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Life Cycle of Financial Planning

    “Take Charge of Your Finances”
           Advanced Level
1.11.2.G1




                      Financial Planning

    Many people follow a similar
  financial pattern during their life
                 BUT
   Everyone has an individualized
            financial plan


© Family Economics & Financial Education – Revised May 2011 – Introduction to Finance Unit – Life Cycle of Financial Planning – Slide 2
 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.11.2.G1




                       Financial Planning

   Financial planning - a tool used to achieve
financial success based upon the development
     and implementation of financial goals

   Financial goals - specific objectives to be
   accomplished through financial planning

      Financial Goals should be SMART goals

 © Family Economics & Financial Education – Revised May 2011 – Introduction to Finance Unit – Life Cycle of Financial Planning – Slide 3
  Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.11.2.G1




         SMART Financial Goals
                                          State exactly what is to be done with the
                                          money involved


                                           Write the exact dollar amount


                                          Determine how it can be reached, which is
                                          often determined by the individual’s budget

                                          Do not set the goal for something unattainable
                                          or unrealistic


                                          Specifically state when the goal needs to be reached



© Family Economics & Financial Education – Revised May 2011 – Introduction to Finance Unit – Life Cycle of Financial Planning – Slide 4
 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.11.2.G1



   What influences a person’s
        financial plan?
Many factors that                                                                                               Values,
                                                                                                               Goals, &
can be expected                                                                                                Personal
                                                                                                               Choices
 or unexpected:
                                                                                                                                              Major
                                                                           Life Cycle
                                                                                                                                               Life
                                                                             Needs
                                                                                                                                              Events



                                                                                                            Lifestyle
                                                                                                           Conditions



    © Family Economics & Financial Education – Revised May 2011 – Introduction to Finance Unit – Life Cycle of Financial Planning – Slide 5
     Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.11.2.G1



        The choices you make today
            impact your future!
  Choices and goals made in the                                                                                                 Values,
                                                                                                                               Goals, &
  present may have a significant                                                                                               Personal
impact on your future financial plan                                                                                           Choices

                                                                                                                                                Major
                                                                                                                                                 Life
                                                                                                                                                Events
    Life events that affect your
       financial plan may be
            unexpected



      © Family Economics & Financial Education – Revised May 2011 – Introduction to Finance Unit – Life Cycle of Financial Planning – Slide 6
       Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.11.2.G1



What are examples of lifestyle conditions that
   may affect a person’s financial plan?
       Marital
                                                        Age
       status                                                                                                                 Values,
                                                                                                                             Goals, &
                                                                                                                             Personal
                                                                                                                             Choices
                                            Number of
      Income
                                           dependents                                                                                         Major
                                                                                                                                               Life
                                                                                                                                              Events
                                          Employment
    Education
                                            status                                                                         Lifestyle
                                                                                                                          Conditions
      Health                                   Economic
      status                                    outlook
    © Family Economics & Financial Education – Revised May 2011 – Introduction to Finance Unit – Life Cycle of Financial Planning – Slide 7
     Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.11.2.G1




                         Financial Life Cycle
                                                                                                                               Values,
    Life cycle - a series of                                                                                                  Goals, &
                                                                                                                              Personal
  stages through which an                                                                                                     Choices
individual passes during his
                                                                                                                                               Major
        or her lifetime                                                                        Life Cycle                                       Life
                                                                                                 Needs                                         Events
  Typical financial life
                                                                                                                            Lifestyle
cycle pattern applies to                                                                                                   Conditions
most people and affects
    a financial plan

     © Family Economics & Financial Education – Revised May 2011 – Introduction to Finance Unit – Life Cycle of Financial Planning – Slide 8
      Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.11.2.G1




         Typical Financial Life Cycle
        Single * Marriage * Start and Raise Family                                                    Approaching                      Retirement Years
                                                                                                      Retirement
                                                                                                         Years

                                                                                                                                Stage 3: Wealth
                                                                                                                                  Distribution
$                                                                      Stage 2: Wealth
                                                                        Accumulation

                    Stage 1: Basic Wealth
                         Protection


    0            20                     30                     40     50      60                                                      70           80
                                                                 Years of Age
         © Family Economics & Financial Education – Revised May 2011 – Introduction to Finance Unit – Life Cycle of Financial Planning – Slide 9
          Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.11.2.G1




           Financial Life Cycle Stages

                                                                             Stage 1: Basic Wealth Protection
                                                                                   Focus on building financial security


