RONAR MORALES

BSBA MKT 3A
PROF. SHIELAMARIE POLINTAN
PERSONAL FINANCE
SATURDAY / 8:00AM-10:00AM

FINAL EXAM

1. What is financial well-being?

• For me, financial well-being could be defined as having a healthy and balanced
relationship with money that allows you to meet your financial goals and live a
fulfilling life. Like having enough income to cover your expenses, save for the
future and handle unexpected financial challenges without feeling overwhelmed.
2. What are the advisable money habits?
• Budgeting
» It is earmarked for expenses, for example paying for electricity, water, house and
so on.
• Savings
» This helps an individual to avoid wasting money on unnecessary things. That's
why the piggy bank became fashionable to save it and use it in important situations
such as calamities or diseases.
• Investing
» This is doing something with the goal of making money in the future or in other
words, making money circulate in a business so that even if you lose your job, at
least you have an investment source.
3. Enumerate and discuss the steps in achieving personal financial success?
• Set Financial Goals
» It is also a way of savings but it is reserved for the things we want to get such as
our own house and lot, nice car etc.
• Create a Budget
» Budgeting is an example of a receipt where you can see what you have spent and
where your money is going. Allocating funds for personal expenses does not help
us to develop because if we budget the things that will be spent, we can somehow
handle what may be a problem.
• Save and Invest
» This is a way in which we can help save the income and grow it further by
investing the income in a business.
• Reduce Debt
» High-interest debt can be a major obstacle to financial success. Make a plan to
pay off your debts, starting with the ones with the highest interest rates. Consider
consolidating your debts or negotiating with creditors for better terms. Avoid
taking on new debt unless necessary.
• Develop Financial Literacy
» Educate yourself about personal finance. Learn about budgeting, investing, taxes,
and other financial concepts. Stay updated on current trends and strategies. The
more you know, the better equipped you will be to make informed financial
decisions.
• Increase Income
» Look for ways to increase your income. This could involve asking for a raise,
pursuing a higher-paying job, starting a side business, or investing in your skills
and education. Increasing your income will provide more opportunities for saving
and investing.
• Protect Your Finances
» Take steps to protect your financial well-being. This includes having insurance
coverage for health, property, and life. Create an emergency fund to handle
unexpected expenses. Regularly review your financial accounts and monitor for
any suspicious activity.
• Seek Professional Advice
» Consider consulting with a financial advisor or planner. They can provide
personalized guidance based on your specific situation and goals. A professional
can help you create a comprehensive financial plan and provide valuable insights.
4. What is the time value of money?
• The time value of money is based on my understanding that there is an
opportunity cost associated with the use of money. By having money today, you
have the ability to invest it or use it for various purposes, such as paying off debt,
making purchases, or saving for the future. On the other hand, if you receive the
same amount of money in the future, you lose the potential benefits and
opportunities that could have been gained by having that money earlier.
5. Enumerate and discuss the steps in career planning?
• Self-Assessment
» Start by assessing yourself, including your skills, interests, values, and
personality traits. Reflect on your strengths, weaknesses, and what motivates you.
This self-awareness will help you identify career paths that align with your abilities
and passions.
• Explore Career Options
» Research and explore different career options that match your interests and skills.
Use resources like career websites, job boards, informational interviews, and
professional networks to gather information about various industries, roles, and job
prospects. Consider factors such as job growth, salary potential, work-life balance,
and personal fulfillment.
• Set Goals
» Based on your self-assessment and career exploration, set clear and achievable
career goals. Define both short-term and long-term objectives that align with your
aspirations. Your goals could involve acquiring specific skills, gaining experience
in a particular field, or reaching a certain position within a desired timeframe.
• Develop a Plan
» Once you have identified your goals, create a plan to achieve them. Break down
your goals into smaller, actionable steps. Determine the skills, education, or
certifications you need to acquire. Outline a timeline for achieving each milestone.
Consider seeking guidance from mentors or career counselors to help you create an
effective plan.
• Acquire Skills and Experience
» Take steps to acquire the necessary skills and gain relevant experience in your
chosen field. This could involve pursuing further education, attending workshops
or training programs, or volunteering/interning in related roles. Seek opportunities
to build a strong foundation and develop expertise in your field of interest.
