Summary FIN2602___Notes BEST FOR EXAM.

Learning outcomes STUDY UNIT 1- Personal Financial Planning pg 4-6 1. Explain the importance of personal financial planning 2. Recognise their position in the financial planning cycle 3. Identify the different steps in the personal financial planning process 4. Explain the advantages of personal financial planning 5. Recognise the different personal financial planning areas STUDY UNIT 2- the measurement and assessment of personal financial performance pg 6-9 6. Assess annual financial statements 7. Explain the relationship between an income statement and a personal budget 8. Recognise the principles of preparing a budget 9. Draw up their own household budget 10. Measure their own financial performance 11. Explain the importance of having a personal budget 12. Identify the advantages of keeping an effective household record system STUDY UNIT 3- the Time Value of Money pg 9 13. Explain the meaning of the time value of money 14. Demonstrate different calculations regarding the time value of money 15. Demonstrate the influence of time value on personal finances STUDY UNIT 4- Credit Planning pg 9-17 16. Explain the importance of credit planning 17. Identify the problems that result from making excessive use of credit 18. Explain how to apply for credit 19. Identify the steps involved in handling a debt crisis 20. Apply debt self-management 21. Evaluate banking services 22. Explain the functioning of credit services 23. Examine a credit agreement critically 24. Identify and quantify the different aspects of buying or selling a car 25. Explain the use of e-shopping and e-banking 26. Define micro lenders and the role of the NCR 27. Ensure that their name never appears on the credit information bureau's black list STUDY UNIT 7- Starting a Business: Entrepreneurship pg 17 28. Define what is meant by the concept “entrepreneur” 29. Describe a business opportunity 30. Explain the pitfalls associated with a family business 31. Evaluate the different forms of business ownership 32. Explain the outlay, content and advantages of a business plan 33. Explain different methods of financing a small business 34. Explain related matters such as location; registration; administration; insurance; employment; your bank; business problems; legal matters; business advisers; succession planning; e-business; business management and growth and importing and exporting STUDY UNIT 8- Buying a business pg 18 35. Evaluate an existing business enterprise as an investment opportunity 36. Assess the financial performance of an existing business 37. Draw up annual financial statements for a business (using various documents) 38. Identify problems associated with buying an existing business 39. Evaluate the purchase price of an existing business 40. Evaluate the location of a business in order to rent, buy, and build or to work from home STUDY UNIT 9- Buying a franchise pg 18-19 41. Define the concepts “Franchise”. ”Franchisor”, “franchisee” and “franchise package” MNF303-8 2 42. Evaluate a franchise opportunity 43. Explain how to finance a franchise STUDY UNIT 10- Estate Planning pg 19-26 44. Define the meaning of the concept “estate planning” 45. Explain the importance of timely and continuous estate planning 46. Identify the different steps in the estate planning process 47. Recognise estate-planning pitfalls and identify methods for avoiding them 48. Recognise the influence of their lifestyle on their estate planning 49. Explain the influence of lifestyle on personal finances 50. Identify the different steps in the administration of an estate (winding up) 51. Draw up a cohabitation agreement, an antenuptial contract, a will and a divorce settlement 52. Identify the uses of a trust 53. Explain the effect of a matrimonial property regime on estate planning and personal finances 54. Identify techniques for decreasing the size of their estate and avoiding paying estate duty STUDY UNIT 11- Investment planning pg 27- 55. Evaluate investments by means of general investment principles 56. Evaluate investments according to different investment criteria 57. Explain how to avoid investment pitfalls 58. Choose a broker 59. Explain the functioning of the different types of investment in both the money and the capital market 60. Apply different investment approaches 61. Evaluate ordinary shares, preference shares and fixed investment-bearing securities 62. Interpret share prices and other information in the newspapers 63. Analyse the meaning of the various economic indicators on television 64. Explain the functioning of retirement packages 65. Evaluate personal financial planning models STUDY UNIT 12- Buying a Dwelling Chpt 8 66. Explain the financial implications of buying a residence 67. Realise the importance of the decision to buy 68. Demonstrate some aspects regarding the value and valuation of a residence 69. Identify and quantify the cost items involved in buying a residence 70. Be aware of the Board and the Institute that regulate the conduct of estate agents 71. Explain the position of trust that exists between estate agents and their principals (the buyer or seller) 72. Identify