Personal Finance & Economics

Managing Your Money

Consumer Rights: Income Types DOLLAR VOTE guides how we spend $ Disposable Income Money left after taxes are paid Used for needs Discretionary Income Money after necessities are bought used for wants

Consumer Rights: Protections Caveat Emptor Let the buyer beware Consumerism Educating buyers about products & demanding top quality from manufacturers Laws passed to protect consumers Labeling: Fair Packaging and Labeling Act– contents must be identified Food, Drug, and Cosmetic Act- list ingredients and amounts Consumer Health & Safety Food & Drug Act 1906 Better Business Bureau

Consumer Responsibilities: Smart Buying Strategies Be informed!! Don’t be easily swayed by advertising Engage in COMPARISON SHOPPING Brand name vs. generic Balance costs & benefits of buying used items, mail order, or alternatives, etc.

Consumer Responsibilities: Other Report faulty products Keep records of efforts to resolve Exhibit ethical behavior

Consumer Rights: Consumer Bill of Rights Started under JFK, re-defined under Nixon 5 basic rights: 1) Right to a safe product 2) Right to be informed 3) Right to choose 4) Right to be heard 5) Right to redress

Planning & Budgeting

Making a Budget: Basic Terms a plan for making and spending $ Income $ you earn Expenses $ you spend on everything (including saving)

Making a Budget: How to Make a Budget Make a list of expenditures Record income Analyze data Set aside Emergency $ Monitor Spending– tame unnecessary spending

Making a Budget: CREDIT: Terms Borrowing $ to pay now, enjoy now, but repay later Annual percentage rate (APR) Annual cost of credit Credit rating Evaluation of borrower’s ability to repay Collateral Items of value pledged as security on a loan Interest $ paid to lender for allowing use of money by borrower

Making a Budget: CREDIT: Sources Credit Cards Most common Banks, cc companies, stores $ limit set on spending allowance Mortgages Home loans Car loans

Making a Budget: CREDIT: Benefits & Drawbacks Can buy now and pay later… helps to satisfy wants Meeting payment requirements can teach financial discipline BANKRUPTCY !!

SAVING & INVESTING

Saving for the Future: Why? Make major purchases Emergencies Luxurious wants: vacations Economic “circle of life” Allows others to borrow $ Improves standard of living

Saving for the Future: Saving Regularly Employer withholdings Employee responsibility Easy availability of funds Earns interest

Saving for the Future: Deciding About Saving Trade-off involved Saving for “tomorrow” eliminates something you can have now

Types of Savings Savings & Checking accounts Certificates of Deposit Money Market Account US Savings Bonds See chart on page 556 !!!

Investments: Stocks Stocks = ownership in a company Stock values go up & down Dividends: payments based on stocks ownership of a company’s profits Can gain $ or lose it all!!

Investments: Bonds Bond– contract to repay borrowed money with interest in a specified amount of time No ownership attached Quick method for raising $ Government bonds Used to pay for expenses Savings bonds (safe!!) Treasury bills

Investments: Mutual Funds Pools of $ from many people who are invested in a selection of individual stocks and bonds chosen by financial experts Limits loss since it is spread out Some tracked by a gov’t regulated index Dow Jones Industrial Average Standard & Poor’s (S&P)

Achieving Your Financial Goals

What kind of SPENDER are you? Impulse buyer Signs: Buy things you don’t need Emotions tied to buying Out of $ & have to borrow often Quick loss of satisfaction with purchases Avoidance Tips Budget Make a list Walk away from temptation Price shop & delay purchasing