The Economic Way of Thinking Personal Finance

The Handy Dandy Guide is based on six ideas of economic reasoning: People choose We always have a choice – though sometimes the choices can be very difficult

All choices involve cost Dollar cost The Handy Dandy Guide All choices involve cost Dollar cost Opportunity cost: your next best option you could have made but did not make.

The Handy Dandy Guide People respond to incentives in predictable ways One powerful incentive is money As well as working for money, people can save money and earn interest on their savings People can use their savings to buy more goods and services in the future

The Handy Dandy Guide People create economic systems that influence choices and incentives The American economic system relies on markets, choices and incentives Every decision comes with an opportunity cost

The Handy Dandy Guide People gain when they trade voluntarily Doing something because you want to, not because someone forced you to do it People must decide if the benefits are greater than the costs, gather sound information and trade carefully

The Handy Dandy Guide People’s choices have consequences for the future Most people live for today, but also for tomorrow People are affected by good and bad luck, but overall people shape their futures by the decisions they make