FINANCIAL PLANNING

Objectives:  By the end of this unit, you will:  Examine why it’s important to have a plan for your money  Know what SMART goals are  Analyze how you get and spend money  Use the decision-making process to create your financial plan  Identify guidelines to implement your financial plan  Learn how to monitor and make changes to your financial plan

Financial Planning  Is a process of setting goals, developing a plan to achieve them, and putting the plan into action.  It’s a road map  Beginning with the end in mind

Cheshire Cat, Alice In Wonderland

DFGDF What does the road ahead of you look like?

Benefits of a Financial Plan  You have more money and financial security.  You know where to use money to achieve your goals.  You have less chance of going into debt you cannot handle.  You can help your partner and support children if you have a family.

Steps of a Financial Plan  Create a Plan  Set Goals  Implement the Plan  Analyze Information  Monitor and Modify the Plan

What are the components of a Financial Plan?  Goals  Net Worth Statement  Budget  Insurance Plan  Savings Plan  Investment Plan Each topic will be addressed in detail through out the course.

NEEDS vs. WANTS  NEEDS  Essentials…the basics of life  WANTS  Increase the quality of life

Needs vs. Wants  Take a few minutes to complete exercise 1A on page 4.

Values  Are the beliefs and practices in your life that are very important to you.  What influences your values?

Values strongly influence our spending habits. We don’t usually spend our money on things we do not feel are important. Typically, the more important something is, the more we are willing to spend on it. Agree or disagree?

Financial Values Inventory Worksheet

DECISION MAKING

Creating a Plan Your Financial Roadmap  DECISION MAKING: The process of gathering and analyzing information in order to make a decision.

Steps for Decision Making  Identify your goal  Establish your criteria  Examine your options  Weigh your pros and cons  Make your decision  Evaluate the results Source: NEFE, Page 9

Form a square with 5 pennies on each side with 12 pennies.

PENNY PUZZLER Lesson: Eliminate Unnecessarily Restrictive Thinking

My Decision ProsCons

Example: Choosing Brand Name Jeans Over No-name Jeans ProsCons Better Fit, won’t stretch out Cost More Look good Can Only Afford One Pair

Consumer Research  You want new headphones for you iPod. Where do you begin looking?  What is your criteria?  What affects your decision?  What value is there in dong some research or comparison shopping?

Types of Influences on Financial Behavior  Cultural  Language, the way someone is raised, geographic location  Social  Peer pressure, fads, marketing, advertising  Emotional  Binge spending, comfort shopping, fear of making a decision

Peer Pressure  The influence others have on an individual’s personal decisions.

Peer Pressure Forms of peer pressure  Friends  Newspapers  Magazines  Telephone Directories  Direct Mail  Commercials  Catalogs  Radio Advertisements Emotional Factors  Gossip  Acceptance  Disapproval  Insecurities  Boyfriend/Girlfriend  Sarcasm  Fear  Clubs  Athletics  Cliques  Rich/Poor

Limited Financial Resources Writing Prompt: Tommy is 17 and lives with his single mother who is unemployed. Tommy works at the video store after school and on weekends to help her pay rent. Prom is in three weeks and he really wants to take his girlfriend. However, his paycheck is barely enough to cover the necessities for him and his mother. What are the sources of pressure that Tommy is feeling? What would you advise Tommy to do? What would you do?

Scarcity “Scarcity is an economic principle stating that because of limited resources, an economic system cannot possibly produce all the goods and services that people want; therefore, choices must be made about how the limited resources will be used.” -Consumer Economics & Education, Glencoe, 2003

Economy Today

Opportunity Cost  Refers to what a person gives up when a decision is made.  This cost, often called a trade-off, may involve one or more of your resources: Time Money Effort Click here to see what Bank High School says about opportunity cost.

Importance of Numbers

Inflation  An increase in the price of goods and services. A dollar in the future won’t buy as much as a dollar today.  Did you know… Inflation usually averages between 3% and 4% each year. Inflation has influenced our economy for decades ranging from.5% to 18%. In 1971 a first class stamp cost 8 cents.

Debt  The entire amount of money a person owes to lenders.

Bankruptcy  A legal process to get out of debt when you can no longer make all your required payment. Source: NEFE

Bankruptcy Consequences of  Influences financial freedom  Limits choices  Pay more for credit  Other people absorb your debt Types  Chapter 7  LIQUIDATION  Chapter 13  REORGANIZATON

Changes to Bankruptcy Law  New law in effect October 17,  New limits on personal bankruptcy.  Requires those filing to get counseling before they are allowed to file.  Bars filers with above-average income from filing Chapter 7 (liquidation).  Those who have $100/month left over after paying certain debts and expenses have to submit repayment plan under Chapter 13 guidelines (reorganization).