• Network and Build Relationships
» Networking is crucial for career advancement. Connect with professionals in
your industry through networking events, online platforms, or professional
organizations. Build meaningful relationships and seek mentorship from
experienced individuals who can offer guidance and open doors to opportunities.
• Update and Adapt
» The job market and industries are constantly evolving. Stay updated on industry
trends, technological advancements, and changes in demand. Continuously develop
your skills and adapt your career plan accordingly. Be open to new opportunities
and be willing to make adjustments as needed.
• Evaluate and Reflect
» Regularly evaluate your progress and reflect on your career journey. Assess
whether you are moving closer to your goals and if your current path is still aligned
with your aspirations. Be open to reassessing and making changes if necessary.
6. Why is it important to build and maintain good credit?
• Because good credit opens doors to various financial opportunities. It allows you
to qualify for loans, credit cards, and favorable interest rates. Whether you want to
purchase a car, buy a home, or start a business, having good credit increases your
chances of obtaining the necessary financing.
7.What are the good uses of credit?
• Building Credit History
» Using credit responsibly and making timely payments helps establish a positive
credit history. This is important for future financial endeavors, such as applying for
loans or mortgages. By demonstrating responsible credit usage, you can build a
strong credit profile that opens doors to better borrowing opportunities.
• Emergency Expenses
» Credit can be a valuable resource during unexpected financial emergencies.
Whether it's a medical bill, car repair, or home maintenance, having access to
credit can help cover immediate expenses when you don't have enough savings.
However, it's important to use credit for emergencies only and have a plan to repay
the debt promptly.
• Convenience and Security
» Credit can be beneficial for making significant purchases, such as a car or home,
especially when you don't have the full amount upfront. By using credit, you can
spread out the payments over time, making it more manageable. However, it's
crucial to assess your ability to repay the debt and choose affordable financing
options.
• Building a Business
» Credit cards offer convenience and security in transactions. They eliminate the
need to carry large amounts of cash and provide protection against fraud or
unauthorized charges. Credit cards also offer additional benefits like rewards
programs, cashback, or travel perks, which can be advantageous if used wisely and
paid off in full each month.
• Establishing Rental History
» For individuals without a significant rental history, using credit to pay rent can
help establish a positive rental payment record. Some rental payment platforms
report rent payments to credit bureaus, which can contribute to building a positive
credit history over time.
• Travel and Accommodations
» Credit cards can be advantageous for travel-related expenses. They offer benefits
like travel insurance, rental car coverage, or access to airport lounges.
Additionally, some hotels or airlines require a credit card for reservations or
security deposits.
8. Downside of credit?
• Debt and Interest Payments
» One of the biggest downsides of credit is the risk of accumulating debt. When
credit is misused or not managed responsibly, it can lead to excessive borrowing
and high-interest payments. Failure to make timely payments can result in late
fees, increased interest rates, and damage to your credit score.
• Temptation to Overspend
» Credit can create a false sense of affordability and lead to overspending. The
availability of credit limits may tempt individuals to make purchases beyond their
means, leading to financial strain and difficulty in repaying the debt. It's important
to exercise self-discipline and only use credit for necessary expenses that can be
comfortably repaid.
• Impact on Credit Score
» Mismanaging credit can negatively impact your credit score. Late payments, high
credit utilization, and excessive debt can lower your credit score, making it harder
to qualify for future loans or obtain favorable interest rates. A poor credit score can
limit financial opportunities and increase the cost of borrowing.
• Additional Fees and Charges
» Credit cards often come with various fees and charges, such as annual fees,
balance transfer fees, cash advance fees, and foreign transaction fees. These
additional costs can add up and erode the benefits of using credit, especially if they
are not carefully considered or understood.
• Risk of Identity Theft and Fraud
» Using credit cards or sharing personal information online carries the risk of
identity theft and fraud. If unauthorized individuals gain access to your credit card
information, they can make fraudulent charges, leaving you responsible for the
debt. It's important to monitor your accounts regularly, report any suspicious
activity, and take precautions to protect your personal information.
• Impact on Future Financial Goals
» Excessive credit card debt or a poor credit history can hinder your ability to
achieve future financial goals. It can make it challenging to secure loans for major
purchases like a home or a car. Additionally, high-interest payments can limit your
ability to save and invest for long-term financial objectives.
