NEFE High School Financial Planning Program
Unit One - Your Financial Plan: Where It All Begins
Unit 1 - Your Financial Plan:
Where It All Begins
NEFE High School Financial Planning Program
Unit One - Your Financial Plan: Where It All Begins
Objective
• Students will be able to examine how the
economy works, basic economic
terminology and the definition of money
NEFE High School Financial Planning Program
Unit One - Your Financial Plan: Where It All Begins
Terms to know
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Financial Literacy
Money
Medium of Exchange
Economy
Economist
Supply
Demand
Market Economy
Barter Economy
Inflation
Incentive
Scarcity
Smart goals
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Goals
Financial goals
Short-term goals
Intermediate goals
Long-term goals
Financial planning
Delayed gratification
Opportunity cost
Satellite decisions
Trade-off
Wants
Needs
Values
NEFE High School Financial Planning Program
Unit One - Your Financial Plan: Where It All Begins
Financial Literacy
• Is the ability to understand how money
works in the world: how someone manages
to earn or make it, how that person
manages it, how he/she invests it (turn it into
more) and how that person donates it to
help others.
• Is the ability to understand finance
It is an understanding of money
management (spending plans, credit
management and savings).
NEFE High School Financial Planning Program
Unit One - Your Financial Plan: Where It All Begins
Financial Literacy
NEFE High School Financial Planning Program
Unit One - Your Financial Plan: Where It All Begins
Money
Money is anything that serves as a medium
of exchange that means it will be accepted
as payment for goods or services
Medium of exchange is a function of money
that means it will be accepted as payment
for goods or services (ex. Check, debit card,
cash, credit card)
NEFE High School Financial Planning Program
Unit One - Your Financial Plan: Where It All Begins
Economy
• Economy means all the activities related
to making and distributing goods and
services in an area
• Economist is a person who studies the
economy
NEFE High School Financial Planning Program
Unit One - Your Financial Plan: Where It All Begins
Market vs. Barter Economy
• The US has a market economy where
the price for an item is set at a point that
consumers are willing to pay and sellers
are willing to accept
• Barter economy is system of exchange
by which goods or services are directly
exchanged for other goods or services
without using a medium of exchange such
as money.
NEFE High School Financial Planning Program
Unit One - Your Financial Plan: Where It All Begins
Demand vs. Supply
• Demand – the willingness and ability of
consumers to buy products and services
• Products and services that are very
popular among consumers they are said to
have high demand.
• When demand exceeds > supply business
may charge higher prices for products
NEFE High School Financial Planning Program
Unit One - Your Financial Plan: Where It All Begins
Inflation
is a general increase in prices and fall in the
purchasing value of money.
NEFE High School Financial Planning Program
Unit One - Your Financial Plan: Where It All Begins
Recession
• Is a significant decline in the economic
activity lasting more than a few months,
where growth slows, businesses stop
expanding, employment falls,
unemployment rises, and housing prices
decline.
NEFE High School Financial Planning Program
Unit One - Your Financial Plan: Where It All Begins
Demand vs. Supply
• Supply the quantity of goods and services
that producers are willing and able to
provide
• So when Supply is > than the demand
business will charge less for their products
(put things on sale, BIGI 50% off. etc)
NEFE High School Financial Planning Program
Unit One - Your Financial Plan: Where It All Begins
Scarcity
• The basic economic situation – limited
resources and unlimited wants
• Economy is growing people are buying
goods or services.
• The lower the demand for goods and
services may mean the business is not
growing.
• The study of the economy is often said to
be the study of scarcity
NEFE High School Financial Planning Program
Unit One - Your Financial Plan: Where It All Begins
Objective
• Explain the relationship between spending
practices and achieving financial goals by
distinguishing between needs and wants
NEFE High School Financial Planning Program
Unit One - Your Financial Plan: Where It All Begins
Needs vs. Wants
Needs - are very basic things we must have
to survive.
Ex. Food, clothing, shelter and money
Wants - are the beliefs and practices in your
life that are very important to you (you don’t
need it to live, makes life easier).