Reasons for Bankruptcy Source: Consumer Bankruptcy Project III; bankruptcy filing data from Administrative Offices of the U.S. Court, Salt Lake Tribune DEBT

GOALS

GOALS!  What is a goal?  Why do we set them?  Give an example of a goal.  _________term Goals  Less than 3 months  ___________ Goals  3 months to a year  _________Term Goals  Longer than 1 year

Complete Exercise 1B

SMART Goals S pecific…….. M easurable… T ime-Limited.. R ealistic……. A ttainable….. “Pay for lodging, transportation, meals for a 5-day trip to Washington, D.C.” “$300 through fundraising, $50 from birthday money, save $25 a week.” “If I stick to my plan, I’ll have the money when I need it.” “I still have enough money to live on while I work toward this goal.” “I need to have all the money by 6 months from now.”

Source: NEFE

Complete Exercise 1C

Think back to goals you have set in the past. How did they do? Is that goal still important? How did they feel when they accomplished a goal? How have your goals reflected your needs, wants, values, and priorities? Write one paragraph summarizing your experiences with goal setting.

Assignment  On a piece of cardstock, complete the following.  On one side, write one short term goal, one intermediate goal, and one long term goal. MAKE SURE THEY’RE SMART, FINANCIAL GOALS! Underneath each goals create an action plan of steps or tasks you will need to take to achieve that goal. List any possible barriers to achieving your goal.  On the other side, create a collage (visual representation) of your goals. Make sure you include a visual for the three goals you listed but you may present more if you wish.  See samples if needed.

ADVERTISING

Impact of Marketing, Advertising, and Sales Strategies

Marketing, Advertising and Sales Strategies/Techniques People who sell products and services are fishing for customers. They lure them in with sales, coupons, and other enticements. Unlike fish, consumers can benefit in this situation – if they know how to take advantage of special purchasing opportunities.

commonly used advertising techniques information Presentation of simple, direct information status Associates product use with those who have status, who are successful, and who enjoy and understand the “fine things in life” peer approval Associates product use with friendship/acceptance hero endorsement Associates use of product with a well-known person physical attraction to others Associates use of product with increased physical attraction/appeal entertainment Associates product with entertainment and feelings of enjoyment intelligence Associates product with smart people who can’t be fooled by gimmicks independence Associates product with people who can think and act for themselves unfinished comparison Use of phrases such as, “Works better in poor driving conditions! ”Works better than what? teens – lesson 10 - slide 10-A

unethical techniques Techniques considered deceptive and/or misleading: “bait and switch” Advertisement entices consumers into the store with bargains that are too good to be true. Once consumers are in the store, they are told the item is unavailable and are shown a similar, but more expensive, item Often high-pressure sales tactics are used Illegal in most states exploitation of fears and misgivings Ad feeds or plays on consumers’ fears supermarket specials Advertisement of products that are not in stock or that are not readily available to consumers at the advertised price out-of-context quotations Comments by a noted person or passages from a story taken out of context to imply an endorsement of a product or service teens – lesson 10 - Slide 10-C

examples of misleading advertisements health fraud Promises of overnight medical cures and treatments Products developed after “years of research” and “proven to provide immediate positive results” Testimonials from medical experts and satisfied customers credit repair Offers, for a fee, to fix a bad credit record “get rich quick” schemes Ads that offer an opportunity to earn a lot of money in a short amount of time with very little effort product misrepresentation Uses names similar to nationally recognized brand Merchandise offered at below-market value for a limited time only Vague descriptions of product travel fraud Offers accompanied by certificates for free or very low-cost travel Vague description of services and accommodations Frequently seen misleading advertisements: teens – lesson 10 - slide 10-D

program-length commercials (infomercials) how to spot program-length commercials “Commercials” similar to the program content Sponsor identified at beginning or end One product is proclaimed superior protect yourself if you want to order the item Use a credit card The Fair Billing Act will offer you some protection if you have problems with the bill or the quality of the product order or pay by mail Your purchase will be covered under the Mail Order Rule actions to avoid Giving your bank account number over the phone remember Product claims are made by the advertiser Such claims represent neither an objective nor an independent evaluation of the product teens – lesson 10 - slide 10-E

rules for evaluating advertisements ask yourself basic questions Does the ad appeal to your emotions? Look beyond the appeal to find out what the ad really says (or doesn’t say) about the product or service. What are the special features of the product? Are these features necessary? as you read, listen to, or watch advertisements... Search for fraud and deception in the ad. Be alert to ads that are misleading (those that make unreasonable claims about the product or service). Read the fine print, or listen carefully. teens – lesson 10 - slide 10-F

Examples of Marketing, Advertising and Sales Strategies  Clearance Sales  Holiday Sales  Coupons  Rebates  Sweepstakes  Contests  Sales People  Attractive Décor  Background Music  Items purchased most often are in back of store (bread/milk)  Most profitable items are given prominent positions.

Homework! Standard 1 Objective 2  Find a print ad (from the internet, newspaper, magazine, flyer, etc.). Write a 1 page summary answering these questions. Attach the copy of the ad and turn it in tomorrow.  What technique is being used?  In what ways is this ad trying to influence me? How is it trying to reach my emotions?  Am I being given all of the facts? Is there anything the advertisement is NOT telling me about the product?  Is there any fine print? Is so what does it say?  Does this advertisement sound too good to be true?