what services estate agents offer in return for a commission 73. Identify the situations when estate agents are entitled to receive a commission 74. Define the various mandates that may arise between the seller(s) of a residence and an estate agent(s) 75. Explain under which circumstances you should make use of a particular type of mandate 76. Explain which parties (natural persons and legal persons) may or may not be involved in the purchase and sale of a residence 77. Identify the financial implications that the Rent Control Act may have for buyers and sellers 78. Identify some of the financing methods that may be used to buy a residence STUDY UNIT 14- Offshore Investments pg 79. Explain the reasons for making offshore investments 80. Identify the homework to be done before investing in foreign countries 81. Explain the different types of offshore investment 82. Illustrate the relationship between offshore investments and their estates STUDY UNIT 15- Protection planning pg 83. Identify and quantify the various risks a household is exposed to 84. Explain which financial products protect against which risks 85. Explain long-term, short-term, medical and business insurance MNF303-8 3 86. Explain the importance of protection planning STUDY UNIT 17- Retirement planning pg 87. Explain the importance of timeous retirement planning 88. Identify the different methods that may be used to provide for retirement 89. Explain the functioning, problems, advantages and disadvantages of the different methods 90. Identify many other very important retirement issues 91. List the many questions they have to ask themselves when they consider retiring MNF303-8 4 Study Unit 1: Personal financial planning ⇒ Uncertainty is created by the following factors: • Changing legislation • The development of new financial products • The influence of the media both as a marketing tool and an advisor ⇒ Personal financial planning consists of a number of different planning areas. Investment planning is one of those areas ⇒ Financial independence does not necessarily suggest great wealth, but rather that the individual has made optimum use of his or her income, irrespective of the level of that income ⇒ Reason for the increasing complexity of Personal financial planning: • Changing economic conditions • The changing political climate • Inflation • The large number of financial institutions • Advertisements in the media • A multitude of financial instruments and products • Conflicting financial advice ⇒ Household resources: assets, skills, trained persons, knowledge, money, equipment and entrepreneurial spirit ⇒ The financial function of an enterprise comprises the flow of funds to and from the enterprise. It consists of the acquisition of funds and the employment of funds in order to achieve the primary objective of the enterprise: maximum prosperity for the owners of the enterprise over the long term. ⇒ In a household, the financial function comprises the flow of funds to and from the household. Funds have to acquired and employed in order to achieve the primary objective of the household: to attain financial independence after retirement Management ⇒ Planning, organising, leading and controlling ⇒ Planning reduces risk and uncertainty and helps to avoid crisis management. It involves goal setting and the development of plans to attain these goals. Consider your financial strong and weak points, and the threats and opportunities in your environment ⇒ Organising involves the allocation of resources in order to execute the plans, the clarification of authority and responsibility and the division of work between household members ⇒ Leading: the person who manages the households money must also take the lead in financial matters ⇒ Controlling involves a comparison between the goals and the actual performance (results) of the individual or household. Concentrate on serious deviations only “Personal financial planning is the organisation of an individual’s financial and personal data for the purpose of developing a strategic plan to constructively manage income, assets and liabilities to meet near and long-term goals and objectives” “Personal financial planning involves the determination of immediate, short-, medium- and long term goals by means of a personal financial planning process based on your own identified lifestyle, phase of the lifecycle, risks and needs in all the various personal financial planning areas in order to be able to retire with financial independence” ⇒ The phase of the human life cycle: youthful years (20- 30); family tears (40-50); pre-retirements years (50-60); retirement years (55+) ⇒ A prerequisite for planning and a budget is an efficient system of household records in which all documentary evidence of income, expenses, agreements, guarantees, investments and loans are kept ⇒ Your financial needs (risks) differ: they are constant; increasing, decreasing, fluctuating, permanent, temporary or future ⇒ Risks: loss of income; loss of property; personal liability; business risks; estate duty; estate administration costs; retirement; estate planning; too much debt accumulated in pursuit of desir