Finance (Basic)
Ludek Benada
Department of Finance
Office 533
75970@mail.muni.cz

Personal Finance
qMonetary decisions of an individual (family).
qAnalyses how the individuals (family unit) obtain, budget, save and spend money.
qThe personal income could be allocated towards expenses, saving, debt repayment.

Sample budget
Category
Monthly amount
Annual amount
Percentage
Housing



Food



Automobile



Tax



Insurance



School



Medical



Clothing



Saving



Example of budged allocation
What happened if the total expanses are not equal to the total income?

The phases of personal finance by age
nPhase of low saving
nPhase of debt
nPhase of investment
nPhase of use accumulated wealth

The phases of personal finance by age
age
0
25
50
75
Part-time job, casual job
Employment, wedding
Purchase of a car
Own housing, mortgage
Child/children
Financing of child’s study
Financial planning for retirement
Repayment of mortgage
Retirement
Expenditure on personal health care

Personal financial planning
qAssessment
qSetting goals
qCreating a plan
qExecution
qMonitoring/Reassessment

Personal financial planning
Analysis of the financial situation
Definition of goals
Creation of financial plan
Execution
Monitoring/examination

Saving
qRegular payment over time
q
qThe task is to identify FV
Categories of saving:
§Long-term
§Short-term:
§Ahead a period
§After a period
§
o
o

Short-term Saving, ahead a period
S  ... total amount saved
m … number of deposits
x  … amount of money
i   … interest rate

Short-term Saving, after a period



Long-term Saving
a … annuity (a regular payment              of a same amount)


Combined Saving
Ahead a period
After a period ?

Retirement plan
Pension is a way to ensure a regular income for people, which are no longer earning a regular
income from employment.
Retirement plane (individuals, employers, unions, insurance companies, government).

The main types of income in Retirement plan
qImmediate income:
§Ahead a period
§After a period
qDeferred income
qIncome paid m-times a year
qPerpetual income
q
qThe task is to identify PV
q

Immediate Income
Ahead a period
v  … 1/(1+i)
D … present value of total income
After a period

Income paid m-times a year
Ahead a period
After a period

Deferred Income (ahead a period)
vk … postponement of income payment


Perpetual Income
Immediately
Deferred

Repayment plan
Consists of:
Debt, Annuity, Interest,  Amortization
Amortization of debt:
qEqual annuity
qUnequal annuity

Extra points
5 Points
For solved examples!
10 Points
For the complex example!

Thank you for your attention