1. Individual Responsibility and the Economy Unit 1 Mr. Vaccaro
Welcome to Economics
Individual Responsibility and the Economy
Unit 1
Mr. Vaccaro

2. Studying Economics will help us in our
daily lives.

3. So, what is Economics?

4. No matter how much money we have, we always want more
No matter how much money we have, we always want more.Yes, we always want more.

5. Why do we always want more?
Economists believe in a concept called scarcity.
Scarcity is the idea that our resources are limited but our wants and desires are unlimited.
Twenty dollars can buy many different goods. Is there only one item you want? Or would you like more?

6. We have so many options but we must choose. We cannot have everything.

7. Scarcity
To think like an Economist, you must always remember that scarcity exists.
You may only have ten dollars in your pocket but you can certainly think of a hundred different ways to spend it.

8. So, how do we choose?

9. Economics Can Help
As we study Economics, we begin to understand that we must make choices.
We begin to understand that we cannot have everything we need or want.
We begin to understand that with every choice, there is a cost.

10. If we choose to live near the ocean,
we are more likely to experience
flooding.

11. Every Choice Has Its Cost
Economists also teach us that every choice we make has its cost.
In other words, every time we get something, we give something else up.
There is no such thing as a free lunch.

12. If we surf the waves, we may break our legs
If we surf the waves, we may break our legs. Even fun activities have their costs.

13. It’s all about making choices and knowing
the costs of those choices.

14. Questions for Reflection
Define Economics.
Why must people make choices?
Define scarcity.
Why do our choices cost us?
Define cost.

15. Personal Finance & Economics

16. Consumer Rights: Income Types
Disposable Income
Money left after taxes are paid
Used for needs
Discretionary Income
Money after necessities are bought
used for wants

17. Consumer Responsibilities: Smart Buying Strategies
Be informed!!
Don’t be easily swayed by advertising
Engage in COMPARISON SHOPPING
Brand name vs. generic
Balance costs & benefits of buying used items, mail order, or alternatives, etc.

18. A Spending Plan will Show you where to cut spending
Provide methods for keeping good records of spending
Allow you to spend money without feeling guilty
Create a way to measure your progress
Improve communication with other people

19. Step 1: Assess Needs Make a realistic list of needs and wants
Needs Wants
Food Lots of Money
Clothing Cell Phone
Housing Big TV
Transportation New Car
Child Care Designer Jeans
Insurance Vacations
Medicines Boat

20. Step 2: Set Goals Specific- Clearly state what you want to do
Make sure your goals are SMART…
Specific- Clearly state what you want to do
Measurable- Measure by time and/or money needed
Attainable- Make sure your goal is realistic and possible
Relevant- Make sure goals fit your needs
Time related- Set a definite target day (day/month/ year)

21. Step 3: Make a Plan
Put things in Priority Order- Imagine the actions you need to take to get from where you are now to where you want to be.
Goals are dreams with deadlines! Post your goals where you will see them frequently. Find a picture to represent your goals. Make them happen.

22. Your Plan with Actions Steps to Get There:
I will save $25.00 from each weekly paycheck for refrigerator.
Steps to Get There:
Pack lunches.
Borrow movies and CD’s from the library.
Shop with a list for everything.
Stay out of Express!
TARGET DATE: 6 MONTHS

23. PRIORITIZING GOALS Build an emergency savings of $_____________.
Put $50.00 from each paycheck for 5 months.
Use OVERTIME or BONUS $$ to build more quickly.
Build a retirement account.
Put $50.00 (automatic deduction)
401(k)
Roth IRA

24. FIXED / MONTHLY EXPENSES
Car Payments
Rent or Mortgage
Child Care
Cable TV
Car Insurance

25. FLEXIBLE / VARIABLE EXPENSES
Clothing
Food
at home
away from home
Telephone
Utilities
Gasoline

26. FLEXIBLE / VARIABLE EXPENSES (cont)..
Public Transportation
Medical / Dental
Recreation
Supplies
household
personal

27. OCCASIONAL / SEASONAL EXPENSES
Car Maintenance / Repairs
License Tags
Insurance Payments
Gifts / Holidays
School
Taxes
Magazine Subscriptions
Vacations
$500
$100
$600
$800 $0
$200
$2400 / 12 = $200/month

28. Start the Savings Habit Now!
If you save $20 per week, every week for a year, after one year you will have saved $1,040!
Keep this up and after five years you will save $5,200, not to mention the interest you will earn!

29. Cost-Benefit Analysis
Process by which business decisions are analyzed. The benefits of a given situation or business-related action are summed, and then the costs associated with taking that action are subtracted.
Seinfeld-CBA

30. Making a Budget: CREDIT: Terms
Borrowing $ to pay now, enjoy now, but repay later
Annual percentage rate (APR)
Annual cost of credit
Credit rating
Evaluation of borrower’s ability to repay
Collateral
Items of value pledged as security on a loan
Interest
$ paid to lender for allowing use of money by borrower

31. Making a Budget: CREDIT: Sources
Credit Cards
Most common
Banks, cc companies, stores
$ limit set on spending allowance
Mortgages
Home loans
Car loans

32. Making a Budget: CREDIT: Benefits & Drawbacks
Can buy now and pay later… helps to satisfy wants
Meeting payment requirements can teach financial discipline
BANKRUPTCY !!