“Anytime you go shopping, you
should ask yourself, is this a need or
is this a want?” – Michelle Singletary
NEFE High School Financial Planning Program
Unit One - Your Financial Plan: Where It All Begins
Sample Wants and Needs
NEEDS
• Food for breakfast
• Clothes for school
• Transportation to
school or work
• ______________
• ______________
1-C
WANTS
• An IPOD
• DVD Players
• Cell Phone
• Hot Car
• ______________
• ______________
NEFE High School Financial Planning Program
Unit One - Your Financial Plan: Where It All Begins
NEFE High School Financial Planning Program
Unit One - Your Financial Plan: Where It All Begins
NEFE High School Financial Planning Program
Unit One - Your Financial Plan: Where It All Begins
NEFE High School Financial Planning Program
Unit One - Your Financial Plan: Where It All Begins
NEFE High School Financial Planning Program
Unit One - Your Financial Plan: Where It All Begins
Spending
Record
$35.00
$5.00
$6.00
$4.00
$7.00
$8.00
$15.00
$15.00
$55.00 $40.00
$15.00
1-I
NEFE High School Financial Planning Program
Unit One - Your Financial Plan: Where It All Begins
NEFE High School Financial Planning Program
Unit One - Your Financial Plan: Where It All Begins
https://www.youtube.com/watch?v=TRTkCH
E1sS4
NEFE High School Financial Planning Program
Unit One - Your Financial Plan: Where It All Begins
Objective
• Analyze the five steps in the financial
planning process focusing on the
importance of values, goal setting by
creating smart goals differentiating
between short-term, intermediate and
long-term goals (2 to 3 days)
NEFE High School Financial Planning Program
Unit One - Your Financial Plan: Where It All Begins
Values
• The beliefs and practices in your life that
are very important to you.
NEFE High School Financial Planning Program
Unit One - Your Financial Plan: Where It All Begins
Values
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Getting a good education
Religious faith or beliefs
Social causes
Handling money responsibly
Friendships / The people I hang out with
What do you think about --slaughtering
animals for their furs? Do you eat meat?
• ____________________________
• ____________________________
1-D
NEFE High School Financial Planning Program
Unit One - Your Financial Plan: Where It All Begins
“Most people don’t plan to fail…
They simply fail to plan!”
1-A
NEFE High School Financial Planning Program
Unit One - Your Financial Plan: Where It All Begins
Financial Planning
• Is a process of setting goals, developing a
plan to achieve them and putting the plan
into action.
• Every decision today affects decisions
made in the future.
NEFE High School Financial Planning Program
Unit One - Your Financial Plan: Where It All Begins
Goals
Personal & Financial
Goals – a plan that is based on values or
desired outcomes
Personal goals – Things a person wants to
achieve
Financial goals – methods used to pay for
personal goals
NEFE High School Financial Planning Program
Unit One - Your Financial Plan: Where It All Begins
The Five-Step
Financial
Planning
Process
1-B
NEFE High School Financial Planning Program
Unit One - Your Financial Plan: Where It All Begins
Term Goals
• SHORT-TERM GOALS
–Within three months
• INTERMEDIATE-TERM GOALS
(medium)
–Three months to a year
• LONG-TERM GOALS
–More than a year
1-E
NEFE High School Financial Planning Program
Unit One - Your Financial Plan: Where It All Begins
S-M-A-R-T GOAL CRITERIA
Specific
Measurable
Attainable
Realistic
Time-Limited
1-G
NEFE High School Financial Planning Program
Unit One - Your Financial Plan: Where It All Begins
SMART Goals
for lodging, transportation, meals
Specific…….. “forPaya 5-day
trip to Washington, D.C.”
$300 through fundraising, $50 from
Measurable… “birthday
money, save $25 a week.”
If I stick to my plan, I’ll have the
Attainable….. “money
when I need it.”
“I still have enough money to live
Realistic……. on while I work toward this goal.”
“I need to have all the money by 6
Time-Limited.. months from now.”
1-H
NEFE High School Financial Planning Program
Unit One - Your Financial Plan: Where It All Begins
Apply what we learned
• Mika knows she will need a new phone in
2 months. What are two things we can say
to describe this?
• Answer that it is a want and a short-term
goal
NEFE High School Financial Planning Program
Unit One - Your Financial Plan: Where It All Begins
Why People Have Money
Problems?
1. Spend more than they make
2. Buy on credit and can’t pay
3. Don’t budget or know exactly how much
you are getting and spending
4. Don’t plan
5. Don’t save money to increase financial
security
NEFE High School Financial Planning Program
Unit One - Your Financial Plan: Where It All Begins
What can be done to prevent
this from happening to you?
• Set goals
• Budget money
• Don’t spend more than you make
https://screen.yahoo.com/dont-buy-stuff000000884.html
NEFE High School Financial Planning Program
Unit One - Your Financial Plan: Where It All Begins
Developing Goals
• What is the time frame?
– Short-term— within 3 months
– Intermediate—reached in 3months to 1 year
– Long-term—reached after 1 year
• Guidelines for developing goals:
– Be specific
– Be measurable
– Be attainable
– Be realistic
– Have a clear time frame
• What action needs to be taken?
