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CHAPTER 1: Introduction Personal Financial Planning - Coggle Diagram

- - - - •Consumable-product goals
      - •Durable-product goals
      - •Intangible-purchase goals
    - - •S – SPECIFIC ; Know exactly what your goals are to create a plan
        
        •M – MEASURABLE ; With a specific amount
        
        •A – Action-oriented ; Identify the personal financial activities you will undertake
        
        •R – Realistic ; Utilizing your income and life situation
        
        •T – Time-based ; Identify the time frame to achieve the goal
- - - - Opportunity Costs:
        1. Personal: Time, effort, or health you give up when making a choice. Example: Working late means less rest or family time.
        2. Financial: The money benefits you miss out on. Example: Buying a phone now vs. saving it and earning interest.
        
        Time Value of Money: Money today is worth more than money in the future.
  - - - Part 1: Planning – Set goals, make a financial plan (Ch. 2–4)
        
        Part 2: Saving & Borrowing – Save money, use credit wisely (Ch. 5–7)
        
        Part 3: Spending – Make smart buying decisions (Ch. 8–9)
        
        Part 4: Insuring – Protect yourself and your assets (Ch. 10–12)
        
        Part 5: Investing – Grow your money through investments (Ch. 13–17)
        
        Part 6: Retirement & Estate – Plan for your future and legacy (Ch. 18–19)
  - - - • Providers of funds: Individuals, businesses, governments, foreign entities.
        
        • Users of funds: Same as providers – they borrow or spend funds.
        
        • Funds flow both ways between intermediaries and markets.
        
        • Regulators: Federal Reserve, FDIC, NCUA, SEC, CFPB and state agencies.
      - • Funds go to:
        
        Financial intermediaries (banks, credit unions, insurance, investment companies)
        
        Financial markets (stocks, bonds, etc.)
  - - - 1. Inflation Risk: Prices may rise later — things could cost more if you wait.
        
        2. Interest Rate Risk: Changes in interest rates affect loan costs and savings returns.
        
        3. Income Risk: Losing a job can affect income — save and upskill early.
        
        4. Personal Risk: Choices may lead to health, safety, or extra cost issues.
        
        5. Liquidity Risk: Some investments are hard to turn into quick cash.
  - - - i. Know your current financial situation – Understand your income, expenses, savings, and debts.
      - ii. Set financial goals – Decide what you want to achieve (short or long term).
      - iii. Find possible options – List different ways to reach your goals.
      - iv. Compare the options – Think about your values, risks, and how much time or money each choice needs.
      - v. Make and follow a plan – Choose the best option and take action.
      - vi. Review and update your plan – Check your progress and make changes if needed.
  - - - Short Term Plan (within 1 year)
        
        • Make a budget
        
        • Pay credit card bills
        
        • Get insurance
        
        • Start saving
        
        • Rent a house
        
        • Save to buy a house
      - Long Term Plan (over 1 year)
        
        • Invest to grow your money
        
        • Choose tax-saving investments
        
        • Pay off loans and house
      - Steps in Financial Planning
        
        Know your money situation
        
        Set your money goals
        
        Take action to reach goals
      - Life Situations Example
        
        1. Single Parent: Goal-Save RM20,000 for child’s college in 10 years.
        Short-term: Save regularly (e.g. in fixed deposit)
        Long-term: Get life insurance for child
        2. Young Couple:Goal: Buy a house
        Short-term: Save monthly with a budget
        Long-term: Keep saving and investing
        3. Middle Aged Adult:Goal: Help parents financially
        Short-term: Get life insurance for them
        Long-term: Invest monthly in mutual funds
- - - - Financial System
        i. Financial Intermediaries
        ii. Users (borrowers, spenders) of funds
        iii. Financial Markets
        iv. Providers (savers, investors) of funds
      - Economic Factors
        
        Forces of Supply and Demand and prices
        
        Study of how wealth is created and distributed
        
        Economy includes different institutions
- - - - Consumer Prices
        
        Consumer Spending
        
        Interest Rates
        
        Money Supply
        
        Unemployment
        
        Housing starts
        
        Gross Domestic Product (GDP)
        
        Trade Balance
        
        Stock Market Indexes (DJI), s&P 500
- - - - Consumer Spending
      - Interest Rates
      - Consumer Prices
- - - - Goals for Different Financial Needs
        
        Durable-product goals
        
        Intangible-purchase goals
        
        Consumable-product goals
      - Timing of Goals
        
        Intermediate ( 1 to 5 years )
        
        Long-term ( more than 5 years )
        
        Short-term ( within the next year)