1. Unit 1 - Your Financial Plan:
Where It All Begins

2. Objective
Students will be able to examine how the economy works, basic economic terminology and the definition of money

3. Terms to know Goals Financial Literacy Financial goals Money
Short-term goals
Intermediate goals
Long-term goals
Financial planning
Delayed gratification
Opportunity cost
Satellite decisions
Trade-off
Wants
Needs
Values
Financial Literacy
Money
Medium of Exchange
Economy
Economist
Supply
Demand
Market Economy
Barter Economy
Inflation
Incentive
Scarcity
Smart goals

4. Financial Literacy Is the ability to understand how money
works in the world: how someone manages
to earn or make it, how that person
manages it, how he/she invests it (turn it into
more) and how that person donates it to
help others.
Is the ability to understand finance
It is an understanding of money management (spending plans, credit management and savings).
Understanding how to finance your money

5. Financial Literacy Goals Rights and responsibilities Resource Mgt
Decision Making Financial Service Fraud Prevention

6. Money
Money is anything that serves as a medium of exchange that means it will be accepted as payment for goods or services Medium of exchange is a function of money that means it will be accepted as payment for goods or services (ex. Check, debit card, cash, credit card)

7. Economy
Economy means all the activities related to making and distributing goods and services in an area
Economist is a person who studies the economy
Economy is growing people are buying goods or services. The lower the demand for goods and services may mean the business is not growing. The study of the economy is often said to be the study of scarcity

8. Market vs. Barter Economy
The US has a market economy where the price for an item is set at a point that consumers are willing to pay and sellers are willing to accept
Barter economy is system of exchange by which goods or services are directly exchanged for other goods or services without using a medium of exchange such as money.

9. Demand vs. Supply
Demand – the willingness and ability of consumers to buy products and services
Products and services that are very popular among consumers they are said to have high demand.
When demand exceeds > supply business may charge higher prices for products
Needs and wants vs. spending wised and getting most value from dollars spent. Example clothes

10. Inflation
is a general increase in prices and fall in the purchasing value of money.

11. Recession
Is a significant decline in the economic activity lasting more than a few months, where growth slows, businesses stop expanding, employment falls, unemployment rises, and housing prices decline.
Recessions are cyclical

12. Demand vs. Supply
Supply the quantity of goods and services that producers are willing and able to provide
So when Supply is > than the demand business will charge less for their products
(put things on sale, BIGI 50% off. etc)
Conclusion: Understanding how the economy affects prices of products, the job market, and your income can help you make better financial decisions.

13. Scarcity
The basic economic situation – limited resources and unlimited wants
Economy is growing people are buying goods or services.
The lower the demand for goods and services may mean the business is not growing.
The study of the economy is often said to be the study of scarcity

14. Objective
Explain the relationship between spending practices and achieving financial goals by distinguishing between needs and wants

15. Needs vs. Wants
Needs - are very basic things we must have to survive. Ex. Food, clothing, shelter and money Wants - are the beliefs and practices in your life that are very important to you (you don’t need it to live, makes life easier).
“Anytime you go shopping, you should ask yourself, is this a need or is this a want?” – Michelle Singletary

16. 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
______________
1-C

21. Spending Record $6.00 $35.00 $4.00 $7.00 $5.00 $8.00 $15.00 $15.00
$55.00
$40.00
$15.00
1-I

24. Objective
Analyze the five steps in the financial planning process focusing on the importance of values, goal setting by creating smart goals differentiating between short-term, intermediate and long-term goals (2 to 3 days)

25. Values
The beliefs and practices in your life that are very important to you.
Ethics

26. Values Getting a good education Religious faith or beliefs
Social causes
Handling money responsibly
Friendships / The people I hang out with
What do you think about --slaughtering animals for their furs? Do you eat meat?
____________________________
1-D

27. “Most people don’t plan to fail… They simply fail to plan!”

28. Financial Planning
Is a process of setting goals, developing a plan to achieve them and putting the plan into action.
Every decision today affects decisions made in the future.