                                    Stage 3                                     Stage 2: Wealth Accumulation
                  Stage 2                                                      Head of household has reached peak
Stage 1                                                                        earning years, is accumulating wealth,
                                                                                    and approaching retirement

  Which stage of the                                                               Stage 3: Wealth Distribution
financial life cycle are                                                         The consumption of wealth, usually
       you in?                                                                           during retirement

          © Family Economics & Financial Education – Revised May 2011 – Introduction to Finance Unit – Life Cycle of Financial Planning – Slide 10
           Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.11.2.G1



What types of financial planning would occur
during each stage of the financial life cycle?
                                                                          Stage 1: Basic Wealth Protection
                                                                          (protecting your future)
                                                                          •Develop emergency savings
                                                                          •Develop positive credit
                                                                          •Begin investing in retirement
                                     Stage 3                              •Purchase insurance
                   Stage 2
                                                                          Stage 2: Wealth Accumulation
 Stage 1
                                                                          (giving it to yourself)
                                                                          •Investing to build wealth
                                                                          •Purchasing a home
                                                                          Stage 3: Wealth Distribution
                                                                          (giving it to your chosen ones)
                                                                          •Estate planning
           © Family Economics & Financial Education – Revised May 2011 – Introduction to Finance Unit – Life Cycle of Financial Planning – Slide 11
            Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.11.2.G1




          Typical Financial Life Cycle


                                    Stage 3
                                                                                 What factors or events in a
                  Stage 2
                                                                                person’s life could cause the
Stage 1
                                                                                typical financial life cycle to
                                                                                      change or vary?




          © Family Economics & Financial Education – Revised May 2011 – Introduction to Finance Unit – Life Cycle of Financial Planning – Slide 12
           Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.11.2.G1



   Financial Life Cycle Events
             Activity
People in certain age groups tend to have
    similar financial life cycle needs




               Determine what types of financial
            planning may occur for each age group.
  © Family Economics & Financial Education – Revised May 2011 – Introduction to Finance Unit – Life Cycle of Financial Planning – Slide 13
   Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.11.2.G1



  Traditional Age Group Financial
          Planning Needs


– Developing a plan for eventual independence
– Preparing for career
– Evaluating future financial needs and resources
– Exploring financial systems – banks, etc.
– Developing a personal system of record keeping

    © Family Economics & Financial Education – Revised May 2011 – Introduction to Finance Unit – Life Cycle of Financial Planning – Slide 14
     Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.11.2.G1



    Traditional Age Group Financial
            Planning Needs


–   Establishing a household
–   Training for a career
–   Earning financial independence
–   Determining insurance needs
–   Establishing credit
–   Establishing savings
–   Creating a spending plan
–   Begin investing in retirement
–   Developing a personal financial identity
      © Family Economics & Financial Education – Revised May 2011 – Introduction to Finance Unit – Life Cycle of Financial Planning – Slide 15
       Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.11.2.G1



    Traditional Age Group Financial
            Planning Needs


–   Child-bearing
–   Child-raising
–   Expanding career goals
–   Investing in retirement
–   Managing increased need for credit
–   Discussing and managing additional insurance needs
–   Creating a will
–   Starting an education fund for children
     © Family Economics & Financial Education – Revised May 2011 – Introduction to Finance Unit – Life Cycle of Financial Planning – Slide 16
      Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.11.2.G1



    Traditional Age Group Financial
            Planning Needs



–   Upgrading career training
–   Developing protection needs for head-of-household
–   Investing in retirement
–   Establishing retirement goals
–   Building on children’s education fund
–   Need for greater income due to expanding needs
     © Family Economics & Financial Education – Revised May 2011 – Introduction to Finance Unit – Life Cycle of Financial Planning – Slide 17
      Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.11.2.G1



  Traditional Age Group Financial
          Planning Needs



– Assisting with higher education for children
– Investing in retirement
– Updating retirement goals and plans
– Developing estate plans


   © Family Economics & Financial Education – Revised May 2011 – Introduction to Finance Unit – Life Cycle of Financial Planning – Slide 18
    Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.11.2.G1



    Traditional Age Group Financial
            Planning Needs

–   Consolidating assets
–   Re-evaluating property transfer
–   Investing in retirement
–   Evaluating expenses for retirement and current housing
–   Planning future security
–   Investigating retirement part-time income or volunteer work
–   Meeting responsibilities of ageing parents
–   Planning for long-term care insurance and medical care in
    retirement
      © Family Economics & Financial Education – Revised May 2011 – Introduction to Finance Unit – Life Cycle of Financial Planning – Slide 19
       Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.11.2.G1



  Traditional Age Group Financial
          Planning Needs


– Re-evaluating and adjusting living conditions and
  spending as related to health and income
– Adjusting insurance programs for increasing risks
– Finalizing will or letter of last instructions
– Acquiring assistance in management of personal
  and financial affairs
– Finalizing estate plans

   © Family Economics & Financial Education – Revised May 2011 – Introduction to Finance Unit – Life Cycle of Financial Planning – Slide 20
    Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.11.2.G1




                                  True or False?

