1. Glencoe Personal FinanceCopyright © by The McGraw-Hill Companies, Inc. All rights reserved.

2. Glencoe Personal FinanceCopyright © by The McGraw-Hill Companies, Inc. All rights reserved. Personal Opportunity Cost Section 2Opportunity Costs and Strategies Personal Financial Planning Personal Resources Require Management Health Chapter 3

3. Glencoe Personal FinanceCopyright © by The McGraw-Hill Companies, Inc. All rights reserved. Financial Opportunity Cost Section 2Opportunity Costs and Strategies Personal Financial Planning To help make choices, consider the time value of money. time value of money the increase of an amount of money due to earned interest or dividends Chapter 3

4. Glencoe Personal FinanceCopyright © by The McGraw-Hill Companies, Inc. All rights reserved. Opportunity Cost Personal Financial Planning An opportunity cost is what you give up to get something else. Source: www.collegeboard.com Chapter 3

5. Glencoe Personal FinanceCopyright © by The McGraw-Hill Companies, Inc. All rights reserved. Financial Opportunity Cost Section 2Opportunity Costs and Strategies Personal Financial Planning Calculating Interest principal the original amount of money on deposit Chapter 3

6. Glencoe Personal FinanceCopyright © by The McGraw-Hill Companies, Inc. All rights reserved. Financial Opportunity Cost Section 2Opportunity Costs and Strategies Personal Financial Planning Calculating Future Value future value Multiply the principal by the annual interest rate and then add that interest amount to the principal. Chapter 3

7. Glencoe Personal FinanceCopyright © by The McGraw-Hill Companies, Inc. All rights reserved. Financial Opportunity Cost Section 2Opportunity Costs and Strategies Personal Financial Planning What is present value? present value Chapter 3

8. Glencoe Personal FinanceCopyright © by The McGraw-Hill Companies, Inc. All rights reserved. Achieving Your Financial Goals Section 2Opportunity Costs and Strategies Personal Financial Planning Strategies 1 2 3 4 5 6 7 8 Obtain financial records. Invest to increase current income and for long-term growth Plan for retirement. Chapter 3

9. Glencoe Personal FinanceCopyright © by The McGraw-Hill Companies, Inc. All rights reserved. Personal Financial Planning Chapter 3

10. Glencoe Personal FinanceCopyright © by The McGraw-Hill Companies, Inc. All rights reserved. A common piece of financial advice is “Do not live beyond your means.” Explain the meaning of this statement. Do you think it is good advice? Why or why not? Section 2Opportunity Costs and Strategies Personal Financial Planning Chapter 3