Page 553 - Introduction to Business

CHAPTER 15 Personal Financial Planning 527

EXHIBIT 15.3
Financial Planning Specialist Designations

Designation Sponsoring Organization

Certified Financial Certified Financial Planner Board of Standards
Planner (CFP) 1700 Broadway, Suite 2100
Denver, CO 80290
http://www.cfp.net
Chartered Financial Consultant American College Student Services
(ChFC) 270 Bryn Mawr
Bryn Mawr, PA 19010
http://www.amercall.edu
CPA, Personal Financial American Institute of Certified Public
Specialist (PFS) Accountants
1211 Avenue of the Americas
New York, NY 10036
http://www.aicpa.org

reality What is your net worth? Do you have any short-term or long-term
CH ECK plans to improve your net worth?

Managing Income

LEARNING OBJECTIVE 3
Describe the budgeting process.
Managing income requires planning and controlling the use of your financial
resources so that you can meet current and future financial needs. Managing
income includes budgeting, checkbook management, use of financial planning
software, locating information on the Web, and acquiring appropriate insurance.

Budgeting
A cash flow budget is necessary to gain control of your finances and ultimately to
achieve financial success. The motivation for maintaining and sticking to a budget
is that it enables you to cover all your bills by paying according to a cash manage-
ment agenda and to have some money left over for savings and investment. Proper
saving and wise investments will enable you to prepare for your future needs. Cash cash flow The flow of money into
flow is the term used to describe the flow of money into and out of your accounts— (inflows) and out of (outflows) accounts
cash inflows and outflows. A cash flow budget shows what came in and what went cash flow budget A budget that shows
what cash came in and what went out
out of your bank account during the selected time period. Cash inflows, or sources
during a selected time period
of cash, include resources such as employment and investment income. Cash out-
flows, or uses of cash, include purchases of necessities and other items, charitable
contributions, and tax payments. Net cash inflow is the excess of total cash inflows net cash inflow The excess of total
over total cash outflows. cash inflows over total cash outflows
Preparing a cash flow budget begins with an evaluation of your historical
expenses. You can start by filling out the worksheet in Exhibit 15.4 (on p. 528) with
figures from the previous year to produce a cash flow budget for that year.
Second, prepare a projected cash flow budget for the coming year based on your
prior year’s figures, but make adjustments for any anticipated changes in income
and expenses for the coming year. Exhibit 15.5 shows some estimated expenses as

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