Shopping Wisely Personal Finance

Journal Questions What would you buy with a million dollars? *Nearly 50% of lottery winners spend all of their winnings within the first five years.

Cautionary Tales Mike Tyson: Earned over 300 million dollars during his career. By 2003, he had to file for bankruptcy. He owed more than 13 million dollars to the IRS. What happened? He spent money on lavish birthday parties, tigers, mansions, and cars. He also had a very expensive divorce.

Cautionary Tales MC Hammer: Made 30 million dollars in the early 1990s off the success of “You Can’t Touch This” and other hits. By 1996, he had to declare bankruptcy. He owed 13 million dollars. He bought a mansion that required a 200 person staff, a helicopter, and gold chains for 4 of his dogs.

How to Avoid Money Mistakes Differentiate between needs and wants. Remove your emotions from your finances. Think about your personal values, not those of advertisers and peers. Know your strengths and weaknesses. Can you go to the mall without buying something? Can you go out with your friends without spending money on unnecessary things? Are there some websites that you cannot visit without buying a product?

Comparison Shopping After you have seriously thought through a spending decision and have decided to buy, you have other options to think about. What brand to buy Where to buy Whether to buy now or later Comparison shopping involves researching different brands to find out which one offers the highest quality for the least amount of money.

Comparison Shopping Generic brands are usually up to 30-50% cheaper than name brands. One of the only reason why people think that name brand is better is because they are advertised more often. Store brands vs. Name brands A great resource is Consumer Reports or Google shopping

Opportunity Cost Personal Finance

Image: Definition: The cost of giving up one thing to get something else. Added Info: This is the real cost of an item is what you gave up to get it. Opportunity Cost Example: What is the opportunity cost of coming to school everyday? What would the opportunity cost of dropping out of high school be?

Image: Definition: A small or inadequate amount of something. Could be a product, time, money, or other thing that people desire. Added Info: Scarcity effects our decision-making everyday. Scarcity Example: Time is scarce and how we choose to divide our time involves scarcity. What else could we be spending our time on? What else could we be spending our money on?

Trade-off

Cost-benefit Analysis

Advertising Personal Finance

W.A.L.T. Identify different advertising strategies. Analyze the effects advertising has on consumers in order to make better spending choices.

Advertising Affects the Way You View Things What would you assume about people who: Shop for clothes at Goodwill Drive station wagons Wear Chuck Taylors Wear Aeropostale Buy clothes at Hot Topic Always carries a Starbucks coffee

Brand & Logo Brand: The name that identifies a product or manufacturer. Ex. Nike, Adidas, Starbucks, Apple Logo: The graphic symbol that represents the company. Ex. Nike “swoosh”, Adidas “three lines”, Apple “apple”

Promoting Brands To promote their brands and persuade consumers to buy their products, companies hire advertising agencies. Ad agencies are staffed by people with marketing, business, communications, and journalism backgrounds. They also employ psychologists, sociologists, and artists. The U.S. teen is bombarded with over 5,000 ads a day! Where do you see these ads? The typical company earmarks most of their spending for marketing. In a typical year, companies spend more than 150 billion dollars a year in marketing and advertising.

Marketing Strategies The Beautiful People Factor: Companies want you to feel that if you buy their product it will make you a popular and beautiful person. What companies do you know use this tactic?

Marketing Strategies Jump on the Bandwagon: Many ads try to get you to buy a product because everyone else is. What companies do you know use this strategy?

Marketing Strategies 3. Celebrity Testimonials: Ad execs hope that you want to buy a product that famous people use and endorse. What companies use this strategy?

Marketing Strategies 4. Emotional Appeal: Many advertisers want you to feel that buying a product will make you feel happier and more loved. What companies do you know use this strategy?

Other Strategies Catchiness Factor: Companies use catchy songs and jingles. What are some jingles that you know? Retail Sensory Overload: Stores bombard you with environmental stimulants that encourage you to buy. They use smells, videos, mannequins, etc. “Gotta Have it Now”: Companies want you to feel as if you have to have their product immediately. Fast food and cell phones