MONEY MANAGEMENT PHILOSOPHIES FOR GRADE 12 STUDENTS AND FOR THOSE WANTED TO KNOW HOW TO MANAGE A BUDGET.pptx

MONEY MANAGEMENT
PHILOSOPHIES
BUSINESS FINANCE

LEARNING COMPETENCY:
Enumerate money management philosophies(ABM_BF12-Ivo-p-
26)

OBJECTIVES: At the end of the lesson, the
students are expected to;
a. Define personal finance
b. Apply money management philosophies in real life situations
c. Discuss the good values that the different management
philosophies have given to manage personal and corporate
finances.

Personal Finance Definition
Personal finance includes all financial decisions and activities of
an individual including budgeting, insurance, mortgage planning,
savings and retirement planning. It involves analyzing current
financial positions, projecting short term and long-term funding
needs, and executing a plan to fulfil those needs considering
individual financial constraints. It is primarily dependent on one’s
earnings, cost of living, and personal goals and wants.

PERSONAL FINANCIAL PLANNING
PROCESS

A. OBJECTIVE SETTING
Quantify monetary objectives with definite time
frames.
Prioritize objectives
Examine these objectives with an individual’s
resources and limitation
Example:
A mom wants to have 1,000,000 pesos after 10 years for
her daughter’s education.

Data Gathering
Use surveys, questionnaires, and
interviews to gather quantitative and
qualitative information from the
individual.

• Quantitative – for assessing financial status
(investments, cash flow, liabilities)
• Qualitative – to identify individual’s goals and
objectives, lifestyles, risk-tolerance, etc.
Example: Interview the mom to know how much
savings she has and her current sources of
income.

c. Data Analysis
Analyze the individual’s financial position and cash flows.
Review legal papers (i.e. insurance policies, trust
agreements, wills and etc.)
Evaluate objectives vis-à-vis the individual’s resources
and economic conditions.
Example: Map the mom’s cash flow and compute her
required return to reach her target of 1 million pesos after
10 years.

d. Financial Plan Recommendation
Propose financial products
At this point, the individual can comment on
the proposed solutions
Example: Identify stocks, mutual funds or other
assets which generate the mom’s required return

e. Plan Implementation
Assist the individual in the execution of the
recommended financial plan.
Implementation may involve other entities so assist
the individual in dealing with the parties involved in
the execution of the financial plan.
Example: help the mom open an account so she can
invest in the recommended financial plan.

f. Plan Monitoring
Review the financial plan periodically to evaluate
changing market conditions ( economic conditions,
taxes, interest rates, etc.)
Evaluate the financial plan regularly to see if it
effectively meets the individual’s goals and objectives.
Example: Check regularly whether the fund is growing as
planned. Consider other alternative assets if performance
is not good.

Six Key Areas of Personal Financial
Planning
a. Financial Position
Understanding of personal resources by checking an individual’s net
worth and cash flow.
Net worth= assets less liabilities at a point in time.
Cash flow= expected sources of income less expected expenses
within a period of time.
Helps in determining the time frame to which personal goals
realistically be met.

b. Adequate Protection
Analysis of protection needed for unforeseen
risks.
Includes risk of liability, property, death,
disability, health and long-term care.
Some insurance plans enjoy some tax
benefits

c. Tax Planning
Management of when and how much taxes will be
paid.
Understanding possible tax incentives, deductions,
rebates, etc. can have a significant impact on
managing personal finances given the magnitude
of taxes paid by an individual.

d. Investment and Accumulation Goals
Planning on wealth accumulation for
large purchases such as house,
educational expenses, , investment for
retirement, etc.

e. Retirement Planning
Understanding the cost of retirement
Analysis of cash flows to come up with
investment plans that will meet the costs
of retirement in the future.

f. Estate Planning
Planning for disposition of one’s assets after
death.
Estate taxes paid to the government are huge,
so avoiding these taxes can significantly impact
one’s personal finances.

Money Management Philosophies
People who set aside time bases to create
a money management plan make them
financially successful and those who fail to
plan, most likely are the ones who are
always in need of money.

Basic Inputs in Preparing a Plan
1.Review Expenditures Incurred in the Past
2.The Significance of Controlling Expenditures
3.Think about the future

1. Devise a Budget
A budget is essentially a financial
roadmap that allows anybody to live within
their means, while having enough left over
to save for long-term goals. Having a budget
is the first mandatory step from which savvy
money management will evolve.

2. Create Emergency Fund
It’s important to ensure money is set aside
for rainy day fund like during emergencies or
sudden unemployment. The ideal safety net for
this fund is between three to six months worth
of living expenses.

3. Limit Incurring a Liability
Living within the available resources will limit
unnecessary liability or obligations. This will also
avoid any deviation of the budget and any
adjustments to the planned expenditures. But
incurring obligations top accumulate an asset ,
like buying a house on installment rather than
renting, is one of the exemptions to the rule.

4. Use Credit Cards Wisely
Acquiring credit cards is one of major traps for anyone
to get in trouble for recurring obligations. In most cases,
anybody is tempted to buy unnecessary things due to
availability of credit cards. Another loophole of using
credit card is that payment can be done on staggered
basis with interest rate stated on a monthly basis. In
reality, this term will yield to a higher interest rate (
monthly rate multiply by 12 months ) compared to the
prevailing interest rate.

5. Monitor Credit Score
Credit score is built and maintained through
credit cards spending. Monitoring credit scores
goes hand in hand with watching credit spending.
This is needed when obtaining an approval for
lease, mortgage or any other type of financing.
Factors that determine credit score include credit
holding period, payment history and credit to debt
ratio.

6. Plan and Save for Retirement
Retirement may seem like another lifetime away, but it
arrives much faster that expected. Based on suggestions
of experts, most people need to save more or less 80% of
their current salary for retirement purposes. There will be
more benefits if anybody will start saving for retirement
at a very young age. Setting aside money now for
retirement allows it to grow over the long term.

7. Family Consideration
Preparing for the future considers the family to
be left behind in case of any eventualities. An
insurance protection is not applicable for material
possessions ( car and house) but most especially
to one’s life. This is to ensure that assets are
protected and meets your family’s needs though
life’s major milestones.

8. Rewarding Oneself
Depriving oneself of the needed break is one
of the consequences of a strict financial
budgeting and planning. However, there is a
need to allow some reasonable rewards to
oneself at least once in a while. It can be a
vacation, purchase, or an occasional night in the
town to enjoy the fruits of hard labor. This is
simply taste of the financial independence for
working so hard.

MONEY MANAGEMENT PHILOSOPHIES FOR GRADE 12 STUDENTS AND FOR THOSE WANTED TO KNOW HOW TO MANAGE A BUDGET.pptx

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