Lesson 2: Life Cycle of Financial Planning and Personal Finance

Question 1

how many stages are there in the life cycle of financial planning

Answer 1

4

Question 2

who proposed the life cycle of financial planning

Answer 2

brown and reilly

Question 3

stages in the life cycle of financial planning

Answer 3

early career, mid-career, late career, retirement stage

Question 4

early career stage is also known as

Answer 4

accumulation phase

Question 5

mid career stage is also known as

Answer 5

consolidation phase

Question 6

late career stage is also known as

Answer 6

spending phase

Question 7

retirement stage is also known as

Answer 7

distribution phase

Question 8

in this stage, individuals are typically starting their careers, possibly still in school or early in their professional life

Answer 8

early career stage

Question 9

financial priorities in early career stage

Answer 9

paying off student loans, start saving for retirement, establsihing emergency fund, buying first home

Question 10

the emphasis is on laying the foundation for future financial security

Answer 10

early career stage

Question 11

during this stage, individuals are typically in the middle of their careers, possibly with increased income and more financial responsibilities

Answer 11

mid-career stage

Question 12

financial goals in mid-career stage

Answer 12

saving for children’s education, advancing careers, paying off larger debts (e.g. mortgage), continue saving for retirement

Question 13

this stage often involves balancing current financial needs with long-term goals

Answer 13

mid-career stage

Question 14

as individuals approach the retirement age, they enter the

Answer 14

late career stage

Question 15

financial priorities of late career stage

Answer 15

maximizing retirement savings, planning healthcare costs in retirement, downsizing/transitioning to more flexible work arrangement

Question 16

this stage is crucial for ensuring that retirement savings are sufficient to support a comfortable retirement lifestyle

Answer 16

late career stage

Question 17

once individuals retire, they enter the

Answer 17

retirement stage

Question 18

focus in the retirement stage

Answer 18

managing retirement income, healthcare costs, leaving a legacy for heirs

Question 19

this stage requires careful planning to ensure that retirement savings last throughout retirement and that individuals can maintain their desired standard of living

Answer 19

retirement stage

Question 20

It is a term that covers managing your
money as well as saving and investing.

Answer 20

personal finance

Question 21

Personal finance is about

Answer 21

personal financial goals (short or long term)

Question 22

Financially free =

Answer 22

successful

Question 23

This refers to a source of cash
inflow that an individual receives
and then uses to support
themselves and their family.

Answer 23

income

Question 24

Common sources of income are

Answer 24

salaries, bonuses, hourly wages, pensions, and dividends

Question 25

These sources of income all generate cash that an individual can use to either

Answer 25

spend, save, invest

Question 26

It includes all types of expenses an individual incurs related to buying goods and services or anything that is consumable

Answer 26

spending

Question 27

two categories of spending

Answer 27

cash or credit

Question 28

spending paid for with cash on hand

Answer 28

cash

Question 29

spending paid for with borrowing money

Answer 29

credit

Question 30

The majority of most people’s income is allocated to

Answer 30

spending

Question 31

Common sources of spending are:

Answer 31

rent, mortgage payment, taxes, food, entertainment, travel, credit card payments

Question 32

If expenses are greater than income, the individual has a

Answer 32

deficit

Question 33

It refers to excess cash that is retained for future investing or spending.

Answer 33

saving

Question 34

If there is a surplus between what a person earns as income and what they spend, the difference can be directed towards

Answer 34

savings or investments

Question 35

Common forms of savings include:

Answer 35

physical cash, savings bank acc, checking bank acc, money market securities

Question 36

Most people keep at least some savings to

Answer 36

manage their cash flow and the short-term difference between their income and expenses

Question 37

Having too much savings, however, can actually be viewed as a bad thing since

Answer 37

it earns little to no return compared to investments

Question 38

It relates to the purchase of assets that are expected to generate a rate of return, with the hope that over time the individual will receive back more money than they originally invested.

Answer 38

investing

Question 39

investing carries

Answer 39

risk

Question 40

not all assets actually end up producing a positive rate of return.

Answer 40

risk

Question 41

This is where we see the relationship between risk and return

Answer 41

investing

Question 42

Common forms of investing include

Answer 42

stocks, bonds, mutual funds, real estate, private companies, commodities, art

Question 43

the most complicated area of personal finance and is one of the areas where people get the most professional advice.