• Stress and Financial Burden
» Carrying a significant amount of debt and struggling with credit payments can
cause stress and financial burden. It can affect your overall well-being,
relationships, and mental health. Managing debt and credit responsibly is essential
to maintain financial stability and minimize stress.
9. Signs of indebtedness?
• Difficulty Making Minimum Payments
» If someone consistently struggles to make the minimum payments on their credit
cards, loans, or other debts, it may be a sign of indebtedness. They may be
stretching their finances thin, unable to keep up with the required payments.
• Increasing Credit Card Balances
» If credit card balances continue to rise over time, it suggests that the individual is
relying on credit to cover their expenses and may be accumulating debt. This can
be a warning sign of increasing indebtedness.
• Late or Missed Payments
» Regularly making late payments or missing payments altogether is a clear sign of
financial strain. It can lead to late fees, increased interest rates, and damage to their
credit score. Persistent late or missed payments indicate a potential problem with
debt management.
• Borrowing to Pay Off Debt
» Taking on new debt, such as personal loans or balance transfers, to pay off
existing debts is a red flag. It may indicate that the individual is struggling to keep
up with their financial obligations and resorting to borrowing more to meet their
debt payments.
• Using Credit for Daily Expenses
» If someone consistently relies on credit cards or loans to cover basic living
expenses, such as groceries or utility bills, it suggests a lack of available funds and
potential financial distress. Depending on credit for day-to-day expenses can
quickly lead to a cycle of indebtedness.
• Feeling Overwhelmed by Debt
» Indebted individuals often experience stress, anxiety, or a feeling of being
overwhelmed by their financial situation. They may constantly worry about their
debt and struggle to see a way out. Emotional distress related to debt can be a
significant sign of indebtedness.
• Declined Credit Applications
» Repeatedly being declined for new credit applications, such as loans or credit
cards, can indicate that lenders view the individual as a high credit risk due to their
existing debt load. This can be a sign that their level of indebtedness is causing
concern among creditors.
10. Steps to get out of excessive debt?
• Assess Your Debt
» Start by gathering all your debt information, including the outstanding balances,
interest rates, and minimum payments for each debt. Create a comprehensive list to
understand the full extent of your debt and prioritize your repayment strategy.
• Create a Budget
» Develop a realistic budget that accounts for your income, essential expenses, and
debt payments. Identify areas where you can cut back on discretionary spending to
free up more money for debt repayment. Stick to your budget and avoid
accumulating more debt.
• Prioritize Debts
» Determine which debts to tackle first. Two common approaches are the
avalanche method and the snowball method. The avalanche method involves
prioritizing debts with the highest interest rates, while the snowball method focuses
on paying off the smallest balances first. Choose the method that aligns with your
financial goals and motivates you to make progress.
• Negotiate with Creditors
» Reach out to your creditors to explore options for better repayment terms. They
may be willing to lower interest rates, waive fees, or establish a more manageable
payment plan. Be proactive in communicating your financial situation and
demonstrating your commitment to repaying the debt.
• Increase Your Income
» Consider ways to increase your income to accelerate debt repayment. This could
involve taking on a side job, freelancing, or selling unused items. The additional
income can be directly applied to paying off debts and help you become debt-free
faster.
• Cut Expenses
» Review your expenses and identify areas where you can make cuts. Reduce
discretionary spending, cancel unnecessary subscriptions or memberships, and find
ways to save on everyday expenses. Redirect the money saved towards debt
repayment.
• Build an Emergency Fund
» While focusing on debt repayment, it's important to simultaneously build an
emergency fund. Having savings to cover unexpected expenses can prevent you
from relying on credit cards or taking on more debt during emergencies.
• Seek Professional Advice
» If you're struggling to manage your debt on your own, consider seeking guidance
from a reputable credit counseling agency or financial advisor. They can provide
personalized advice, help you create a debt management plan, and negotiate with
creditors on your behalf.
• Stay Motivated and Persistent
» Getting out of excessive debt takes time and perseverance. Stay motivated by
tracking your progress, celebrating milestones, and visualizing the financial
freedom you'll achieve. Surround yourself with a supportive network and seek
encouragement from others who have successfully overcome debt.
• Avoid Future Debt
» Once you've paid off your debts, commit to responsible financial habits. Avoid
unnecessary borrowing, live within your means, and continue to budget and save.
Building healthy financial habits will help you maintain a debt-free lifestyle.