Personal Finance

Personal Finance

Personal Finance is the 

financial management which an individual
or a family unit performs to budget, save,
and spend monetary resources over time,
in order to live comfortably, have financial
security and achieve financial goals taking
into account various financial risks and
future life events.
B. Goal setting is the foundation of personal
financial planning:
1. Identify and set clear goals

2. Financial Goals
• a. Short Term Goals are goals that you would like to
achieve within 3 months
b. Intermediate Term Goals are goals that you would
like to accomplish within 3 months to a year
c. Long Term Goals are goals that you would like to
accomplish over a year or longer
• 3. Goals should be:
• a. Specific - goals should be
clearly defined
• b. Measurable – there must be tangible evidence
that the goal is accomplished
• c. Attainable - goals should be achievable
• d.Realistic - goals should measure outcome, not
activities
• e. Time-limited - goals should be linked to a
time frame
There are Four Basic Economic
Activities of Consumers

• Earning

• Spending

• Saving

• Borrowing
 Earning
• Earning - gaining money by working, owning
a business, or receiving investment returns.
• Money gained from earning is called Earnings
 Factors Affecting EarningsAbility to Advance
Ability to Find
Career Choices • Type of career/job
• Type of career/job
Employment
• Education • Education level
• Place of • Job performance
level
employment • Employability • Economic
skills condition
• Prior job s
performance • Workplace trends
• Economic
conditions
and
• Workplace trends and opportunities
opportunities

Standard
Earnings
of
Living
 Responsible Earning

Involves realizing that career choices

greatly affect lifetime earnings and
standard of living and considering these
factors when making career choices.
 2.3.1.G
1

Education pays…
Income
Earning Ability

Education

Unemployment
© Take Charge Today – August 2013 – Invest in Yourself – Slide 5
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of
Arizona
 2.3.1.G
1

© Take Charge Today – August 2013 – Invest in Yourself – Slide 6

Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of
Arizona
 2.3.1.G
1

Average Annual Earnings based on

Educational Attainment

© Take Charge Today – August 2013 – Invest in Yourself – Slide 7

Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of
Arizona
 Spending
• Spending - using money to purchase goods & services.

• The way a person

spends money
determines the value
received and influences
the economy.
• Each purchase
contributes to the
demand for the product
or service purchased
To be financially responsible, you need to live
within your means. And to live within your
means, you must spend less than you make.
Spending every dime that you earn is simply
irresponsible unless you have a massive 
trust fund that is so flush with cash that you
will never outlive the earnings. 
Trade-offs and Opportunity Costs
• Because of scarcity, any time a choice is
made there are alternatives that are not
chosen.
• When making a choice, other alternatives
must be sacrificed.
• The highest-valued alternative that must be
given up when a choice is made is the
opportunity cost of the choice.
• The choice of one item while giving up another
is called a trade- off.
 Responsible spending
• Responsible spending includes researching and
planning purchases in advance and making wise
choices in light of opportunity costs and trade-offs that
apply
 Saving
• Saving --- putting aside money for later use.
• Money may be “saved” in a bank account or in a wallet.
• The form of savings used determines the financial return

“Later Uses” For Savings

• Emergencies
• Recurring expenses
• Future purchases
• Financial goals
• Retirement
Responsible Saving is forming the
habit of saving regularly and
finding the forms of saving that
yield high returns.
 Benefits of Saving
• Provide money for future purchases

• Can be used to earn income

• Produce a healthy economy

• Increase personal financial security

• Provide growth opportunities for business ventures

 Borrowing
• Borrowing --- obtaining money, goods,
or services at present in exchange for
the promise of future payment .
Examples of Borrowing

Buying with a Credit Card

Buying on Installment
Payday Loans
Cash Advances
Layaway Purchases
 Reasons for Borrowing

• Major purchases
• Emergencies
• Convenience
• Prepare for future goals
• Take advantage of good sales/offers
Responsible borrowing
means borrowing only what
can be paid back when due.
 “Personal financial planning is essential
if we want to improve our standard of
living, minimize the likelihood of
financial disasters,  invest optimally, and
accumulate sufficient wealth over time,”

- Dr. Koh Seng Kee and

- Dr. Fong Wai Mun
in their book,
“Personal Financial Planning.”
“All we have been talking about are
things that money can buy…
But in our journey to financial
independence, let us not lose
sight of those that money
cannot buy ”
 References:

• https://en.wikipedia.org/wiki/Personal_finance
• https://www.slideshare.net/deborahburns/personal-f
inance-101-ppt
• https://slideplayer.com/slide/5970245/