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Course 1: Introduction to Financial Planning

 

 

 

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Susan Croes

  

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The Introduction to Financial Planning course discusses the financial planning process and various areas of the process. It covers planning approaches, gathering the necessary financial information, and setting financial goals. 

 

After you complete the course, you will be able to:

 

·         Describe financial planning process

·         Identify documents needed for the financial planning process

·         Identify the steps needed to develop a plan

·         Describe how to monitor the plan

 

 

 

 

 

 

 

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These objectives are for the entire course.

 

 

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Course 1: Introduction to Financial Planning

Lesson 1: What is Personal Financial Planning?  

 

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Susan Croes

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What is Personal Financial Planning?

 

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This lesson provides a brief introduction to personal financial planning and presents several key fundamental financial planning concepts.

 

After completing this lesson, you will be able to:

 

·         List the five-steps of the financial planning process

·         Identify the trade-offs of balancing the financial plan

·         Explain the Life Stages approaches to personal financial planning

·         Explain specific financial need approaches to personal financial planning

                         

 

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Course 1: Introduction to Financial Planning

Lesson 1: What is Personal Financial Planning?  

Topic 1: Overview   

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Susan Croes

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Overview

 

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Personal financial planning is a method of identifying and achieving an individual’s financial goals. Personal financial planning is a systematic way to build a secure financial future and deal effectively with ongoing financial needs. It is a disciplined and organized method of achieving financial control and providing financial security for an individual and his or her family. 

 

A financial plan must be flexible to be effective. Personal financial planning is an evolving process that reflects not only the changes in an individual’s financial situation, but also in his or her life. Because personal financial planning addresses each individual’s specific goals and circumstances, the process is unique for every individual.

 

Personal financial planning may require making difficult choices. Most people have limited resources and must identify and pursue their most important goals. 

 

  

 

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Course 1: Introduction to Financial Planning

Lesson 1: What is Personal Financial Planning?  

Topic 1:  Overview

Sub-Topic 1: Evolving Process

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Susan Croes

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Evolving Process

 

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Personal and financial goals can and often do change. Individuals and families need a plan that is flexible enough to change with their circumstances.

 

For example, events such as births, deaths, illnesses and marriage can affect goals profoundly. Employment changes, inflation, unusually good or bad investment results and inheritances will also affect financial circumstances. For these reasons, a person should avoid making plans that are rigid and unresponsive to change.

 

Each individual’s financial plan will be different, for a number of reasons. Individuals have different values and goals. They begin the personal financial planning process from different starting points and experience different life events such as getting married or divorced, raising a family and deciding when to retire

 

 

 

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Course 1: Introduction to Financial Planning

Lesson 1: What is Personal Financial Planning?  

Topic 1: Overview

Sub-Topic 2: Trade Offs/ Balancing

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Susan Croes

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Trade Offs/ Balancing

 

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A balanced, comprehensive financial plan addresses short-term, medium-term and long-term goals. While short-term goals may require the most immediate attention, delaying action on long-term goals (such as retirement) may cause significant problems in the future.  

 

 

 

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Course 1: Introduction to Financial Planning

Lesson 1: What is Personal Financial Planning?  

Topic 1: Overview

Sub-Topic 2: Trade Offs/ Balancing

C1 L1 T1 ST2

Susan Croes

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Trade Offs/ Balancing

As an individual creates a financial plan, he or she may find that there are trade-offs. A person may have to give up some things in order to reach a more important goal. 

 

For example, a couple has a short-term goal of paying off their credit card debt. To meet that goal, they have identified several action steps:

 

                        • Postpone their vacation

                        • Reduce their entertainment expenses

                        • Delay purchase of new car

 

 

There may have trade-offs for medium- and short-term goals. Because each individual has a unique situation and therefore a unique financial plan, there are no answers or solutions that are right for everyone.     

 

 

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Course 1: Introduction to Financial Planning

Lesson 1: What is Personal Financial Planning?  

Topic 2: Planning Approach

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Susan Croes

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Planning Approach

 

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What do individuals want from the financial planning process? Is it a comprehensive view of their financial future? Or are they interested only in specific issues? Either alternative is fine. The deciding issue is simply what best suits an individual’s needs.

 

The two approaches to personal financial planning are:

 

·         Planning for different life stages

·         Planning for specific financial goals

 

 

Let’s review each approach in more detail.

 

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Course 1: Introduction to Financial Planning

Lesson 1: What is Personal Financial Planning?  

Topic 2: Planning Approach 

Sub-Topic 1: Life Stages

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Susan Croes

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Life Stages

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The life stages approach to personal financial planning recognizes that each individual’s needs differ widely throughout the life cycle. The steps in the approach are to:

 

1. Start with a general assessment of someone’s current position

2. Proceed to a more detailed identification of goals

3. Create a comprehensive plan

 

 

 

 

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