1. Personal Finance and Economics
Chapter 20

2. Managing Your Money
Section 1

3. Consumer Rights
Consumers have rights, or protections, in the free enterprise system.
A consumer is someone who buys a good or service.

4. Two Types of Income Consumers have two types of income to spend:
Disposable Income: money left after taxes are paid
Discretionary Income: money left after bills are paid and after all necessities have been bought and paid for

5. Protecting Consumer Rights
Consumerism: a movement to educate buyers about the purchases they make and to demand better and safer products from manufacturers
Laws (ex. Pure Food and Drug Act)
Private groups (Better Business Bureau)

6. Consumer Bill of Rights
Right to a safe product
Right to be informed
Right to choose
Right to be heard
Right to redress

7. Consumer Responsibilities
Consumers have responsibilities as well as rights.

8. Smart Buying Strategies
Gather information
Use advertising carefully
Determine the best value
Comparison shopping is a buying strategy to get best buy for the money
Look at brand name and generic items
Balance costs and benefits

9. Other Responsibilities
Initiate problem-solving process for faulty goods or services
Keep warranty information
A Warranty is the promise made by a manufacturer or a seller to repair or replace a product within a certain time period if it is faulty
Respect rights of producers and sellers
Report problems to government when a settlement cannot be reached

10. Making Buying Decisions
Buying a product or service costs more than money; it also costs the time it takes to make the purchase and the opportunity cost of not buying something else.

11. Making Buying Decisions
Many factors are involved in consumers’ buying decisions.
Steps:
Decide whether to buy an item or not
Invest time obtaining product information
Balance opportunity cost

12. Planning and Budgeting
Section 2

13. Making a Budget and Sticking To It!
A budget is a record of money earned and spent to help you match expenses to income.

14. Basic Budgeting Terms
Income is money received from labor, business, or property
Expenses is money spent on goods and services
Balance: leftover money
Surplus: More income than expenses (good)
Deficit: More expenses than income (bad)

15. How To Make A Budget List what you spend. Record what you earn.
Analyze the data.
Try to have surplus.
Monitor spending.

16. Credit
Credit can be a valuable item in your financial toolbox; however, as with all tools, you have to know how to use it correctly.

17. Credit Credit is money borrowed to pay for a good or service
Credit allows consumers to receive a good or service and pay for it later.

18. Recognizing Credit Terms
A lender gives money to a borrower.
A lender charges interest, expressed as the annual percentage rate (APR).
APR is the annual cost of credit expressed as a percentage of the amount borrowed
A credit rating evaluates how well the borrower will repay the loan.
The borrower may pledge collateral for the loan.
Collateral is property or valuable item serving as security for a loan

19. Sources of Credit Usually require down payment
Banks, savings and loans, credit unions, finance companies offer credit
Most common—credit cards
Can charge high interest rates

20. Benefits of Credit Allows you to get what you want sooner
Teaches financial discipline

21. Drawbacks to Credit Spending more than you can afford
Bankruptcy is the inability to pay debts
Poor credit rating

22. Your Responsibility As A Borrower
Have a plan to make payments
Use budget skills
Understand credit agreement

23. Saving and Investing
Section 3

24. Saving For The Future
To save is to set aside income for later use.

25. Why Save? Money for large purchases Emergency aid Luxuries
Benefits the whole economy

26. Saving Regularly Automatic deposits into savings accounts
Budgeting for savings
Earning interest by saving through financial institutions
Interest is the payment people receive when they lend money or allow someone else to use their money

27. Deciding About Your Saving
Trade-offs:
Less to spend today
More to spend tomorrow

28. Types of Savings
Many ways exist for people to save portions of their incomes.

29. Savings Accounts Savings accounts Earn low interest on principal
Financial institutions loan the money to others

30. Checking Accounts Checking Accounts Money for purchases
Must keep careful records
Debit cards allow paperless money transfer

31. Money Market Accounts Money Market Accounts
Allows you to write checks, like a checking account
Pays interest like a savings account

32. Certificates of Deposit
Type of time deposit
Agreement to leave money in financial institution for a set amount of time

33. Investments
Making wise investments in a variety of stocks and bonds is an important part of achieving long-term financial goals.
Investing in stocks and bonds leads to higher returns than other types of savings.
Returns is the profit earned through investing

34. Stocks Shares of stock provide partial ownership in a company
A stock is an ownership share of a corporation
Stock prices may go up or down, based on company performance.
Investors may earn dividends.
Dividend is the payment of a portion of a company’s earnings
Higher possible return, but at greater risk

35. Bonds
A bond is a contract to repay borrowed money with interest at a specific time in the future
Loans money to company or government
Pays set rate of interest over several years
U.S. government bonds are a very safe investment.

36. Mutual Funds
Mutual Funds are pools of money from many people who are invested in a selection of individual stocks and bonds chosen by financial experts.
Pools money to invest in different stocks and bonds
Chosen by financial experts
Less risk than investment in individual stocks

38. Achieving Your Financial Goals
Section 4

39. What Kind Of Spender Are You?
Careful spenders avoid pitfalls, such as impulse buying, on their way to meeting their financial goals.
Impulse buying is purchasing an item on the spot because of an emotional rather than planned decision
Setting financial goals can help you spend money wisely.
Evaluate your spending to help you meet financial goals.

40. Impulse Buying Beware of impulse buying.
Try not to buy too quickly based on emotions.
Some impulse-buying is okay. Too much is bad.
Follow guidelines to avoid too much impulse buying.

41. Your Goals and Your Buying Decisions
The buying decisions you make can have a major impact on your life and career choices.
Consider goals when buying items.

42. Now or Later? Long-term goals can conflict with short-term goals.
Must balance long and short- term goals.
Long-term planning can improve finances down the road (e.g., saving for college will lead to higher income later)

44. Chapter Summary

45. Buying Strategy
Making consumer decisions involves deciding the following:
whether to spend your money
what you will purchase
how to use your purchase
Comparison shopping involves making comparisons among brands, sizes, and stores.

46. Consumerism Consumer Rights Include: the right to safety
the right to be informed
the right to choose
the right to be heard
the right to redress

47. Budget A budget is an organized plan for spending and saving money.
What you do with the information in a budget is up to you. No one can force you to spend less and save more unless you want to.

48. Credit
When buying on credit, the amount you will owe is equal to the principal plus interest.
Financial institutions that provide credit include commercial banks, savings and loan associations, and credit unions.

49. Saving and Investing It is important to get into the habit of saving.
Individuals have many places to invest their savings, including savings accounts and certificates of deposit.
Shares of stock entitle the buyer to a certain part of the future profits and assets of the corporation that is selling the stock.