FINC101: Personal Finance Introduction and Principles

General course information, financial life cycles, and the ten principles of personal finance.

Weekly Assessments (FINC101)

Submissions worth a total of $50\%$ of the grade, with recommended due dates on the Friday of the following week and a final deadline on the last day of the semester.

Quizzes

Online multiple-choice questions with unlimited attempts and the best score counting, designed as practice for Test 1 and Test 2.

Workshops

A non-mandatory drop-in facility held during the third lecture hour on Fridays where students can receive help from the instructor and a tutor named Max.

Stage 1: Early Years

The period through age $54$ focused on wealth accumulation, developing regular savings patterns, and initial goal setting.

Stage 2: Approaching Retirement (The Golden Years)

The transition years between ages $55$ and $64$ characterized by a reassessment of retirement goals, tax planning, and estate planning.

Stage 3: The Retirement Years

The period for individuals ages $65$ and over where they live off savings and superannuation payments.

Step 1: Evaluate Your Financial Health

The first step of personal financial planning involves preparing a personal balance sheet and income statement to determine net worth and track where money comes and goes.

SMART Goals

A framework for defining financial goals that ensures they are Specific, Measurable, Attainable, Relevant, and Timely.

Short-term goals

Financial objectives intended to be achieved within $1$ year, such as accumulating an emergency fund or paying off outstanding bills.

Medium-term goals

Financial objectives with a timeline of $1$ to $10$ years, such as saving for a home down payment or financing a wedding.

Long-term goals

Financial objectives extending beyond $10$ years, like purchasing a home, starting a business, or retirement planning.

Principle 1: The best protection is knowledge

The concept that individuals must understand personal finance basics and take responsibility for their own lifetime financial plan.

Principle 3: The time value of money

The understanding of the power of compounding interest, where time acts as an advantage for financial growth.

Principle 5: Liquidity

The importance of having funds available for unexpected events; ideally, liquid funds should cover $3$ to $6$ months of living expenses.

Principle 8: Risk and return go hand in hand

The trade-off where investors demand higher returns for taking on added risk, and use diversification to reduce that risk.

Loss Aversion

A behavioral quirk where individuals are far more affected by losses than by equivalent gains.

Myopic loss aversion

A behavioral bias where getting more frequent feedback on financial standing makes individuals more risk-averse.

House Money Effect

The tendency for individuals to be more willing to take risks with found money (easily obtained) than with earned money.

Sunk cost effect

A behavioral bias where a person continues to pour money into a failing investment or project because of resources already invested.

Child Expenditure Calculation (NZ)

Based on average weekly earnings of $\$1,586.32$, the estimated annual cost for one child is $\$13,197.55$, plus hidden opportunity costs from time out of the workforce.

KiwiSaver

A New Zealand retirement savings scheme; the transcript calculates that a $\$68,000$ annual salary with $3\%$ contributions and $7.5\%$ return could grow to $\$300k$ in $25$ years.