1.  What shape is our economy in?  Dave Ramsey Activity…  Chapter 1 Quiz  Chapter 1 Notes  Get My Goals WS  NEFE 1-7 pages PF-Chapter 1 Personal Planning1

2. 1. Payday: You did it! You are a Millionaire.  Statistically speaking you represent a portion of society that adheres to a financial game plan, avoids debt, invests early, and is wise with their resources 2. Smarties: Debt Free and Living Large  You’ve paid for your college education, your care, and your house, and you have a fully funded emergency fund  You live within our means, save, and pay for things with cash  You started saving for retirement a little late, but other than that you’re looking good! PF-Chapter 1 Personal Planning2

3. 3. Dum Dums: “Normal, Broke, Busted and Disgusted”  23 year old college graduate  Total debt is $45,000 (car: 21,000, school loan 20,000, credit card: 4,000)  Annual Income: $40,000…Monthly Take home pay $2,500…Monthly expenses…$2,125  You’ll have to save for three months to get over $1,000 in the emergency fund  It will take you 10 years to pay off your student loan, 5 years to pay off your car, and credit card by making only the monthly payment 4. Jay Breakers: “Zero, Zilch, Nada…The American Dream”  Married, 28 years old, two kids, and a dog  Combined debt of $85,400: Car loans $42,000; school loans $35,000, credit card $8,400  Annual income: $80,000….take home pay $4,700, expenses, $4,555  You’ll have to save more than 7 months to get $1,000 in emergency fund  It will take you a min. of 10 years to pay off credit card; 15 years pay off student loan, and you will always have a car payment!  12 years you will have no money in the bank and your kids need to go to college  You can’t make it…file for bankruptcy…maybe divorce  90% of divorces stem from a financial disagreements PF-Chapter 1 Personal Planning3 Milk Duds: “Death by Credit Cards” Same as Jaw Breakers but with $100,000 in debt more. Under pressure, depressed, ARRRGGGG

4. Why is it important to set financial goals? Do you think that it makes a difference in the long run? PF-Chapter 1 Personal Planning4

5.  Arranging to spend, save, and invest money to live comfortably, have financial security, and achieve goals  Goals: things you want to accomplish  Everyone has different goals (e.g car, pay for college, new pair of shoes, starting a business)  Financial planning WILL help you reach these goals… PF-Chapter 1 Personal Planning5

6. 1. Determine your current financial situation 2. Develop financial goals  Needs vs. wants 3. Identify your options (jobs, potential income, savings, stay the same) 4. Evaluate your alternatives (leave job, save vs. spend)  Opportunity cost: what is given up when making one choice instead of another 5. Create your financial plan of action 6. Review & Revise Plan PF-Chapter 1 Personal Planning6

7.  Inflation (prices increase)  Interest (rates fluctuate)  Income (loss or gain of job)  Personal (driving to Alaska vs. flying)  Liquidity: the ability to easily convert financial assets into cash without loss in value (house vs. checking account) PF-Chapter 1 Personal Planning7

8.  Short-term goals: take 1 year or less to achieve (e.g. buying a computer)  Intermediate goals: take 2- 5 years to achieve (saving $ for down payment on house)  Long-term goals: take more than five years to achieve (retirement or saving for college) PF-Chapter 1 Personal Planning8

9.  R ealistic  S pecific  C lear time frame  D ictate Action PF-Chapter 1 Personal Planning9 Once you meet your goals you can buy goods and services….. Service: task that person or machine performs Good: physical item Consumable Good: everyday items Durable Good: long term items (car) Intangibles: health, relationships

10.  You may set realistic, specific goals, BUT…there are other life changes and challenges that can effect your goals  Some include:  Economy  Supply  Demand  Federal Reserve System  Inflation  Interest Rates PF-Chapter 1 Personal Planning10

11.  Save your notes as PF-Ch 1 notes  We will finish and print notes next class  Get My Goals! Worksheet Individually  Get out your NEFE book and read pages 1-7  Complete the activities on pages 1-7 with a partner quietly  We will review the NEFE book pages together at the end of class PF-Chapter 1 Personal Planning11

12. Get Article, “6 Financial Milestones before 30” and read. Journal the following: List 5 tips that the article offers to people before they turn 30. PF-Chapter 1 Personal Planning12

13.  Whenever you make a choice, you have to give up, or trade off, some of your other options  When making your financial decisions and plans, you will need to carefully consider:  Personal opportunity costs: personal resources that impact your future potential (e.g You have tickets to a concert on Thursday night and a Math test on Friday morning. The opportunity cost of going to a concert is not getting enough sleep or study time and not doing well on the exam)  Financial opportunity costs PF-Chapter 1 Personal Planning13

14.  Choosing how to spend, save or invest your money  E.g. spending $129 on new Nike Shoks or putting the $129 in the bank to earn interest  Time Value of Money: increase of the amount of money due to interest or dividends earned PF-Chapter 1 Personal Planning14

15. You can calculate the time value of your savings by figuring out how much interest you will earn. To do this, you will need to know:  The principal  The annual interest rate  The length of time your money will be in an account By comparing interest rates at several financial institutions, you can figure out which one will make your money grow the fastest. (PAGE 21) PF-Chapter 1 Personal Planning15

16.  Future Value: the amount your original deposit will be worth in the future based on a specific interest rate over a specific period of time  Principal: the original amount of money on deposit  Interest Rates: annual rate given by financial institutions that you earn on money invested PF-Chapter 1 Personal Planning16

17.  You deposit $1,000 into a saving account  The bank will pay you 3% annual interest  FORMULA: Principal x Annual Interest Rate = Interest earned in 1 year  $1,000 x.03 = $30  SEE PAGE 21 IN TEXT PF-Chapter 1 Personal Planning17 Bank 1 Bank 3 Bank 2

18.  Print both days of Chapter 1 Notes  Bring notes for me to check (10 points)…I am looking for both days notes & both journals  Get a Chapter 1 packet and start working on  Finance Collage PF-Chapter 1 Personal Planning18