October 1, 2012
Personal Finance Basics and Time Value of Money
This chapter has helped me to understand how important money and financial planning is to my present and future well being. I learned and realized just through the definition of the word personal financial planning that it means how we can map out our money and manage it better in given time frames. Managing your money is key and fundamental to your future stability and happiness. It can make your quality of living so much better if you know how to set goals for yourself and or your family. I think it is very important that all adults starting from eighteen should learn how to properly manage their money. The earlier we start off learning how to properly plan and manage our money the better off we would be as a society. The debt ceiling would be lowered tremendously and people would be far less stressed out. Financial planning needs to be used for simple to complex times in one’s life. Like going on vacation, going to school, going out for dinner, entertainment and savings etc. People should take financial basics to help them achieve their goals in life no matter short or long term. Time Value of money is a great tool needed to help people gauge when they should use, save or invest their money. I have gained so much knowledge and information from reading this chapter and I hope to explain thoroughly the process of personal financial planning and the time value of money. In this paper, I will explain the financial planning process, types of financial goals, influences on personal financial planning, opportunity costs and the time value of money, and achieving financial goals. The financial planning process includes the idea of having a comprehensive financial plan. It means that I can increase how I get, use and save my money. I will be able to control my money by not going into debt or depending on others for it. I'll be able to have healthier relationships with my spouse, friends and family if I map out my money and use it well. Stress becomes lowered and improved once I achieve my personal money goals. I learned that personal financial activities have three main areas with include spend, save and share. Spend is for my daily expenses and bills, entertainment and any other major spending expenses I might possess. Spending is part of everyday life and is needed to get major needs paid for to include shelter and food. Save is just for my long term goal of having financial security like for my retirement. Savings are very expensive because in times of need you can take from your savings to keep you afloat until an alternative plan is made, created and implemented. Share is to help others that may be in need of help, like a charity or foundation. There are six steps to the financial planning process. The first one is figuring out what state of being are my finances. A list should be prepared to show what current money/assets I have, how much debt I have and a list of what I currently spend my money on. I have composed my own personal list and I realized that I have so much debt compared to the money I am bringing in, that alone helped me to realize that I need to make some major changes in my life. The second step is how to develop my financial goals. It is important to know the difference and determine what are your needs and wants. It's also good to set your own financial goals. Financial goals can help alleviate debt and secure a good amount of savings for retirement or future needs. One of my future financial goals is to get my masters degree so I can have a better chance of getting higher pay. I hope that furthering my education will help to secure my job and help me to begin he process of getting out of debt. Identify alternative course of action is the third step, sometimes financial situations change within a year so its good to have backup plans. Alternative course of action is very important with any financial plan so you can be...
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