  Everyone has the same
       financial plan
FALSE! Individualize your financial plan but
  consider the typical life cycle needs for
             every age group.


© Family Economics & Financial Education – Revised May 2011 – Introduction to Finance Unit – Life Cycle of Financial Planning – Slide 21
 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

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2.01 fefe life_cycle_financial_planning_p_pt

  • 1. Life Cycle of Financial Planning “Take Charge of Your Finances” Advanced Level
  • 2. 1.11.2.G1 Financial Planning Many people follow a similar financial pattern during their life BUT Everyone has an individualized financial plan © Family Economics & Financial Education – Revised May 2011 – Introduction to Finance Unit – Life Cycle of Financial Planning – Slide 2 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
  • 3. 1.11.2.G1 Financial Planning Financial planning - a tool used to achieve financial success based upon the development and implementation of financial goals Financial goals - specific objectives to be accomplished through financial planning Financial Goals should be SMART goals © Family Economics & Financial Education – Revised May 2011 – Introduction to Finance Unit – Life Cycle of Financial Planning – Slide 3 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
  • 4. 1.11.2.G1 SMART Financial Goals State exactly what is to be done with the money involved Write the exact dollar amount Determine how it can be reached, which is often determined by the individual’s budget Do not set the goal for something unattainable or unrealistic Specifically state when the goal needs to be reached © Family Economics & Financial Education – Revised May 2011 – Introduction to Finance Unit – Life Cycle of Financial Planning – Slide 4 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
  • 5. 1.11.2.G1 What influences a person’s financial plan? Many factors that Values, Goals, & can be expected Personal Choices or unexpected: Major Life Cycle Life Needs Events Lifestyle Conditions © Family Economics & Financial Education – Revised May 2011 – Introduction to Finance Unit – Life Cycle of Financial Planning – Slide 5 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
  • 6. 1.11.2.G1 The choices you make today impact your future! Choices and goals made in the Values, Goals, & present may have a significant Personal impact on your future financial plan Choices Major Life Events Life events that affect your financial plan may be unexpected © Family Economics & Financial Education – Revised May 2011 – Introduction to Finance Unit – Life Cycle of Financial Planning – Slide 6 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
  • 7. 1.11.2.G1 What are examples of lifestyle conditions that may affect a person’s financial plan? Marital Age status Values, Goals, & Personal Choices Number of Income dependents Major Life Events Employment Education status Lifestyle Conditions Health Economic status outlook © Family Economics & Financial Education – Revised May 2011 – Introduction to Finance Unit – Life Cycle of Financial Planning – Slide 7 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
  • 8. 1.11.2.G1 Financial Life Cycle Values, Life cycle - a series of Goals, & Personal stages through which an Choices individual passes during his Major or her lifetime Life Cycle Life Needs Events Typical financial life Lifestyle cycle pattern applies to Conditions most people and affects a financial plan © Family Economics & Financial Education – Revised May 2011 – Introduction to Finance Unit – Life Cycle of Financial Planning – Slide 8 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
  • 9. 1.11.2.G1 Typical Financial Life Cycle Single * Marriage * Start and Raise Family Approaching Retirement Years Retirement Years Stage 3: Wealth Distribution $ Stage 2: Wealth Accumulation Stage 1: Basic Wealth Protection 0 20 30 40 50 60 70 80 Years of Age © Family Economics & Financial Education – Revised May 2011 – Introduction to Finance Unit – Life Cycle of Financial Planning – Slide 9 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
  • 10. 1.11.2.G1 Financial Life Cycle Stages Stage 1: Basic Wealth Protection Focus on building financial security Stage 3 Stage 2: Wealth Accumulation Stage 2 Head of household has reached peak Stage 1 earning years, is accumulating wealth, and approaching retirement Which stage of the Stage 3: Wealth Distribution financial life cycle are The consumption of wealth, usually you in? during retirement © Family Economics & Financial Education – Revised May 2011 – Introduction to Finance Unit – Life Cycle of Financial Planning – Slide 10 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
