Unit One Financial Priorities & Goals Financial Literacy Standard 1—Financial Priorities & Goals Mrs. Morrey Riverton High School

OBJECTIVE: Evaluate the role of emotions, attitudes, and behavior in making decisions. Describe a rational decision-making process. Identify and create short-term and long-term financial goals.

Decision Making Process Identify the Problem Gather Information & List Alternatives Consider the Consequences Select Best Course of Action Evaluate Results

IDENTIFY THE PROBLEM Recognize that there is a decision to be made. Decisions are not made randomly, they result from an attempt to address a specific problem, need or opportunity.

GATHER INFORMATION & LIST POSSIBLE ALTERNATEIVES What information might be helpful? Ask for advice from others who have been in your situation. Gather as much information regarding options as possible. Look for alternatives that may still help you achieve your goal.

CONSIDER THE CONSEQUENCES After gathering information and opinions regarding alternatives and options, write down the consequences of each alternative. PROS CONS

SELECT THE BEST COURSE OF ACTION After weighing the pros and cons of each alternative, choose the best course of action for YOU! Choose the option with the least amount of negative impact on you and your current situation. Choose the option that ensures you the greatest degree of success.

EVALUATE THE RESULTS Look at the results of the decision you have made, analyze the positives and negatives. Determine whether or not the decision you made helped you achieve your goal. If if did NOT, evaluate how you could make changes when you are faced with the same decision again in the future.

Factors that Influence Our Decisions Values Peers Habits Feelings Risks Age Economics Marketing/A dvertising

VALUES A person's principles or standards of behavior; one's judgment of what is important in life.

What makes up one’s VALUES? VALUES Family & Friends ExperiencesBeliefs

How do our VALUES affect our spending? The more important we feel something is, the more willing we are to spend money on that good or service.

PEERS One belonging to the same societal group especially based on age, grade, or status. Peers can have both a positive and negative influence on the behavior’s of others.

What is PEER pressure? Peer pressure is social pressure by members of one's peer group to take a certain action, adopt certain values, or otherwise conform in order to be accepted. Direct peer pressure is a teenager or a group of teenagers actually telling another teenager what he/she should be doing or what is okay to do. Indirect peer pressure is not necessarily verbal peer pressure but optical peer pressure. Individual peer pressure is trying too hard to fit in and doing things because other people are doing them.

How does PEER pressure affect our purchasing decisions? Branding and Marketing Placing logos prominently on goods. Teens seek out branded products as a way to have immediate prestige with friends. Subcultures Skateboarders, tech fans, surfers, athletes, etc. Teens need certain things to belong to a certain subculture, like a skateboard, musical instrument, bicycle, computer or surfboard.

Emotional Factors Related to PEER Pressure Gossip Acceptance Disapproval Insecurities Boyfriend/Girlfriend Sarcasm Fear Clubs Athletics Cliques Rich/Poor

HABITS A HABIT is settled or regular tendency or practice, especially one that is hard to give up. How do HABITS affect your financial decisions?

FEELINGS Love Anger Jealousy/Envy Pride Hungry Sad Frustration Anxious Our current emotional state, or the way we are feeling often determines affects our financial decisions.

RISKS What do I stand to win or what do I stand to lose? Personal Risk: Factors that create a less than desirable situation. Personal risk may be in the form on embarrassment, safety, inconvenience or health concerns. Inflation Risk: Fluctuation in prices. Will buying the item later mean paying a higher price?

AGE MINORS Young people tend to make riskier decisions because they feel less vulnerable and feel as if they have more time to recover from a bad decision. ADULTS The older individuals get, the less time they feel they have to recover from a bad decision, therefore, adults tend to make more reasonable and less risky decisions.

ECONOMICS PEOPLE CHOOSE BECAUE OF LIMITED RESOURCES… People evaluate the cost and benefits of different alternatives and then choose the alternative that best fits them. SCARCITY: Limited resources (money) to meet both needs and wants. People must choose as to which needs and which wants they will satisfy and which they will leave unsatisfied. We make decisions based off of how much money we make, how much we are willing to spend and what we are willing to spend our money on.

WANTS VS. NEEDS Wants Things that make life more entertaining and enjoyable but are NOT essential to survival. Phone Air Conditioning Car Netflix Needs Things that are essential to your health and security. Food Water Shelter Clothing

SCARCITY EXAMPLES I want an Audi, but I am a teacher and don’t make that kind of money, therefore, I buy a Toyota instead. I want a new phone and new boots. The new phone is a WANT and the new boots are a NEED. Because I only make 9.00 an hour, I cannot have both, I choose my NEED over my WANT. I want to put a swimming pool in my backyard but I also need to start saving for my children’s college education. Because I value my children’s future over a swimming pool and because I do not have enough money for both, I decide to save for my children’s education instead of putting in a swimming pool.

