P ERSONAL F INANCE Objective 1.01 Understand responsible earning, spending, savings, borrowing.

T HERE ARE FOUR BASIC ECONOMIC ACTIVITIES OF CONSUMERS Earning Spending Savings Borrowing

E ARNING Earning --- gaining money by working, owning a business, or receiving investment returns. Money gained from earning is called earnings. A person’s career choices, ability to find employment, and ability to advance determine his or her expected earnings and standard of living. Factors affecting career choices, ability to find employment, and ability to advance are shown in boxes below

F ACTORS A FFECTING Career Choices Type of career/job Place of employment Ability to Find Employment Education level Employability skills Prior job performance Economic conditions Workplace trends and opportunities Ability to Advance Type of career/job  Education level  Job performance  Economic conditions  Workplace trends and opportunities Earnings Standard of Living

S PENDING Spending --- using money to purchase goods and services. The way a person spends money determines the value received and influences the economy. Each purchase contributes to the demand for the product or service purchased

L AW OF S CARCITY Law of Scarcity : An economic system cannot produce all goods and services that consumers want, and most consumers do not have the resources to purchase everything they want. Choices must be made about how limited resources (time, money) are used.

T RADE - OFFS AND O PPORTUNITY C OSTS When making a choice, other alternatives must be sacrificed. The highest-valued alternative that must be given up when a choice is made is the opportunity cost of the choice. The choice of one item while giving up another is called a trade-off.

R ESPONSIBLE SPENDING Responsible spending includes researching and planning purchases in advance and making wise choices in light of opportunity costs and trade-offs that apply

S AVING Saving --- putting aside money for later use. Money may be “saved” in a bank account or in a wallet. The form of savings used determines the financial return Emergencies Recurring expenses Future purchases Financial goals Retirement

B ENEFITS OF S AVING Provide money for future purchases Can be used to earn income Produce a healthy economy Increase personal financial security Provide growth opportunities for business ventures

B ORROWING Borrowing --- obtaining money, goods, or services at present in exchange for the promise of future payment... “Buy now, pay later.”

E XAMPLES OF B ORROWING Buying with a credit card Buying on installment Payday loans Cash advances Layaway purchases

R EASONS FOR B ORROWING Major purchases Emergencies Convenience Prepare for future goals Take advantage of good sales/offers

Q UESTIONS ??? l. Which is an example of saving? A. Mr. Clark used his credit card to order takeout food online. B. Mrs. Eames receives extra money in her paycheck each October since she qualified for longevity. C. Ms. Dennis has $100 of his salary for each pay period deposited in an interest-bearing account. D. The Bartons secured a loan to buy a two-story townhome in the suburb 2. Michelle charges $8 an hour when she babysits for neighbors. This is an example of which economic activity? A. borrowing B. earning C. saving D. spending

Q UESTIONS ??? 3. Harold saves all extra income earned during peak seasons to give him money to fall back on during off-season months when work is more difficult to find. This illustrates which benefit of saving? A. Can be used to earn additional income B. Increases financial security C. Produces a healthier economy D. Provides growth opportunities for small businesses

Q UESTIONS ???? 4. Which is an example of responsible spending ? A. Before buying her class ring, Beth compared costs and quality of rings from three sources. B. Carolyn decided to save $10 a week during her junior year to help pay for her senior expenses. C. Dee borrowed her mother’s sweater only after her mother said it would be fine. D. Eli decided not to accept the offer of a part-time job because he needed more time to study