Answer 43

investing

Question 44

There are vast differences in risk and reward between different investments, and most people seek help with this area of their financial plan

Answer 44

investing

Question 45

refers to a wide range of products that can be used to guard against an unforeseen and adverse event.

Answer 45

personal protection

Question 46

Common protection products include:

Answer 46

life & health insurance; estate planning

Question 47

This is another area of personal finance where people typically seek professional advice and which can become quite complicated.

Answer 47

protection

Question 48

There is a whole series of analysis that needs to be done to properly assess an individual’s insurance and estate planning needs.

Answer 48

protection

Question 49

refers to the management of an individuals financial decisions, activities, and resources

Answer 49

personal finance

Question 50

it involves budgeting, saving, investing, and planning for the future

Answer 50

personal finance

Question 51

6 steps for personal financial planning

Answer 51

income mgmt; expense mgmt; risk mgmt and insurance; savings and investments; debt mgmt, retirement planning

Question 52

Involves understanding and effectively managing various sources of income.

Answer 52

income managemnt

Question 53

This includes optimizing your main salary, exploring additional income streams, and ensuring a stable cash flow for financial planning.

Answer 53

income managemnt

Question 54

Focuses on tracking, controlling, and optimizing spending habits.

Answer 54

expense managemnet

Question 55

Developing a detailed budget helps identify discretionary and nondiscretionary expenses, allowing for strategic allocation of funds towards savings and investments.

Answer 55

expense managemnt

Question 56

Involves protecting against unexpected events through insurance coverage.

Answer 56

risk management and insurance

Question 57

dequate insurance, such as health, life, and property insurance, safeguards against financial setbacks, providing a sense of security.

Answer 57

risk management and insurance

Question 58

-Encompasses setting aside money for shortterm needs (savings) and long-term goals (investments).

Answer 58

savings and investment

Question 59

short-term needs = long term needs =

Answer 59

savings investment

Question 60

Balancing risk, diversifying investments, and aligning strategies with financial goals are crucial for wealth accumulation and growth

Answer 60

savings and investments

Question 61

Involves handling and repaying debts responsibly.

Answer 61

debt management

Question 62

Prioritizing high-interest debts, exploring debt consolidation options, and maintaining a healthy debt-toincome ratio contribute to financial well-being.

Answer 62

debt management

Question 63

Focuses on preparing for financial needs during retirement through savings and investments.

Answer 63

retirement planning

Question 64

Evaluating retirement goals, estimating expenses, and selecting appropriate retirement accounts are key components of ensuring a comfortable and secure retirement.

Answer 64

retirement planning

Question 65

10 basic principles of personal finances

Answer 65

set clear financial goals; create and follow a budget; emergency fund; debt managemnet; save and invest regularly, diversification in investments; insurance coverage; retirement planning; continuous learning; review and adjust

Question 66

Establishing specific and achievable shortterm and long-term financial objectives provides a roadmap for effective financial planning.

Answer 66

set clear financial goals

Question 67

helps track income, control expenses, and allocate funds wisely, ensuring financial resources are used efficiently

Answer 67

create and follow a budget

Question 68

Building a reserve for unexpected expenses provides a financial safety net, reducing the impact of unforeseen events on your overall financial health.

Answer 68

emergency fund

Question 69

Responsible handling of debt, prioritizing highinterest loans, and avoiding unnecessary debt contribute to longterm financial stability.

Answer 69

debt management

Question 70

Consistent savings and investments, aligned with financial goals and risk tolerance, promote wealth accumulation and financial growth over time

Answer 70

save and invest regularly

Question 71

Spreading investments across various asset classes helps manage risk, ensuring that the performance of one investment doesn't disproportionately affect your overall portfolio.

Answer 71

diversification in investments

Question 72

Adequate insurance, including health, life, and property insurance, protects against unexpected financial burdens, providing peace of mind.

Answer 72

insurance coverage

Question 73

Planning for retirement early, estimating future expenses, and contributing to retirement accounts ensure financial security during your post-working years.

Answer 73

retirement planning

Question 74

Staying informed about financial trends, investment options, and economic changes empowers individuals to make informed and strategic financial decisions

Answer 74

continuous learning

Question 75

Regularly reviewing your financial plan, adjusting goals based on life changes, and adapting strategies to economic conditions contribute to a dynamic and effective personal finance approach.

Answer 75

review and adjust