Unit 1 - Your Financial Plan: Where It All Begins

“Most people don’t plan to fail… They simply fail to plan!” Financial Education Impact 3 years after implementing a financial education mandate, participating states saw increased credit scores and lower delinquency rates on credit accounts Georgia (+11 points) Idaho (+16 points) Texas (+32 points)

Sample Wants and Needs NEEDS Food for breakfast Clothes for school Transportation to school or work ______________ WANTS An iPOD DVD Players Cell Phone Hot Car ______________ Activity 1A

Values Getting a good education Religious faith or beliefs Social causes Handling money responsibly Friendships / The people I hang out with ____________________________ On left margin of packet, write down 2 personal values you have

Term Goals Within three months Three months to a year More than a year SHORT-TERM GOALS Within three months INTERMEDIATE-TERM GOALS Three months to a year LONG-TERM GOALS More than a year

Delayed Gratification Saving money over time to make a major purchase. Waiting to buy a new product until the price goes down. Waiting to see the latest movie until the crowds get smaller and the lines shorter. ____________________________________________________________________ Activity 1B

The Five-Step Financial Planning Process

S-M-A-R-T GOAL CRITERIA Step 1 – Set SMART Goals Specific Measurable Attainable Realistic Time-Limited

Planning Spring Break Specific Measurable Attainable Realistic “I want to go to Daytona for Spring Break” is more specific than “I want to go somewhere fun over Spring Break” Measurable “I’ll need $150 for my share of the hotel room for the week” is measurable; “I want to save a bunch of money for the trip” is not. Attainable “I’ll split the driving with my friends and take $200 more for gas, food, and other spending” is much more attainable than “I want $500 to fly there and $700 for spending money.” Realistic “I’ll save $60 a month from my paycheck for the next six months” is more realistic than “I’ll buy lottery tickets every week” Time Bound “I want to save all the money by March 1st” gives you a specific date from which to plan backwards, unlike “I want to save all the money by spring.”

SMART Goals Specific…….. Measurable… Attainable….. Realistic……. “Pay for lodging, transportation, meals for a 5-day trip to Washington, D.C.” Measurable… “$300 through fundraising, $50 from birthday money, save $25 a week.” Attainable….. “If I stick to my plan, I’ll have the money when I need it.” Realistic……. “I still have enough money to live on while I work toward this goal.” Time-Limited.. “I need to have all the money by 6 months from now.” Activity 1C

Step 1 – Set SMART Goals Individual Assignment My SMART Goals List 3 personal financial goals in SMART format Determine if each is a want or a need Estimate how much each will cost and how long it will take you to reach your goal. End

Where Does Your Money Go? Warm Up – At the top of your hand out, write down your best guesses of the total amount of money you spent in the last week Include food, gas, entertainment, clothes, etc. If you went out to dinner with your family, estimate your share of the meal

Step 2 – Analyze Information Where does your money go? How might this list change when you are in your 20’s? Top 5 Items Guys Bought with their Own Money Top 5 Items Girls Bought with their Own Money Food 30% Clothes 43% Soda or Soft Drinks 26% Candy 34% 24% 32% 21% 31% Music 19% Salty Snacks 22%

Analyze Information How do your actual spending habits align with your values? Will you be able to achieve any of your financial goals with your current spending and saving habits?

Spending Log $6.00 $35.00 $4.00 $7.00 $5.00 $8.00 $15.00 $15.00 $55.00 Step 2 – Analyze Information Cash Flow – measures the money you receive and the money you spend $6.00 Starting Monday, you are to write down/ keep receipts for everything you spend money on for 7 days to create your own Personal Spending Log $35.00 $4.00 $7.00 $5.00 Teacher notes: Next class hand out the Personal Spending Log spreadsheet. You may want to also set up a Celly account to text reminders to your students. $8.00 $15.00 $15.00 $55.00 $40.00 $15.00

Factors That Affect Decision Making Needs Age Time What about you? Wants Culture Society Family Motivation Money Values Education Habits Attitudes

Step 3 – Create a Plan Decision-Making Process Evaluate Results Identify Your Goal See a movie Type of movie When How much Establish Criteria Weigh Pros and Cons Don’t want to wait hours, another film showing that you want to see Make a Decision Buy tickets to show that is playing now Evaluate Results Did you like movie? Decision-Making Process

The Decision- Making Process Decision Making and Financial Planning The Decision- Making Process The Financial Planning Process Evaluate Results Make a Decision Identify Your Goal Weigh Pros and Cons Establish Criteria Monitor & Modify the Plan Implement Set Goals Create a Plan Analyze Information

Know What You Want Identify Your Goal Decide where to eat Establish Criteria 1. Less than $10 2. Less than 30 minutes away Teacher Note: the hyperlink takes you to a 10 minute Weird Al Yankovic music video. It is a spoof of a 2 hour song/video by R. Kelley. You don’t have to show the entire thing. But the point of it is how relatively simple decisions can take forever. i.e. Lets go out to eat. OK. Where do you want to go? I don’t care. Where do you want to go? How about Chick-fil-A. No, I was just there, how about Olive Garden. No, I don’t like their pasta. How about…. 3. Home by 9:00 Stuck in the Drive Through

Create a Plan Opportunity Cost Satellite Decisions When you can’t accomplish all your goals, you have to make some sort of trade-off What you give up to get something else Satellite Decisions When a major decision leads to several smaller ones Exercises 1D and 1E

Deciding to Buy a Car What kind? What dealer? Buy or lease? New or used? What features? Exercise 1F

Step 4 – Implement the Plan REALITY Resources are limited RESPONSIBILITY Plan vs. “Winging it” RESTRAINT Know when to say NO

Implement the Plan Guidelines for Sticking with Your Plan Remind yourself of goals regularly Tell other people about your goals When you’re going to spend money, decide how much in advance and only take that amount Review your plan regularly so you can make adjustments quickly

SAVING SPENDING SHARING

Step 5 – Monitor and Modify Review your plan and your progress at regular intervals When you achieve a goal, celebrate and cross it off your list Ask yourself are your existing goals still worth achieving? Is there a new goal to add to your list?

Family Events Activity Consider how each family would handle the following: Vacation Illness Transportation needs Flat screen TV Night out

Unit 1: Your Financial Plan: Where it All Begins