,000 in five years by making a single investment today.  You believe you can achieve a return from Present Value Interest Factor for an Annuity your investment of 8 percent annually. (PVIFA) Using the information in the example and the table, we can determine that in order to A factor multiplied by a periodic savings have $50,000 today: level (annuity) to determine the present $50,000 × 0.681 = $34,050. value of the annuity. This can also be determined using a ○ i represents various rates of interest. financial calculator. ○ n represents the time periods in the annuity. Future Value of an Annuity Example: Present Value of an Annuity Annuity Due: A series of equal cash flow payments that occur at the beginning of Suppose you have just won the lottery. As a each period. result of your luck, you will receive $82,000 Timelines: Diagrams that show payments at the end of every year for the next 25 received or paid over time. years. Now, a financial firm offers you a These values can also be calculated using a lump sum of $700,000 in return for these table or a financial calculator. payments. If you can invest your money at an annual interest rate of 9 percent, should Future Value Interest Factor for an Annuity you accept the offer? (FVIFA) Using our example and the previous table, we can determine that the present value of A factor multiplied by the periodic savings the stream of $82,000 payments is: level (annuity) to determine how the savings $82,000 × 9.823 = $805,486. will accumulate over time. Since this amount is less than the $700,000 ○ i is the periodic interest rate. offered, you would reject the offer. ○ n is the number of payments in the annuity. Using Time Value to Estimate Savings Example: Future Value of an Annuity Estimating the future value from savings: Provides motivation for regular saving. Suppose that you have won the lottery and Estimating the annual savings that will will receive $150,000 at the end of every achieve a future amount: Helps set year for the next 20 years. As soon as you specific goals when saving for a large receive the payments, you will invest them purchase. at your bank at an interest rate of 7 percent annually. How much will be in your account How a Savings Plan Fits Within Your Financial at the end of 20 years, assuming you do not Plan make any withdrawals? Using our example and the table, we can Key savings decisions for building your determine that, at the end of twenty years, financial plan are: you would have: ○ How much should I attempt to $150,000 × 40.995 = $6,149,250. accumulate in savings for a future This can also be determined using a point in time? financial calculator. ○ How much should I attempt to save every month or every year? Present Value of an Annuity The present value of an annuity is determined by discounting the individual cash flows of the annuity and adding them up. This value also can be obtained by either using a present value of an annuity table or a financial calculator. Chapter 4: Using Tax Concepts for Planning ○ If you earn income you must file a Form 1040 to determine your tax Background on Taxes liability ○ Filing deadline is April 15 of each Financial planning involves decisions that year affect your income ○ Whether or not to take a second job Background on Taxes ○ Deciding to finance a home ○ Investment decisions Tax Relief Act of 2001 ○ Contributing to a retirement account ○ Lower taxes rates phased in These decisions affect the amount of taxes gradually until 2010 you pay and therefore affect your wealth ○ Impact various adjustments made to determine personal income taxes Background on Taxes ○ Designed to provide both a short-term stimulus to the economy Taxes are paid at the federal, state, and and long-term tax relief for individual local levels taxpayers The purpose of taxes is to fund government activities Filing Status The federal tax system is administered by the Internal Revenue Service Taxpayers must specify a filing status for This chapter focuses on the federal income their tax return because different rates are tax process associated with each status. ○ Single Background on Taxes ○ Married filing joint return ○ Married filing separate return Social Security and Medicare Taxes ○ Head of household ○ Wages are subject to FICA ○ Qualifying widow(er) with dependent ○ FICA (Federal Insurance child Contribution Act): Taxes paid to fund the Social Security System and Gross Income Medicare ○ Medicare: a government health Gross income: all reportable income from insurance program that covers any source, including salary, interest people over age 65 and provides income, dividend income, and capital gains payments to health care providers in received during the tax year the case of illness ○ Wages and Salaries — including bonuses, but excluding contributions Background on Taxes to an employee-sponsored retirement account Social Security and Medicare Taxes ○ Interest income: interest earned from ○ Your employer matches the amount investments or loans to other that is withheld from your wages individuals Social Security taxes equal 6.2% of your salary up to a Gross Income maximum level of $84,900 Medicare taxes are 1.45 % of Dividend income: income received in the your entire salary form of dividends paid on stocks or mutual ○ Self-employed people must pay both funds parts of these taxes themselves — Capital gain: income earned when an asset 15.3% is sold at a higher price than was paid for it ○ Short-term capital gain: a gain on Background on Taxes assets that were held less than 12 months Personal income taxes: taxes imposed on ○ Long-term capital gain: a gain on income earned assets that were held for 12 months or longer Gross Income Deductions and Exemptions Capital loss: a loss that results from selling Expenses for transportation to and from an asset at a lower price than was paid for it care Capital gains tax: the tax that is paid on a Accident and health insurance premiums gain earned as a result of selling an asset Charitable gifts for more than the purchase price Other expenses ○ Casualties or thefts Gross Income ○ Job-related expenses Compare the total allowable itemized Determining gross income deductions to the standard deduction and ○ Adjusted gross income: the amount use the larger calculated by adjusting gross income for contributions to individual Deductions and Exemptions retirement accounts, alimony payments, interest paid on student Exemption: an amount that can be deducted loans, and other special for each person who is supported by the circumstances income reported on a tax return All of these items related to gross income ○ Usually one exemption each for the are reported on