FIN1 FTU - Stage 6

F1 – Project-Stage 6: Evaluate Current Wealth TCHE322 Lawrence et al(2011). Chapter 2 Tillery & Tillery (2017). Chapter 2 Thomas (2009). Chapter 3 1 Personal finance planning Personal finance planning process 1. Define financial goals. 2. Develop financial plans and strategies to achieve goals. 3. Implement financial plans and strategies. 4. Periodically develop and implement budgets to monitor and control process toward goals. 5. Use financial statement to evaluate results of plans and budgets, taking corrective action as required. 6. Redefine goals and revise plans and strategies as personal circumstances change. Essential Information of personal financial plans * 1. A summary of the goals 2. Significant assumptions and justification 3. Estimates 4. Recommendations 5. A description of limitations on the work performed 6. The recommendations in the engagement should contain qualifications to the recommendations if the effects of certain planning areas on the client’s overall financial picture were not considered. * Adapted from Paragraph .35, Statement on Standards in Personal Financial Planning Services No. 1 3 Schedule of lectures Project topic covered • Financial statements • Ratio analysis Groupwork project activities • Prepare (i) Balance sheet; (ii) Income and Expense/Cash flow Statement • Evaluate current financial situation 4 Financial statements Serve as planning tools that are essential to develop and monitor personal financial plans. Balance sheet • Describes a person’s financial position at a given time • A personal financial statement is: a listing of everything owned or owed presented in a uniform way so that the user of the statement can understand it. (AICPA Personal Financial Statements Guide) Total assets = Total liabilities + net worth Net worth = Total assets - total liabilities Income and expenses statement/cash-flow statement • Prepared on a cash basis • Cash basis: Only transactions involving actual cash inflows or actual cash outlays are recorded 5 From: Business world online 6