FIN1 FTU - Stage 7

F1 – Project-Stage 7: Creating a Budget and Planning for the Unexpected TCHE322 Thomas (2009). Chapter 3 Lawrence et al (2011). Chapter 2 Tillery, S. M., & Tillery, T. N. (2017). Chapter 4 CFP Handbook (2015). Chapter 10 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 • Budget • Expect the unexpected Groupwork project activities • Dealing with the uncertainties • Budget allocation 4 Financial statements and budget Any uncertainty?? How could they affect the budget? Budget: a statement that estimates the financial resources and expenditures for a given period. Budgets are actually pro‐forma or forecasted cash‐flow statements that are used for the purpose of tracking actual expenses relative to the amount budgeted for them. 5 Make and Reconcile Budget Estimates Budget estimates Projected dollar amounts to receive or spend in a budgeting period. Take-home pay/disposable income Pay received after employer withholdings for taxes, insurance, and union dues. Discretionary income Money left over after necessities such as housing and food are paid for. 6