  • 11. 1.11.2.G1 What types of financial planning would occur during each stage of the financial life cycle? Stage 1: Basic Wealth Protection (protecting your future) •Develop emergency savings •Develop positive credit •Begin investing in retirement Stage 3 •Purchase insurance Stage 2 Stage 2: Wealth Accumulation Stage 1 (giving it to yourself) •Investing to build wealth •Purchasing a home Stage 3: Wealth Distribution (giving it to your chosen ones) •Estate planning © Family Economics & Financial Education – Revised May 2011 – Introduction to Finance Unit – Life Cycle of Financial Planning – Slide 11 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
  • 12. 1.11.2.G1 Typical Financial Life Cycle Stage 3 What factors or events in a Stage 2 person’s life could cause the Stage 1 typical financial life cycle to change or vary? © Family Economics & Financial Education – Revised May 2011 – Introduction to Finance Unit – Life Cycle of Financial Planning – Slide 12 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
  • 13. 1.11.2.G1 Financial Life Cycle Events Activity People in certain age groups tend to have similar financial life cycle needs Determine what types of financial planning may occur for each age group. © Family Economics & Financial Education – Revised May 2011 – Introduction to Finance Unit – Life Cycle of Financial Planning – Slide 13 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
  • 14. 1.11.2.G1 Traditional Age Group Financial Planning Needs – Developing a plan for eventual independence – Preparing for career – Evaluating future financial needs and resources – Exploring financial systems – banks, etc. – Developing a personal system of record keeping © Family Economics & Financial Education – Revised May 2011 – Introduction to Finance Unit – Life Cycle of Financial Planning – Slide 14 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
  • 15. 1.11.2.G1 Traditional Age Group Financial Planning Needs – Establishing a household – Training for a career – Earning financial independence – Determining insurance needs – Establishing credit – Establishing savings – Creating a spending plan – Begin investing in retirement – Developing a personal financial identity © Family Economics & Financial Education – Revised May 2011 – Introduction to Finance Unit – Life Cycle of Financial Planning – Slide 15 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
  • 16. 1.11.2.G1 Traditional Age Group Financial Planning Needs – Child-bearing – Child-raising – Expanding career goals – Investing in retirement – Managing increased need for credit – Discussing and managing additional insurance needs – Creating a will – Starting an education fund for children © Family Economics & Financial Education – Revised May 2011 – Introduction to Finance Unit – Life Cycle of Financial Planning – Slide 16 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
  • 17. 1.11.2.G1 Traditional Age Group Financial Planning Needs – Upgrading career training – Developing protection needs for head-of-household – Investing in retirement – Establishing retirement goals – Building on children’s education fund – Need for greater income due to expanding needs © Family Economics & Financial Education – Revised May 2011 – Introduction to Finance Unit – Life Cycle of Financial Planning – Slide 17 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
  • 18. 1.11.2.G1 Traditional Age Group Financial Planning Needs – Assisting with higher education for children – Investing in retirement – Updating retirement goals and plans – Developing estate plans © Family Economics & Financial Education – Revised May 2011 – Introduction to Finance Unit – Life Cycle of Financial Planning – Slide 18 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
  • 19. 1.11.2.G1 Traditional Age Group Financial Planning Needs – Consolidating assets – Re-evaluating property transfer – Investing in retirement – Evaluating expenses for retirement and current housing – Planning future security – Investigating retirement part-time income or volunteer work – Meeting responsibilities of ageing parents – Planning for long-term care insurance and medical care in retirement © Family Economics & Financial Education – Revised May 2011 – Introduction to Finance Unit – Life Cycle of Financial Planning – Slide 19 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
  • 20. 1.11.2.G1 Traditional Age Group Financial Planning Needs – Re-evaluating and adjusting living conditions and spending as related to health and income – Adjusting insurance programs for increasing risks – Finalizing will or letter of last instructions – Acquiring assistance in management of personal and financial affairs – Finalizing estate plans © Family Economics & Financial Education – Revised May 2011 – Introduction to Finance Unit – Life Cycle of Financial Planning – Slide 20 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
  • 21. 1.11.2.G1 True or False? Everyone has the same financial plan FALSE! Individualize your financial plan but consider the typical life cycle needs for every age group. © Family Economics & Financial Education – Revised May 2011 – Introduction to Finance Unit – Life Cycle of Financial Planning – Slide 21 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona