1. Investing 9.2 Options to Spend, Save and now Invest. Investment—Occurs when people exchange their money for something of value with the expectation of earning profit from it in the future. Land, stock, bonds, etc. Greater risk but also possibly >returns

2. Financial Planning 9.2 Financial Plan—Provides one with an organized system of balancing your wants and needs with your ability to pay for them. Budget—A spending and savings plan. Fixed expenses—Payments that remain constant from month to month. Flexible expenses—vary from month to month.

3. Financial Planning 9.2 Investment Plan— First determine reasons to invest Need current income? OR increase value? What kind of investments to make? Diversification—A person chooses a variety of investments, CD’s, stocks, bonds, etc.

4. Financial Planning 9.2 Retirement Plan—How much money to set aside for retirement. Choosing investments that will grow while you are working. 401K Plans Company matching of $ Law of 72 (72/interest rate)=Years to double your investment. Estate Plan—Provides for a smooth transfer of a person’s property after death. *Helps avoid paying large estate taxes.

5. Types of Investment 9.2 Financial Investment—The exchange of property ownership and payment between two individuals or groups. Ex. Buying stocks, bonds, real estate, or other property. Real Investment—When investors use money to create a new capital good. Ex. Buy land/Build apartments

6. Law of 72 Save $300/month starting at age 22 Employer matches 50% on 401-K At age 30: approx. $50,000 in your account Assume a 10% return on your investment in stock market (Stock market over last 111 years) Investment doubles every 7 years(72/interest rate) Age 65: doubled 5 times $1.6 million assumes you would not add any more $ after age 30! Of course, you would continue to add $ every year. The “miracle” of compound interest!

7. Investment and Growth9.2 Capital Accumulation—The expansion of the capital goods existing in an economy. Promotes economic growth Ex. Replace one building with another OR Add an additional building in a business Technological Change—Real investment allows companies to purchase new technology—Ex. New software

8. Investment and Growth 9.2 Venture Capital—Money invested in entrepreneurial enterprises. Helps entrepreneurs develop an idea into a marketable product, improve production facilities, or finance product distribution.

9. Student exercise Look up 401-K information for the following companies: Microsoft Intel Johnson and Johnson Apple Citibank Do they have a 401-K employee plan? Explain any details that you find.