29. Goals Personal & Financial
Goals – a plan that is based on values or desired outcomes Personal goals – Things a person wants to achieve Financial goals – methods used to pay for personal goals
Give Mrs. K’s personal goals and financial goals

30. The Five-Step Financial Planning Process
1-B

31. Term Goals Within three months Three months to a year More than a year
SHORT-TERM GOALS
Within three months
INTERMEDIATE-TERM GOALS
(medium)
Three months to a year
LONG-TERM GOALS
More than a year
1-E

32. S-M-A-R-T GOAL CRITERIA
Specific
Measurable
Attainable
Realistic
Time-Limited
1-G

33. Specific…….. Measurable… Attainable….. Realistic……. Time-Limited..
SMART Goals
Specific……..
“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.”
1-H

34. Apply what we learned
Mika knows she will need a new phone in 2 months. What are two things we can say to describe this?
Answer that it is a want and a short-term goal
Want and a short-term goal

35. Why People Have Money Problems?
Spend more than they make
Buy on credit and can’t pay
3. Don’t budget or know exactly how much you are getting and spending
4. Don’t plan
5. Don’t save money to increase financial security
Spend more than they make
Buy on credit and can’t pay
Don’t budget
Don’t plan

36. What can be done to prevent this from happening to you?
Set goals
Budget money
Don’t spend more than you make

37. Developing Goals What is the time frame?
Short-term— within 3 months
Intermediate—reached in 3months to 1 year
Long-term—reached after 1 year
Guidelines for developing goals:
Be specific
Be measurable
Be attainable
Be realistic
Have a clear time frame
What action needs to be taken?

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

42. Decision Making Video Clip

43. Understanding the Importance of a Financial Plan by Setting Goals
If I fail to plan, I plan to fail. What does this mean to you?
List your financial goals
How do you plan to achieve them?

44. Financial Planning Take out your Financial ID Quiz
What did you find out about yourself?
What is meant by “Pay Yourself First”?
Put some money into your savings account before paying bills

45. Decision-Making Process
Identify Your
Goal
Establish
Criteria
Examine Your
Options
Weigh Pros and Cons
worksheet
Make a Decision
Evaluate
Results
1-K

46. The Decision- Making Process p9
NEFE High School Financial Planning Program
Unit One - Your Financial Plan: Where It All begins
Decision Making and Financial Planning
The Decision- Making Process p9
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
Examine Your
Options
1-L

47. Know What You Want Identify Your Goal Decide where to eat Establish
Criteria 1. 2. 3.
1-M

48. 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.
___________________________________________________________________
1-F

49. Opportunity Cost, Scarcity, Trade-offs & Satellite Decisions
Opportunity cost is the cost of passing up the next best alternative when making a decision
Scarcity – the basic economic situation – limited resources and unlimited wants
Trade-off – giving up one want to satisfy another
Satellite decisions – is when a major decision leads to several smaller ones ex. Car (kind, down payment, color, where and when to buy, insurance, etc.)

50. Satellite decision examples
Buying a car creates the need to make other decisions like where to obtain car insurance
John purchased a new gaming system that one came with one controller. He needs another to play the game with a friend so he purchased a second
fix

51. Opportunity Cost Scenarios
Scenario 1. Time Scarcity: Volunteer Work or SAT Prep: 24 hours in a day Rosa has to decide how to spend her time Alternative: Attend SAT prep or do volunteer work at a community agency Decision: ? Opportunity cost: ? Complete Scenario 2 Money & 3 Space
Incentive to make decision is that sat scores could improve and help her gain admission to the college of her choice
Volunteer work is the choice, Rosa will miss added prep for the sat. An incentive for Rosa would be that many college admission officers consider extracurriculars. Added incentive Rosa could receive great satisfaction.

52. Opportunity Cost Example
Reduce income by cutting back on work hours to go to college

53. Why is it important to have a financial plan?
To have money to buy what I want
To be able to afford things
To have financial security (be able to pay bills and buy what I want)

54. REALITY
RESPONSIBILITY
RESTRAINT
1-N

55. SAVING
SPENDING
SHARING
1-O

56. Unit 1: Your Financial Plan:
Where it All Begins