2.1.3.G1 © Take Charge Today – August 2013 – Financial Decisions – Slide 1 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Introduction to Chapter 4 Objectives: Apply the concepts of trade-offs and opportunity costs to decision making. Identify the difference between a cash flow and net worth statement. QUESTION: Describe the difference between… Instant Gratification and Future Gratification

2.1.3.G1 Financial Decisions Chapter 4, Section 1

2.1.3.G1 © Take Charge Today – August 2013 – Financial Decisions – Slide 3 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona What contributes to the decisions you make? Financial Decisions Values Needs Wants

2.1.3.G1 © Take Charge Today – August 2013 – Financial Decisions – Slide 4 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Needs, Wants, and Cupcakes Icing and decorations represent wants, the extra items that make our lives interesting and enjoyable. The cake part of a cupcake represents our needs. They must be present and addressed before considering any icing or decorations (wants). Decisions : ask yourself if your needs are met before spending on any of your wants. What you determine to be a need versus a want will depend on your personal values.

2.1.3.G1 © Take Charge Today – August 2013 – Financial Decisions – Slide 5 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Resources Limit Choices Unlimited Wants/Needs + Limited Financial Resources = Financial Choices **Opportunity Cost

2.1.3.G1 © Take Charge Today – August 2013 – Financial Decisions – Slide 6 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Financial Strategies Consider your future – Financial Plan/Goals If you have doubt, don’t buy it – Remember: businesses create demand by advertising Avoid buyer’s remorse (impulse buys) – Don’t be tempted to buy products you can’t afford

2.1.3.G1 © Take Charge Today – August 2013 – Financial Decisions – Slide 7 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Cash Flow Statement April 1-30, 2012 Cash Inflows (Income) Work (part-time)$ Allowance for household chores40.00 Lunch money allowance60.00 Savings account interest2.00 Total cash inflows$ Cash Outflows (Expenses) Gifts$20.00 Clothes and shoes60.00 Loan payment to parents20.00 Lunches60.00 Entertainment/miscellaneous40.00 Total cash outflows Net cash flow$22.00 Shows the movement of money FINANCIALSITUATIONFINANCIALSITUATION

2.1.3.G1 © Take Charge Today – August 2013 – Financial Decisions – Slide 8 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Slide Resources and Choices PERSONAL NET WORTH STATEMENT Assets (items of value)Liabilities (debt) Cash and checking account$ Car loan$1, Savings account500.00Credit card debt Savings bond300.00Total liabilities$1, Baseball card collection Computer, iPod, games Car, current value 3,000.00Net Worth Total assets$4,652.56Assets minus liabilities 3, Total liabilities and net worth$4, Net Worth Shows your wealth based on assets – liabilities FINANCIALSITUATIONFINANCIALSITUATION

2.1.3.G1 © Take Charge Today – August 2013 – Financial Decisions – Slide 9 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Slide Resources and Choices NAME THIS STATEMENT! Assets (items of value)Liabilities (debt) Cash and checking account$ Car loan$1, Savings account500.00Credit card debt Savings bond300.00Total liabilities$1, Baseball card collection Computer, iPod, games Car, current value 3,000.00Net Worth Total assets$4,652.56Assets minus liabilities 3, Total liabilities and net worth$4, Net Worth Shows your wealth based on assets – liabilities FINANCIALSITUATIONFINANCIALSITUATION

2.1.3.G1 © Take Charge Today – August 2013 – Financial Decisions – Slide 10 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona NAME THIS STATEMENT! April 1-30, 2012 Cash Inflows (Income) Work (part-time)$ Allowance for household chores40.00 Lunch money allowance60.00 Savings account interest2.00 Total cash inflows$ Cash Outflows (Expenses) Gifts$20.00 Clothes and shoes60.00 Loan payment to parents20.00 Lunches60.00 Entertainment/miscellaneous40.00 Total cash outflows Net cash flow$22.00 Shows the movement of money FINANCIALSITUATIONFINANCIALSITUATION

