The process of planning your spending, financing, and investing to optimize your financial situation.

is mostly about realising personal financial goals, whether it’s saving enough for short-term financial needs, planning for retirement, or saving for your child’s college education. Mostly, it depends on your income, expenses, leaving requirements, and individual goals, and the plan you make to fulfill those goals within your financial constraints.

A plan that specifies your financial goals and describes the spending, financing, and investing plans that are intended to achieve those goals.

is a comprehensive picture of your current finances, your financial goals and any strategies you’ve set to achieve those goals.

should include details about your cash flow, savings, debt, investments, insurance and any other elements of your financial life.

Components of a Financial Plan You can benefit from building your own financial plan, which consists of the following personal finance components:

(also referred to as budgeting) is the process of forecasting future expenses and savings. It requires you to determine how you spend money, the amount of money to spend, and how much to save. Your spending decisions are critical because they determine how much of your income can be used for other purposes.

The first step in budget planning is to evaluate your current financial position by _______

Your ___ is the value of what you own minus the value of what you owe.

You can measure your wealth by your ___

Many financial decisions are affected by ____, as some forms of income are taxed at a higher rate than others.

By understanding how your alternative financial choices would be affected by ___, you can make financial decisions that have the most favorable effect on your cash flows.

You need to have ___, or _____ to cover any short-term cash needs.

access the funds to cover any short-term cash needs.

decisions regarding how much money to retain in a liquid form and how to allocate the funds among short-term investment instruments.

decisions regarding how much credit to obtain to support your spending and which sources of credit to use.

are arguably needed to finance large expenditures, such as the payment of college tuition or the purchase of a car or a home

Managing loans includes

To protect your assets you can conduct ________, which determines the types and amount of insurance that you need

___ protect your assets

limits your potential medical expenses.

protect your income.

Any funds that you have beyond what you need to maintain liquidity should be invested.

Because these funds normally are not used to satisfy your liquidity needs, they can be invested with the primary objective of earning a ___.

Potential investments include

You must determine how much of your funds you wish to allocate toward investments and what types of investments you wish to consider

Most investments are subject to risk (uncertainty surrounding their potential return), so you need to manage them so that your risk is limited to a __\.

involves determining how much money you should set aside each year for retirement and how you should invest those funds.

must begin well before you retire, so that you can accumulate sufficient money to invest and support yourself after you retire.

Money contributed to various kinds of retirement plans is _____ until it is withdrawn from the retirement account.

is the act of planning how your wealth will be distributed before or upon your death

protects your wealth against unnecessary taxes and ensures that your wealth is distributed in the manner that you desire.