Essential Standard 1.00: Understand economic activities of individuals and families. Objective 1.02Understand characteristics of financial goals, steps in decision making and factors that affect financial decisions.
Essential Questions What are the steps in goal setting and decision making? How do individuals needs, wants, values, standards, and priorities affect financial goals and decisions?
FINANCIAL GOALS Financial Goals Financial goals should be SMART: are Specific accomplished Measurable through and give Attainable direction to Realistic financial Time-bound planning. Learning to set financial goals is an important part of learning to live
Decision Making Steps 4. Identify the pros and1. Identify the problem & cons of each option decision to be made 5. Choose the best2. Identify resources and option gather information 6. Put the decision into3. Identify the options action..just do it! (alternatives) 7. Evaluate the *team members outcomes of the brainstorm decision
Six Steps in Economic Decision- Making Process Do the Positives (+) outweigh the Negatives (-)? + Disadvantages Advantages Use T-account to determine positives and negatives Good Decision/Bad Decision5
Good Decision Making Following logical Good decisions lead steps when making to the achievement decisions helps of goals and a feeling individuals make of self-control and informed choices. self-confidence. When decisions are Good decisions are a made from habit or on key to successful impulse, there is a independent living. greater likelihood of Who makes those negative outcomes. decisions? Be sure YOU are making the best decisions!
FACTORS THAT AFFECT FINANCIALDECISIONS Family factors Technology Cultural factors The media Social factors The marketplace Societal and Legal and moral demographic factors factors Economic factors Personal factors Steps in Decision Making
Personal Factors Breakdown Needs and wants Distinguishing wants from needs helps individuals and families set more realistic goals and make better decisions. Values Understanding and prioritizing values helps individuals and families set goals and make decisions that lead to greater personal satisfaction. Standards --- Measures of quality or excellence With regard to standards for success, individuals have different views of what it means to be successful. Priorities Each individual or family needs to set priorities by deciding what is more important at any point in time.
Principles of Financial Planning from the Jump$tart Coalition Classify the 12 Money doubles by the “Rule of 72” Your credit past is your credit future Start saving young Stay insured Budget your money Don’t borrow what you can’t repay Map your financial future Don’t expect something for nothing High returns equal high risks Know your take-home pay Compare interest rates Pay yourself first http://www.jumpstartcoalition.org/files2010/2010_J$_Cale ndar.pdf
Factors AffectingDecisions Family structure Income level Lifestyle Size Age Stage of life cycle Health status Emergencies
Cultural factors Cultural and ethnic groups impact Values Beliefs Lifestyle Family structures Clothing choices What are the advantages and disadvantages of cultural diversity within a family, a school, a workplace, a community?
Social factors Education level Family structure Immigration Ethnicity Rural, urban, suburban community Peer pressure Community relationships and involvement
Societal and DemographicFactors Demography is the statistical characteristics of a population Age Sex Race Birth, marriage, death rates Where people live
Economic Factors Employment rate Kind and number of jobs available Inflation A period of rapid increase in the price of goods and services Recession An extended period of slow economic growth * Review the Business Cycle-prosperity, recession, depression, recovery Government Regulations & Spending Fiscal policies affect personal & business spending Cash for clunkers, stimulus $, tax rates
Technology The use of mechanical or electronic devices to manipulate Information (Computers, Ipads, Fax machines, fiber optics, GPS systems, smart phones) Objects (i.e Robots, automated assembly lines, hybrid cars) On going change impacts Training needs Replacing obsolete technology Types of jobs available
The Media Impacts the ways people and businesses communicate and operate locally, nationally, and globally. Communications that reach large audiences with the aid of publication devices that include Internet Television Voice, text, & data transmissions Publications
The Marketplace Supply Goods and services available to the consumer Demand Consumer desire to purchase as compared to availability Market response How quickly the market adjusts to supply versus demand
Legal and Moral Factors Laws that impact spending Taxation Investment and Retirement Accounts Insurance requirements Beliefs in what is right and wrong What is appropriate behavior of employers, employees, and individuals at home, work, and within the community. Charitable Giving and Community Service
Personal Factors Needs Items to survive – food, clothing, & shelter Wants Not essential but desirable – cell phone, Music CDs, Values A person’s belief about what is important and desirable