Download Financial Planning Exam Study Guide - Prof. Ruth H. Lytton and more Study notes Financial Management in PDF only on Docsity! Exam 1 Suggested Study Concepts (be sure to bring your calculator) SMART (specific, measurable, achievable, realistic and trackable) goals Financial Life Cycle – what is the concept and how is used for planning? Purpose of financial planning – Why should everyone do it? Need a financial plan because it’s easier to spend than to save. Want a financial plan since it helps you achieve financial goals. Use financial planning, not to make more money, but to achieve goals. Control your finances or they will control you. What are common concerns in all financial plans? Some people are uncomfortable discussing financial matters, the “fear of finance.” Motivation and time is required to complete an accurate plan. Good record keeping is necessary both before and during the planning period. 15 Principles – Concepts not the number or exact title Case - Be able to calculate a Balance Sheet Be able to calculate an I & E Statement Be able to calculate Ratios – Debt – total liabilities / total assets - Month’s living expenses covered - monetary assets / month’s living expenses Others – Know by concept only Budgeting process – steps/purpose Time Value of $ applications - PV The amount a person would need to deposit today with a 5 percent interest rate to have $2000 in three years. PV of Annuity The amount a person planning for retirement would need to deposit today to be able to withdraw $6000 each year for 10 years from an account earning 6 percent. FV The future value of $400 in two years that earns 5 percent. FV of Annuity The future value of $1200 saved each year for 10 years earning 7 percent. Perpetuity - annuities that continue forever Rule of 72s – 72 / interest rate = amount of time it takes your money to double Income taxes (do NOT memorize numbers or income range restrictions/applications…just know that an income restriction or phase out may apply, such as for student loan interest as explained on page 104) o Tax Formula, filing status o Marginal Tax Bracket (MTB) o Problems to calculate taxable income, or the effect of MTB on taxes due o Definitions and examples (ones commonly identified in class) of adjustments, deductions, exemptions, and credits o Dependent or exemption test o Capital gains (long and short term; implications for taxes paid)