SCARICTY CREATES VALUE Things that are less available for consumers hold a greater value. Examples: Diamonds Coins Classic Cars Gold Comic Books—Original 1963 Spider Man, originally.12, todays value 40,000.00

ECONOMICS PEOPLE’S CHOICES INVOLVE COSTS… OPPORTUNITY COST: The alternative you give up when you make a choice. OPPORTUNITY COSTS do NOT always involve money. I want to go to the basketball game but I need to do my homework. If I choose to go to the basketball game my opportunity cost is my homework. If I choose to do my homework, my opportunity cost is the basketball game. I want to continue to stand in the hall and talk to my friends but I need to get to class so I will not be tardy. If I stand in the hall and talk my opportunity cost is being tardy. If I go to class on time, my opportunity cost is talking to my friends. What are some examples of OPPORTUNITY COSTS that teenagers may be faced with?

ADVERTISING & MARKETING Clearance Sales Holiday Sales Coupons Rebates Contests BOGO Frequent Shopper Card Sales People Attractive Décor Background Music Product Placement Most profitable items are placed in prominent positions Items most commonly purchased are in the back of the store

IMPULSE PURCHASE An impulse purchase or impulse buying is an unplanned decision to buy a product or service, made just before a purchase. One who tends to make such purchases is referred to as an impulse purchaser or impulse buyer. What promotes impulse buys? Emotions Product Location Allure of a “Good Deal” Gender Age

IMPULSE BUYS & EMOTIONS

DECISION MAKING STRATEGIES SPONTENATITY Choosing the first option that comes to mind; giving little or no consideration to the consequences of the choice.

DECISION MAKING STRATEGIES COMPLIANCE Going along with family, school, work or expectations.

DECISION MAKING STRATEGIES PROCRASTINATION Postponing thought and action until your options are limited.

DECISION MAKING STRATEGIES AGONIZING Accumulating so much information that analyzing the options becomes overwhelming.

DECISION MAKING STRATEGIES INTENTION Choosing an option that will be both intellectually and emotionally satisfying.

DECISION MAKING STRATEGIES DESIRE Choosing the option that might achieve the best result, regardless of the risk involved.

DECISION MAKING STRATEGIES AVOIDANCE Choosing the option that is most likely to avoid the worst possible result.

DECISION MAKING STRATEGIES SECURITY Choosing the option that will bring some success, offend the fewest people and post the least risk.

DECISION MAKING STRATEGIES SYNTHESIS Choosing the option that has a good chance to succeed and which you like the best.

GOALS SMART GOALS S Specific M Measurable A Attainable R Relevant/Reasonable T Time Bound

SPECIFIC A SPECIFIC goal will usually answer the five 'W' questions: What: What do I want to accomplish? Why: Specific reasons, purpose or benefits of accomplishing the goal. Who: Who is involved? Where: Identify a location. Which: Identify requirements and constraints.

MEASURABLE A MEASURABLE goal will usually answer questions such as: How much? How many? How will I know when it is accomplished?

ATTAINABLE An ATTAINABLE goal will usually answer the question “How”? How can the goal be accomplished? How realistic is the goal based on other constraints?

RELEVANT/REASONABLE A RELEVANT goal can answer yes to these questions: Does this seem worthwhile? Is this the right time? Does this match our other efforts/needs? Are you the right person?

TIME BOUND A TIME-BOUND goal will usually answer the questions: What can I do six months from now? What can I do six weeks from now? What can I do today? WHEN will this goal be accomplished?

Examples of a SMART Goal… Broad Goal: I want to grow my business. Specific: I will acquire three new clients for my consulting business. Measurable: I will measure my progress by how many new clients I bring on, while maintaining my current client base. Attainable: I will ask current clients for referrals, launch a social media marketing campaign and network with local businesses. Relevant: Adding additional clients to my business will allow me to grow my business and increase my revenue. Time-Based: I will have three new clients within two months. SMART Goal: I will acquire three new clients for my consulting business within two months by asking for referrals, launching a social media marketing campaign and networking with local businesses. This will allow me to grow my business and increase my revenue.

LONG TERM AND SHORT TERM FINANCIAL GOALS LONG TERM GOAL Goal set to be accomplished in a year or MORE. SHORT TERM GOAL Goal set to be accomplished in a year or LESS.

COMPONENTS OF A FINANCIAL PLAN What do I want to accomplish with my spending? Goals How do I plan to spend the money I have? Budget Money you have minus the money you owe. Net Worth Statement Health, Automobile, Life, and Home Owners/Renters Insurance. Insurance Plan How should I invest my money to plan for retirement (401K and IRA)? Investment Plan How will I save money for unexpected expenditures and for items that I want to purchase in the future? Savings Plan