1. Steps For Financial Decisions

2. Vocabulary Inventory Income Expenses Debt Savings Estimate Need Want

3. Six Steps for Financial Decisions Determine Your Current Financial Situation Develop Your Financial Goals Identify Alternative Courses of Action Evaluate Your Alternatives Create and Use Your Financial Plan of Action Review and Revise Your Plan

4. 1. Determine Your Current Financial Situation Take an inventory of your finances Inventory: a complete list of items such as property, goods in stock, or the contents of a building. a.Determine your monthly income Income: money received, especially on a regular basis, for work or through investments. b.Determine your monthly expenses Expenses: the cost required for something; the money spent on something.

5. Take an inventory of your finances (cont.) c.Determine your total debt something, typically money, that is owed or due. d.Determine your total saving an economy of or reduction in money, time, or another resource. the money one has saved, especially through a bank or official scheme.

6. Take an inventory of your finances (cont.) One needs to estimate their inventory Estimate: an approximate calculation or judgment of the value, number, quantity, or extent of something. How do you do that? Look at past values and calculate based on them and changes

7. 2. Develop Your Financial Goals How do your values about finances affect your goals? Determine what you need verses what you want. Need Something that is critically essential. Want Something that you desire or wish for. You might need to prioritize your goals

8. Vocabulary Risk

9. 3. Identify Alternative Courses of Action Make a list of options to obtain a financial goal Get ideas from other sources such as friends, bankers, “older people” May want to increase/decrease savings May want to lower the goal to make it more attainable May want to sacrifice another goal to reach this one May want to find another way that has the same effect (truck vs. trailer)

10. 4. Evaluate Your Alternatives Use the Internet, financial institutions, magazines, specialists, and parents Realize you will only be able to choose one plan – others need to be shelved Calculate the Risks Risk – a chance of loss or possible gain, daring choices

11. Inflation Risk The price of an item may be higher next year, or the item is on sale only for a short time. Interest Rate Risk Interest varies based upon the economy. Rates may be higher/lower in the future Income Risk Will your job be there in the future: health/accident/closings/job changes Personal Risk Does your job place you in a high risk category? Is public transportation better than personal transportation Is your job stressful/hated/loved Liquidity Risk Can you convert your assets into cash to pay off debt? How fast can you convert your assets into cash?

12. 5. Create and Use Your Financial Plan of Action Implement your plan and stick to it

13. 6. Review and Revise Your Plan Remember that situations come up that you were not expecting With unforeseen changes happening, are you going to keep the same plan or modify it? If you get married will you keep the same plan?