Form 1040 filer, the spouse, and each dependent child Deductions and Exemptions ○ Deducted from gross income to determine taxable income Standard deduction: a fixed amount that can be deducted from adjusted gross income to Taxable Income and Taxes determine taxable income ○ Not affected by income Taxable income: adjusted gross income less ○ Affected by filing status and age deductions and exemptions ○ Marriage penalty: term used to Taxes describe the fact that many ○ Depends on taxable income and two-income married people pay filing status more in taxes than if they were ○ Progressive: a term used to single characterize a tax system where a positive relationship exists between Deductions and Exemptions an individual’s income level and tax rate Itemized deductions: specific expenses that can be deducted to reduce taxable income Taxable Income and Taxes ○ Interest expense: interest paid on borrowed money — primarily interest Determining your tax liability on mortgages and student loans ○ Determine filing status and follow the ○ State income tax: an income tax instructions on the tax schedule imposed by some states on people ○ Tax Liability = Tax on Base + who receive income from employers [Percentage on Excess over the in that state Base x (Taxable Income – Base)] Deductions and Exemptions Taxable Income and Taxes Real estate tax: a tax imposed on a home or Marginal tax bracket: the tax rate imposed other real estate in the county where the on any additional (marginal) income earned property is located ○ Tax credits: amounts that offset Medical expenses taxes; the full amount of the tax ○ Amounts paid for prevention, credit is subtracted from taxes owed diagnosis or alleviation of physical or mental defects or illness ○ Amounts paid to affect any structure or function of the body Taxable Income and Taxes Child tax credit: a tax credit allowed for each child in a household who is less than 17 years old (reduced or eliminated for households in high-income brackets) ○ Gradually increasing from $600 in 2001 to $1,000 in 2010 ○ Available as a refund to low-income workers who owe no income tax Taxable Income and Taxes College expense credits: tax credits for parents who incur college expenses, based on the amount of financial support they provide ○ Section 529 College Savings Plan Allows tax benefits for parents who set aside money for their children’s future college expenses Available to all parents, regardless of income Taxable Income and Taxes Earned income credit: a special credit for taxpayers who earn low incomes; can reduce the amount of taxes owed Other tax credits are also available, for example for child care and adoptions Focus on Ethics: Reducing Your Taxes Resist the temptation to underreport income The IRS usually uncovers such behavior There are many legal ways to reduce taxes File on time Financial Planning Online: Tax Information Resource This website provides useful information on the most recent tax rates, forms, laws, and issues. Search for a particular tax topic in which you are interested. How Tax Planning Fits within Your Financial Plan The key tax planning decisions for building your financial plan are: ○ What tax savings are currently available to you? ○ How can you increase your tax savings in the future? PERFIN QUIZ 1 13. Which of the following is a crucial step in creating an effective personal budget? D. Tracking all income and expenses accurately 1. What does personal finance primarily involve? C. Managing an individual's or family's financial 14. What is a common mistake people make when resources creating a personal budget? D. Forgetting to account for discretionary 2. Which of the following best describes the goal of spending personal finance? E. None of the above 15. Which of the following items would not be classified as an asset on a personal balance sheet? 3. What is the primary purpose of a financial plan? B. Outstanding credit card debt B. To create a strategy for achieving long-term financial goals 16. When preparing a personal balance sheet, which of the following statements is incorrect? 4. Which of the following best describes a financial B. Liabilities are always greater than assets plan? B. A comprehensive roadmap for managing 17. Which of the following best describes the your finances to meet life goals impact of a positive cash flow on personal wealth? C. It contributes to the accumulation of assets 5. How can understanding personal finance help you in your daily life? 18. Which of the following statements about D. By enabling you to make informed decisions personal cash flow and wealth is incorrect? about spending and saving D. Wealth is solely determined by the amount of cash flow 6. Which of the following is a benefit of having a good grasp of personal finance? 19. Which of the following scenarios would result in A. You can manage your money to achieve a higher debt-to-asset ratio? financial goals and reduce financial stress A. Increasing total assets while keeping total liabilities constant 7. Which of the following is the best strategy to maintain personal liquidity? 20. Which of the following statements about the B. Keeping a significant portion of your savings debt-to-asset ratio is incorrect? in a high-interest savings account A. A higher debt-to-asset ratio indicates greater financial leverage 8. What is a potential downside of maintaining too much liquidity? 21. Which of the following factors would not directly C. Lower returns due to conservative affect an individual's savings rate? investments D. The stock market performance 9. Which of the following is the first step in 22. Which of the following statements about the developing a personal financial plan? savings rate is incorrect? B. Determining your current financial situation D. The savings rate is unaffected by changes in income levels 10. What is a common mistake people make when developing a personal financial plan? 23. Which of the following transactions would not E. None of the Above directly affect an individual's net cash flow? D. Transferring money from a savings account 11. Which of the following factors is least likely to to a checking account directly affect your personal cash inflows? C. The amount of rent you pay 24. Which of the following statements about net cash flow is incorrect? 12. Which of the following is a factor that can D. Net cash flow is unaffected by non-cash significantly impact your personal cash outflows? expenses like depreciation C. The size of your family 25. Which of the following is generally the best option for financing a large purchase if you want to avoid paying interest? C. Using a credit card with a 0% introductory APR offer.