Introduction

Personal finance is comprised of a wide variety of subjects. Though some of the topics and concepts may be unfamiliar, everyone can master the fundamentals. So you can make the most of your money now and be well prepared for the future, this program covers the basic elements of financial planning, including:

• Begin Financial Planning
• Finance Your Goals – Retirement and Higher Education
• Manage Your Taxes
• Protect Yourself With Insurance
• Plan For Your Estate

Chapter 1: Begin Financial Planning

Financial planning means preparing for your future by making informed money management decisions in the present. There are many tools available that will help you achieve the security you desire – but none are as important as simply taking a steady and committed approach to funding your long-term goals.

Understanding Today’s Finances
The first step toward planning for your financial future is to understand where you are today.

• Net Worth. In order to know how much you need to save to achieve your goals, you need to know how much you already have. A net worth statement will give you that figure. To calculate your net worth, subtract the total of your liabilities from the total of your assets.

• Cash flow. Knowing the amount of money you have coming in and going out is vital for planning purposes. It will help you reduce budgetary waste (only after you see where you are spending your money can you make powerful changes to your spending and savings habits) and provide you with a figure for savings and investments.

Establishing Goals
Identifying clear, achievable goals is crucial to a personal finance plan. A financial goal is an exact amount of money needed for a specific purchase or service, at a definite date. By making the goal precise, you’ll be able to track your progress and keep going when you may be tempted to give up.

Planning Assistance
Part of financial planning is getting the right help. Your financial institution may have professional advisors on staff – and since their services are free to members, they are great place to start.

There are many different types of financial advisors, each specializing in various areas of money management:

• Certified Financial Planners complete a rigorous two-year course and pass a comprehensive board exam. They can offer tax planning, estate planning, portfolio management and insurance advising. Some planners earn all their income from commissions, while others charge a flat fee.

• Chartered Financial Consultants/Chartered Life Underwriters complete a three-year course. They can offer services in tax, estate, insurance, financial and investment management.

• Certified Public Accountants often offer financial services. Those with the Personal Financial Specialist designation have at least 250 hours of yearly experience in financial planning and have passed an exam.

• Enrolled Agents work exclusively in the field of taxation. In addition to preparing your return, they can help with tax planning, represent you at audits, and negotiate with the IRS on your behalf.

• Certified Consumer Credit Counselors are certified by the National Foundation for Consumer Credit and offer assistance with budgeting and money management, as well as advice on how to get out of debt and how to use credit wisely.

• Brokers are registered representatives that buy and sell securities on behalf of their clients for a commission. Many financial planners are also brokers for one or more investment firms and earn a commission on the sale of investment products.