GE1202
Managing Your
Personal Finance
Week 2 Tutorial
Introduction to Personal Finance
Management
Question 1 True/False
Explain whether the statements are true or false.
a.
a. Personal financial planning is a process that should be carried out on
a regular five-yearly basis.
b. The whole financial planning process should be revisited on regular
basis.
c. Or when personal or economic circumstances change
False
Question 1 True/False
a.
a. It is far more important for older people to engage with personal
financial planning, than younger people.
Personal financial planning is important to people who have financial
goals but limited financial resources.
Both young people and older people face the same situation.
False
Question 1 True/False
a.
a. If inflation is measured at 3% per annum and a savings account is
paying interest at 3% per annum, the purchasing power of the
savings made will remain unchanged.
% △ Real value = % △ Nominal value – Inflation%
0 3 3
% % %
True
Question 1 True/False
a.
False
a. Career planning is not a part of financial planning.
b. Eight major personal financial planning areas
Obtaining – the receipt of income and other financial resources
Planning – actions to determine future financial directions
Saving – set aside funds for expected and unexpected expenses
Borrowing – appropriate use of short-and-long-term credit plans
Spending – analysis of purchasing decisions for wise money use
Managing Risk – insurance and other methods to reduce financial uncertainty
Investing – accumulation of funds for long-term financial security
Retirement and Estate Planning – efforts to provide for post-career years and
transfer of assets
Question 1 True/False
a.
a. False
Once you have set your financial goals, you should try to achieve
them by all means.
Financial goals should take a SMART approach
If the goal is unrealistic, it is very unlikely for you to achieve it
Six-step financial planning process
Determine your
1.
1. 1.
current financial
1. Review and 1. Develop your
situation
revise the plan financial goals
1.
1. 1.
1. Create and 1. Evaluate 1. Identify alternative
implement alternatives courses of actions
Question 2 Calculation
Your friend is now working in an insurance company. He is prompting an
investment project of his company to you:
“Our company is now offering a plan, which is a very good project. You just
need to pay $3000 at the end of each month from January 2017 for ten
years. Then you can get back HK$1million on 31st December 2046.”
Question 2 Calculation
Assume that the market interest rate is 6%p.a. and is stable during the
period, will you consider the project?
PV of your investment

= $270,220
PV of the return
$1
= = $166,042 NO!!!
(1 + 0.5%)360
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