2.1.3.G1 © Take Charge Today – August 2013 – Financial Decisions – Slide 11 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona NAME THIS STATEMENT! April 1-30, 2012 Cash Inflows (Income) Work (part-time)$ Allowance for household chores40.00 Lunch money allowance60.00 Savings account interest2.00 Total cash inflows$ Cash Outflows (Expenses) Gifts$20.00 Clothes and shoes60.00 Loan payment to parents20.00 Lunches60.00 Entertainment/miscellaneous40.00 Total cash outflows Net cash flow$22.00 FINANCIALSITUATIONFINANCIALSITUATION

2.1.3.G1 © Take Charge Today – August 2013 – Financial Decisions – Slide 12 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Slide Resources and Choices NAME THIS STATEMENT!! AssetsLiabilities Cash and checking account$ Car loan$1, Savings account500.00Credit card debt Savings bond300.00Total liabilities$1, Baseball card collection Computer, iPod, games Car, current value 3,000.00Net Worth Total assets$4,652.56Assets minus liabilities 3, Total liabilities and net worth$4, FINANCIALSITUATIONFINANCIALSITUATION

2.1.3.G1 © Take Charge Today – August 2013 – Financial Decisions – Slide 13 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Why do you think this happens? – People do not make enough money – People spend too much money Almost half of all American families spend more money than they make

2.1.3.G1 © Take Charge Today – August 2013 – Financial Decisions – Slide 14 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Why is a Spending Plan an important part of financial planning? Analyze the opportunity costs to maximize financial well- being Set and reach goals Track where your money is going Identify income and expenses

2.1.3.G1 © Take Charge Today – August 2013 – Financial Decisions – Slide 15 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Money Management Tools Statement of Financial Position Cash Flow & Net Worth Income & Expense Statement Spending Plan/Budget What is my financial position today? What is my future money management plan? How have I managed my money in the past? Make changes Determine what changes to make

2.1.3.G1 © Take Charge Today – August 2013 – Financial Decisions – Slide 16 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Spending Plan Development Process Step 1 – Analyze spending for one month Step 2 - Personalize by designating money to specific categories Step 3 – Implement and Control Step 4 – Identify Variances Step 5 – Balance your budget Develop the spending plan Maintain the spending plan

2.1.3.G1 © Take Charge Today – August 2013 – Financial Decisions – Slide 17 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Be Sure to Pay Yourself First! Before designating money in different categories, take a fixed amount for yourself and put it in your savings account. Remember, a little goes a long way! Amount SavedInterest Earned10 Year Future Value $7.005%$4,720 $21.005%$14,160 $35.005%$23,600

2.1.3.G1 © Take Charge Today – August 2013 – Financial Decisions – Slide 18 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Strategy Spend 70% of your income Save 20% of your income Invest 10% of your income

2.1.3.G1 © Take Charge Today – August 2013 – Financial Decisions – Slide 19 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Spending Plan Guide What variables may cause these percentages to be different?

2.1.3.G1 © Take Charge Today – August 2013 – Financial Decisions – Slide 20 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Financial Plan (One Goal) FINANCIAL PLAN Net worth on April 1, 20--: $ Personal Goal Financial Goal Steps to Take (Benchmarks) Timeline Live in my own house in the country. Buy a house in the country. 1.Save money for a down payment ($12,000) 5 years Set aside $200 per month Once per month Open a separate account for money saved November 6 (next week) Talk to a mortgage broker to get prepared Make an appointment for November 9 2.Get a job that provides enough income to make monthly payments 2 years Step 1: Gather Information Step 2: Analyze Step 3: Set Goals Step 4: Develop a Timeline Step 5: Implement **Review and Update as Needed**

2.1.3.G1 © Take Charge Today – August 2013 – Financial Decisions – Slide 21 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Budget Advice In your assigned group, read through the information on the Brown Family and the Carson Family and complete both activities.