Personal Finance

 A. Personal Financial Planning is arranging to spend, save and invest your money wisely, so you are able to live comfortably, have financial security, and achieve your personal financial goals  1. Goal setting is the foundation of personal financial planning  2. There are 3 types of financial goals  a. Short Term Goals are goals that you would like to achieve within 3 months  b. Intermediate Term Goals are goals that you would like to accomplish within 3 months to a year  c. Long Term Goals are goals that you would like to accomplish over a year or longer  3.Unfortunately, most people never reach their financial goals because, because they fail to plan and have no financial goals

Personal Finance  B. Money is a tool used to facilitate the exchange of goods/services in the global marketplace  1. Money (currency) itself has no real value; it has intrinsic value, meaning it’s value is derived from the faith that people have in the currency  2. In the past, people used shells, stones, corn, etc. for money  3. Modern society uses coins, currency, checks and debit cards for money  4. Goods and services are directly exchanged using money

Personal Finance  5. Functions of Money - Money has 3 basic functions  a. It’s a medium of exchange meaning it’s used to purchase goods/services in the global marketplace  b. It’s a standard of value it’s used to measure the value of goods/services  c. It’s a store of value meaning it holds it’s value and can be stored or saved

Personal Finance  6. In today’s global economy each country’s currency has a value that is different from those of other countries  a. A country’s currency’s value is established, in the Foreign Exchange Market (International Currency Market)  b. And global currencies are bought and sold in these foreign exchange markets

Personal Finance  c. When currency values are not set by Foreign Exchange Markets, they are set at fixed rates by their governments  d. The value of one currency in comparison to another currency is called the exchange rate (eg. One U.S. Dollar is worth $13.35 in Mexican Peso’s)  e. Exchange rates change from day to day, and from country to country

Personal Finance  f. The amount a country’s currency is worth depends on the number of other countries that want to buy their products; If demand for a countries goods and services increase the value of their currency will increase (eg. If demand for California Wine increases in the global marketplace, the value of the dollar will increase in the global marketplace) 

Personal Finance  g. When the value of a country’s currency goes up in comparison to another country’s currency, it is said to appreciate in value, and when it goes down, the currency depreciates in value  h. Currency exchange rates affect everyone, whether your shopping online for goods from another country or just buying products that were imported from another country

Personal Finance  7. Currency has 2 classifications: Hard Currency or Soft Currency  a. Hard Currency is any globally traded currency that is considered stable and highly liquid  Criteria for a currency to be classified as a hard currency is:  * The currency must come from a politically and economically stable country  *The currency has a long term history of the stability of it’s purchasing power  U.S. Dollar British Pound Sterling  European Euro Japanese Yen  Swiss Franc Canadian Dollar  Australian Dollar

Personal Finance  8. Soft Currency (weak currency) is any global currency that is expected to fluctuate erratically or depreciate against other currencies  1. The currencies of most undeveloped countries are soft currencies  2. These currencies fluctuate according to the countries political or economic status  3. These currencies are not preferred for international trade  4. An example of a soft currency would be the Zimbabwean Dollar 

Group Projects  Each group will choose two countries and compare/contrasts the following:  1. Brief history of the country (type of government, type of economic system, major types of industry, educational level of population)  2. Major imports/exports  3. Major trading partners  4. Type of Currency and current rate of exchange  5. Compare both Country’s currency rate to the U.S. dollar; analyze what the results mean  7. PowerPoint/Oral Presentation, Individual Names on Slides….all late assignments will be deducted by 25 points per day….Due Date…..Next Scheduled Class