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THE BPM HANDOUTS

Introduction

1. Concept and Meaning of Financial Literacy.

1.1. A process of acquiring the knowledge necessaryto understand concepts and principles related topersonal finance and of translating thisknowledge into SMART ACTION PLAN.

1.2. Knowledge of facts, concepts, principles, andtechnological tools that are fundamental to beingSMART about money. This leads to economic well-

being through informed judgments and decisions.

2. Aims of Financial Literacy.

2.1. To enhance ones ability to successfully handlethe more ambiguous and qualitative aspects ofthe day-to-day financial decision making in aninformed, proficient, and confident manner.

2.2. To help people to avoid or ameliorate thenegative consequences of poor financial decisionsthat otherwise might take years to overcome.

3. Adverse Effects of Lack of Financial Literacy.

3.1. Negative Cash Flow (Personalbankruptcy/insolvency)

3.2. Debt Trap3.3. Financial Dislocation of the Family Due to theUntimely Death of the Breadwinner

3.4. Lack or Absence of Fund in Emergency Situations3.5. Insufficient Retirement Income and Absence of

Long Term Care3.6. Unable to Preserve Estate

4. Obstacles to Financial Literacy

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4.1. Comfort Zone (job, career, business, lifestyle)4.2. Arrogance (professional, academic, financial:

omniscient, omnipotent)4.3. Absence of Personal Financial Planning4.4. No Time to Learn About Personal Finance

5. Meaning and Scope of Personal Finance.

5.1. The study of personal and family resourcesconsidered important in achieving financialsuccess.

5.2. It involves how people spend, save, protect, andinvest their financial resources.

5.3. It includes budgeting, cash flow management,debt management, risk management (protectionof income and healthcare, property and assets),investment, retirement and estate planning.

6. Concept of Financial Planning.

6.1. Financial planning is the process of developing

and implementing a coordinated series offinancial plans to achieve financial success.

6.2. It requires the application of financial knowledge,tools, strategies and tactics necessary for one toplan effectively and achieve personal financialsuccess.

7. Essential Components of Financial Planning

7.1. Specified Values that Underlie the Plan7.2. Explicitly Stated Financial Goals7.3. Logical and Consistent Financial Strategies

Values are fundamental beliefs about what isimportant, desirable and worthwhile. They serve as thebasis for financial goals as one considers some things

more important than others. We express our values, in

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part, by the ways we spend, save, and invest ourmoney.Financial Goals are the specific long-term and short-term objectives to be attained through financialplanning and management efforts. Goals should be

consistent with values. To serve as a rational basis forfinancial actions, they must be stated explicitly.

Financial goals should be specific both in terms of pesoamounts and the projected dates by which they are tobe achieved. Setting goals helps you visualize the gapbetween your current financial status.

Financial Strategies are pre-established plans of actionto be implemented in specific situations.

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8. The Six Financial Strategies are:

8.1. Increase Cash Flow8.2. Eliminate Debt8.3. Ensure Proper Protection8.4. Set Up Emergency Fund8.5. Build Long Term Asset8.6. Preserve Estate

9. Increase Cash Flow

9.1. Cash flow is a measurement of the differencebetween what we spend and what we earn.

9.2. Cash flow can have either a negative or a positivevalue. If our cash flow is positive it means that weare spending less than we are earning over time. Ifour cash flow is negative it means we are spending

more than we are earning over time.

9.3. For example, if you find yourself Php 1,000 short atthe end of the month, it means you've got anegative cash flow. If you've got an extra Php1,000 at the end of the month then you've got apositive cash flow.

9.4. Basic Rules in Increasing Cash Flow

- Pay Yourself First- Live Below Your Means-

9.5.

10.

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