Economics of Sports July 26-27, 2016

WELCOME!

Disclaimer The views expressed today are our own and do not necessarily reflect the positions of the Federal Reserve Bank of St. Louis or the Federal Reserve System.

Agenda – Day 1

Essential Question: Why Talk About Sports and Economics?

Economics of Sports Icebreaker Show the beginning through 7:54.

Lesson #1: Making Personal Finance Decisions…Planning and Tracking Picture is of Michael Jordan’s 56,000-square-foot, 9-bedroom and 15-bath estate outside of Chicago. Picture is hyperlinked to a sales video his realtor did to try to hype the property. Originally went up for $29M, now at $15.5 since May 2015.

Activity Stop watch Procedure step 4 starts here.

Discussion What is the impact of changing the inflow and outflow rate of students on the number of students in the area? If inflow > outflow = + students (Rounds 2 and 3) If inflow < outflow = - students (Rounds 4 and 5) If inflow = outflow = students (Round 1 )

Discussion Imagine that each student in the demonstration was a dollar bill and the area represented someone’s wallet or purse. What might be an example of an inflow? What might be some examples of an outflow?

Discussion What does the amount of students in the area represent? What does this demonstration suggest about how you might grow your wealth over time?

Wealth Wealth is usually measured by net worth Net worth = the value of a person’s assets minus the value of their liabilities. Assets: things you own Liabilities: things you owe A person’s net worth is like their inventory or stock of dollars (i.e students in the area)

Cash Flow Cash Flow = income (dollars coming in, usually from working) - expenses (dollars going out, usually to buy goods and services). Since these are flows, they often have a time element associated with them.

Cash Flow If cash flow is positive (income > expenses over a given period of time), then net worth will ↑. Q: In what rounds did this happen? A: Rounds 2 and 3 If cash flow is negative, (income < expenses over a given period of time) their net worth ↓. A: Rounds 4 and 5

Why does this matter? An important element of financial planning is keeping track of these two things: net worth (a statement of your assets and liabilities); and cash flow (your monthly budget or flow of funds).

They ended up Bringing it home From the clip we watched, did the athletes seem to be doing a good job with financial planning? NO! As a result, what happened to them? They ended up