Objectives
Part I Financial Decision Making and its Environment
1. Planning and Decision Making (See also objectives in interest handout).
After studying this section, you should be able to:
Explain the difference between protective goals and attain-
ment goals.
Explain the process of setting goals and converting them into objectives and planned actions.
Set your own goals and objectives and plan how to accomplish them.
Describe the segments of our personal financial statement form, including the three segments into which the net worth section of it should be divided. Prepare a financial statement for someone using our form.
Describe, calculate, and evaluate ratios which might be used to judge someone's financial position.
Identify the elements of the decision process and what makes a decision good.
Define each of the following terms: rate of return, after- tax rate, real rate of return, after-tax real rate of return of return, present value, opportunity cost, implicit income, implicit rate of return, marginal rate of return, marginal tax rate, risk.
Calculate a person's marginal rate of return, after-tax rate of return, real rate of return, and after-tax real rate of return, given information on income or gain, tax status, inflation, and funds to be committed.
2. Thinking About the Future
After studying this section, you should be able to:
Describe the philosophies which influence how people think
about the future. contd
Describe the major trends which are likely to shape the future.
Define "scenario" in our financial planning context
Tell how your financial planning should take into account the trends or scenarios you think possible and your circumstances and changes in circumstances over time.
3. Analyzing the Economy
After studying this section you should be able to:
Outline the phases of the business cycle and how each would affect your financial planning.
Briefly explain the measurement, causes, and effects of inflation.
Describe three indicators used to measure where the economy is in the business cycle and explain how they are used.
Cite sources for the economic and financial data which you need.
4. Understanding Taxes
After studying this section, you should be able to:
Describe the nature of the Federal Income Tax System
Explain the effects of the progressive tax rate structure, including the difference between marginal and average rates, the marriage penalty, and the interaction of the tax structure with inflation.
Outline the procedure for calculating taxable income and the income tax due.
Calculate taxes due for someone whose tax situation is
simple.
Define: gross income, adjusted gross income, itemized deduc- tion, standard deduction, personal exemption, exclusions, tax credits, tax shelter, and the various tax forms we may deal with.
Describe the techniques which you may be able to use to
minimize your tax burden.