NEFE High School Financial Planning Program
Unit One - Your Financial Plan: Where It All Begins
NEFE High School Financial Planning Program
Unit One - Your Financial Plan: Where It All Begins
NEFE High School Financial Planning Program
Unit One - Your Financial Plan: Where It All Begins
Age
Factors That Affect
Wants
Decision Making Needs
What about you?
Family
Time
Money
Values
Habits
1-J
Culture
Society
Motivation
Education
Attitudes
NEFE High School Financial Planning Program
Unit One - Your Financial Plan: Where It All Begins
Decision Making Video Clip
https://docs.google.com/file/d/0B2ptWhLqs_
0YV0hZOUtuLXppcXc/edit?pli=1
NEFE High School Financial Planning Program
Unit One - Your Financial Plan: Where It All Begins
Understanding the Importance of
a Financial Plan by Setting Goals
• If I fail to plan, I plan to fail.
What does this mean to you?
• List your financial goals
• How do you plan to achieve them?
NEFE High School Financial Planning Program
Unit One - Your Financial Plan: Where It All Begins
Financial Planning
• Take out your Financial ID Quiz
– What did you find out about yourself?
• What is meant by “Pay Yourself First”?
– Put some money into your savings account
before paying bills
NEFE High School Financial Planning Program
Unit One - Your Financial Plan: Where It All Begins
Decision-Making Process
Identify Your
Goal
Establish
Criteria
Examine Your
Options
Weigh Pros and Cons
Make a Decision
1-K
Evaluate
Results
NEFE High School Financial Planning Program
Unit One - Your Financial Plan: Where It All begins
Begins
Decision Making and Financial Planning
The DecisionMaking Process p9
Identify Your
Goal
Set Goals
Establish
Criteria
Examine Your
Options
Weigh Pros
and Cons
Analyze
Information
Create a Plan
Implement
the Plan
Make a Decision
Evaluate
Results
1-L
The Financial
Planning Process
Monitor & Modify
the Plan
NEFE High School Financial Planning Program
Unit One - Your Financial Plan: Where It All Begins
Know What You Want
Identify Your
Goal
Establish
Criteria
Decide where to eat
1.
2.
3.
1-M
NEFE High School Financial Planning Program
Unit One - Your Financial Plan: Where It All Begins
Delayed Gratification
• Saving money over time to make a major
purchase.
• Waiting to buy a new product until the
price goes down.
• Waiting to see the latest movie until the
crowds get smaller and the lines shorter.
• __________________________________
_________________________________
1-F
NEFE High School Financial Planning Program
Unit One - Your Financial Plan: Where It All Begins
Opportunity Cost, Scarcity,
Trade-offs & Satellite Decisions
• Opportunity cost is the cost of passing up the
next best alternative when making a decision
• Scarcity – the basic economic situation –
limited resources and unlimited wants
• Trade-off – giving up one want to satisfy
another
• Satellite decisions – is when a major decision
leads to several smaller ones ex. Car (kind,
down payment, color, where and when to buy,
insurance, etc.)
NEFE High School Financial Planning Program
Unit One - Your Financial Plan: Where It All Begins
Satellite decision examples
• Buying a car creates the need to make
other decisions like where to obtain car
insurance
• John purchased a new gaming system
that one came with one controller. He
needs another to play the game with a
friend so he purchased a second
NEFE High School Financial Planning Program
Unit One - Your Financial Plan: Where It All Begins
Opportunity Cost Scenarios
Scenario 1.
Time Scarcity: Volunteer Work or SAT Prep:
24 hours in a day
Rosa has to decide how to spend her time
Alternative: Attend SAT prep or do volunteer
work at a community agency
Decision: ?
Opportunity cost: ?
Complete Scenario 2 Money & 3 Space
NEFE High School Financial Planning Program
Unit One - Your Financial Plan: Where It All Begins
Opportunity Cost Example
• Reduce income by cutting back on work
hours to go to college
NEFE High School Financial Planning Program
Unit One - Your Financial Plan: Where It All Begins
Why is it important to have a
financial plan?
• To have money to buy what I want
• To be able to afford things
• To have financial security (be able to pay
bills and buy what I want)
NEFE High School Financial Planning Program
Unit One - Your Financial Plan: Where It All Begins
REALITY
RESPONSIBILITY
RESTRAINT
1-N
NEFE High School Financial Planning Program
Unit One - Your Financial Plan: Where It All Begins
SAVING
SPENDING
SHARING
1-O
NEFE High School Financial Planning Program
Unit One - Your Financial Plan: Where It All Begins
Unit 1: Your Financial Plan:
Where it All Begins