Exam 1: The Financial Planning Process

Laticia is twenty-two years old and she has all of her savings in a Certificate of Deposit at the bank that currently pays an annual 3 percent yield. The account is protected by the FDIC so it is virtually risk free. She hopes to use her savings for a down payment on a new house in ten years. Inflation in house prices in her area has averaged 5 percent per year. What financial principle from Chapter One does she need to pay better attention to?

Describe the five steps in the personal financial planning process.

What aspect of financial planning might you discuss with a friend who buys fancy coffee drinks twice a day, visits the mall at least once a week for recreational shopping, and prefers impulse buying to carefully researched purchasing?

Based on the Life Cycle of Financial Planning, when would be a good time to review and possibly adjust an effective financial plan?

The amount of current income that you earn today isn't relevant to setting your long term goals for the future.

Education and specialized skills required for a job are important determinants of the income potential associated with that job.

What should you do with your goals on a frequent basis throughout your lifetime?

Elaborate upon the four common concerns that should guide all financial plans.

An economic condition in which rising prices reduce the purchasing power of money is termed

While reviewing your current financial plan, you discover that you most likely won't achieve your long term financial goals. What should you do now?

Which of the following statements applies to obtaining an undergraduate college degree?

Differentiate between short-term, intermediate, and long-term goals. Give examples.

What piece of advice might you give to someone for whom the act of saving is an afterthought?

Personal financial planning can help you to

Which of the following is outlined in the text as reason(s) why many people do not have an adequate financial plan?

What is the significance of the financial life cycle?

Suppose that you just completed your first year of college with $11,000 in loans and plan to borrow the maximum each year from now until graduation. You have never accounted for the way you spend your money, do not have a budget, and want to insure that you will be able to repay your loans after college. What is the most important thing you can do right now?

Chapter 1 discusses ten principles that form the foundation of personal finance. The principle that considers the fact that one expects to earn additional return for increasing investment risk is the ________ principle.

Which of the following typically occur(s) during stage one of the financial life cycle?

The term that considers having money readily available when you need it is the concept of