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Cake and Personal Finance: An Introduction to Basic Financial Planning

By Jill Sabitsana January 27, 2013 Slice, High Street, Taguig

All financial decisions and activities of an individual, this could include budgeting, insurance, savings, investing, debt servicing, mortgages and more. Financial planning generally involves analyzing your current financial position and predicting short-term and long-term needs. (Source: Investopedia)

How you manage your resources and grow your net worth.

Get your financial house in order 1. Face the music 2. Look out for No. 1 3. Grow your money

How much do you earn per month? How much do you spend? Track all of your expenses for the next 2-3 months. List down EVERYTHING. Be honest. You will not be judged :)

Assess your spending pattern. See what you can improve on. - Daily coffee fix -Eating out -Commuting -Shopping -Travelling

Pay off high interest debts ASAP.

Get your financial house in order 1. Face the music 2. Look out for No. 1 3. Grow your money

A. Emergency Funds B. Life Insurance C. Health Insurance

Emergency funds- 3-6 months worth of expenses stashed in a bank account - to answer life's many surprises - to provide you with confidence when you start investing

Examples of emergencies: 1. Losing your job 2. Car repairs 3. House repairs 4. Medical emergency 5. Death in the family

Life Insurance- Protection against the loss of income in the event that the insured passes away. The named beneficiary receives the proceeds and is thereby safeguarded from the financial impact of the death of the insured.

You need life insurance if someone is dependent on your income. Life insurance can be an investment, but a very poor one.

Two types of life insurance: (1) Term and (2) Whole

Term Insurance is straight up insurance with no frills. You croak, your beneficiary gets the proceeds. That's all there is to it. Whole Life Insurance combines a term policy with an investment aspect.

Cash Surrender Value or Fund Value Total Premium paid since May 24, 2011- Php63,000 Cash Surrender ValuePhp38,960

Health Insurance

Get your financial house in order 1. Face the music 2. Look out for No. 1 3. Grow your money

Short term (1-5 years)= vacation, house equity, wedding - low risk= bonds, cash deposit, insurance, mutual funds, treasury bills Medium term (5-10 years)= house payment, early retirement - medium risk= business venture, MLM, mutual funds, real estate, stocks. Long term (10 years above)= retirement, education fund - high risk= business venture, forex, real estate, stocks

Mutual Funds / Unit Investment Trust Funds (UITF) pooled funds invested in securities and professionally managed by a fund manager (or the bank's trust department when it comes to UITFs)

Types of mutual funds A) Bond Funds (low risk) B) Stock Funds (high risk) C) Balanced Funds (medium risk)

Stocks: (1) Stock trading (2) Stock investing

short term vs long term technical vs fundamental high stock price vs low stock price for experts vs everyone can participate

Peso cost averaging- investment strategy that takes the form of investing equal monetary amounts regularly and periodically over specific time periods in a particular investment or portfolio. Advantages: 1) Buy more when prices are low, less when prices are high. 2) Lower average cost per share over time.

Summary: 1) Personal finance is how you manage your resources and work them in a way to increase your net worth. 2) Before investing, protect yourself first by having an emergency fund. 3) Get life insurance only if you have dependents. 4) Choose term over whole and invest the difference. 5) Know your financial goals and let these guide you as to what vehicles to invest in. 6) Keep reading and increasing your knowledge on personal finance.

Thank you!

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