Chapter 1 Personal Financial Planning Personal Finance Chapter 1 Personal Financial Planning

Quick Question Does Money = Happiness?

Opening Number $8,000 Average College Graduate leaves school with at least $8,000 of debt, other than student loans

Objectives Discover how to create a financial plan

Motivation Question Think about the financial goals you might set during this school year. What are they? How do you think you will be able to achieve these goals?

Personal Financial Planning Spending, Saving, and Investing your money so you can have the kind of life you want

Benefits of a Plan More money- know how to use it Less chance of going into debt Help your partner and support children

If someone gave you $200, what would you do with it If someone gave you $200, what would you do with it? Pick three of the options below Take out friends to eat and to the movies (5 Pts) Spend $50 and save the rest (3 Pts) Save the money to make your next car payment (1 Pt) Buy school clothes (3 Pts) Buy some new CDs (5 Pts) Buy an Ipod (3 Pts) Get a cell phone (5 Pts) Buy a savings bond (1 Pt) Put the money in a savings account for college ( 1 Pt) Buy the hottest new concert tickets (5 Pts)

What do your choices say about you? Big Saver: If you scored 3-5, you’re willing to give up things today so you can buy something you want more tomorrow Middle of the Roader: If you scored 7-11, you know how to use your money for current needs while keeping an eye on the future Big Spender: If you scored 13-15, wow, do you like to spend money!

Financial Plan Steps (6)

1: Determine Your Current Financial Situation Make a list of your savings, monthly income, allowances, monthly expenses and debts

2: Develop Your Financial Goals What is your personal attitude towards money? Importance of saving for future, job after high school, go to college, etc…

3: Identify Alternative Courses of Action What changes could you make? Continue same course, or choose something different Examples?

4: Evaluate Your Alternatives Sources of financial information What are some sources? Opportunity Cost: The price of what you give up Example of Opportunity Cost? Risk

5: Create and Use Your Plan Follow your plan

6: Review and Revise As you get older, things change Goals Change Wants and Needs Change

Liquidity The ability to easily convert your financial resources into cash without a loss in value

Service vs. Good Service: a task that a person or a machine performs for you Good: a physical object that is produced & can be weighed or measured

Timing of Goals Short Term: 1 year or less Intermediate: 2-5 Years Long term: more than 5 years Examples of each?

Guidelines For Goals S.M.A.R.T. Specific Measureable Attainable Realistic Time-Bound

Class Work Develop 1 personal financial SMART goal and share with the class Make sure it means all of the criteria to be SMART

Economics The study of the decisions that go into making, distributing, and using goods & services

Supply vs. Demand Supply: the amount of goods & services available for sale Demand: the amount of goods & services people are willing to buy

Federal Reserve System The central banking organization of the United States Primary role is the regulation of the money supply

Inflation The general rise in the level of prices for goods & services over time

Consumer A person who purchases & uses goods or services

Interest The price that is paid for the use of another’s money

Closing Complete the following statement: “If I learn & put into action the six steps in the financial planning process, I will…” Example: “…have a solid foundation for making all my financial decisions, now and in the future.” Be prepared to discuss your answer

Assignment Page 19 in Textbook #1-4; #6 Hand in at the end of the period