Unit One
Financial Priorities & Goals
Financial Literacy
Standard 1—Financial Priorities & Goals
Mrs. Morrey
Riverton High School
OBJECTIVE:
• Evaluate the role of emotions,
attitudes, and behavior in making
decisions.
• Describe a rational decision-making
process.
• Identify and create short-term and
long-term financial goals.
Decision
Making
Process
Identify the
Problem
Evaluate Results
Select Best
Course of Action
Gather
Information &
List Alternatives
Consider the
Consequences
IDENTIFY THE PROBLEM
• Recognize that there is a decision
to be made.
• Decisions are not made randomly, they result from an
attempt to address a specific problem, need or
opportunity.
GATHER INFORMATION & LIST
POSSIBLE ALTERNATEIVES
• What information might be helpful?
• Ask for advice from others who have been in your
situation.
• Gather as much information regarding options as
possible.
• Look for alternatives that may still help you achieve
your goal.
CONSIDER THE
CONSEQUENCES
• After gathering information and
opinions regarding alternatives and
options, write down the consequences
of each alternative.
• PROS
• CONS
SELECT THE BEST
COURSE OF ACTION
• After weighing the pros and cons of
each alternative, choose the best course
of action for YOU!
• Choose the option with the least amount of
negative impact on you and your current
situation.
• Choose the option that ensures you the
greatest degree of success.
EVALUATE THE RESULTS
• Look at the results of the decision you have
made, analyze the positives and negatives.
• Determine whether or not the decision you
made helped you achieve your goal.
• If if did NOT, evaluate how you could make
changes when you are faced with the same
decision again in the future.
Factors that Influence Our
Decisions
• Values
• Risks
• Peers
• Age
• Habits
• Economics
• Feelings
• Marketing/A
dvertising
VALUES
A person's principles or
standards of behavior;
one's judgment of what is
important in life.
What makes up one’s
VALUES?
Family &
Friends
VALUES
Beliefs
Experiences
How do our VALUES affect
our spending?
The more important we feel
something is, the more willing
we are to spend money on that
good or service.
PEERS
• One belonging to the same societal
group especially based on age, grade,
or status.
• Peers can have both a positive and
negative influence on the behavior’s of
others.
What is PEER pressure?
Peer pressure is social pressure by members of one's peer
group to take a certain action, adopt certain values, or
otherwise conform in order to be accepted.
• Direct peer pressure is a teenager or a group of teenagers
actually telling another teenager what he/she should be
doing or what is okay to do.
• Indirect peer pressure is not necessarily verbal peer
pressure but optical peer pressure.
• Individual peer pressure is trying too hard to fit in and
doing things because other people are doing them.
How does PEER pressure affect
our purchasing decisions?
• Branding and Marketing
• Placing logos prominently on goods.
• Teens seek out branded products as a way to have immediate
prestige with friends.
• Subcultures
• Skateboarders, tech fans, surfers, athletes, etc.
• Teens need certain things to belong to a certain subculture, like
a skateboard, musical instrument, bicycle, computer or
surfboard.
Emotional Factors Related to
PEER Pressure
• Gossip
• Fear
• Acceptance
• Clubs
• Disapproval
• Athletics
• Insecurities
• Cliques
• Boyfriend/Girlfriend
• Rich/Poor
• Sarcasm
HABITS
A HABIT is settled or
regular tendency or
practice, especially one
that is hard to give up.
How do HABITS affect your financial
decisions?
FEELINGS
Our current emotional state, or the way we
are feeling often determines affects our
financial decisions.
• Love
• Hungry
• Anger
• Sad
• Jealousy/Envy
• Frustration
• Pride
• Anxious
RISKS
What do I stand to win or what do I stand to lose?
• Personal Risk: Factors that create a less than
desirable situation. Personal risk may be in the form
on embarrassment, safety, inconvenience or health
concerns.
• Inflation Risk: Fluctuation in prices. Will buying
the item later mean paying a higher price?
AGE
MINORS
Young people tend to
make riskier decisions
because they feel less
vulnerable and feel as
if they have more
time to recover from a
bad decision.
ADULTS
The older individuals
get, the less time they
feel they have to recover
from a bad decision,
therefore, adults tend to
make more reasonable
and less risky decisions.
ECONOMICS
PEOPLE CHOOSE BECAUE OF LIMITED RESOURCES…
• People evaluate the cost and benefits of different alternatives
and then choose the alternative that best fits them.
• SCARCITY: Limited resources (money) to meet both needs
and wants. People must choose as to which needs and which
wants they will satisfy and which they will leave unsatisfied.
• We make decisions based off of how much money we make,
how much we are willing to spend and what we are willing to
spend our money on.
WANTS VS. NEEDS
Wants
Things that make life more
entertaining and enjoyable but
are NOT essential to survival.
• Phone
• Air Conditioning
• Car
• Netflix
Needs
Things that are essential to
your health and security.
• Food
• Water
• Shelter
• Clothing
SCARCITY EXAMPLES
• I want an Audi, but I am a teacher and don’t make that
kind of money, therefore, I buy a Toyota instead.
• I want a new phone and new boots. The new phone is a
WANT and the new boots are a NEED. Because I only
make 9.00 an hour, I cannot have both, I choose my
NEED over my WANT.
• I want to put a swimming pool in my backyard but I also
need to start saving for my children’s college education.
Because I value my children’s future over a swimming
pool and because I do not have enough money for both, I
decide to save for my children’s education instead of
putting in a swimming pool.
SCARICTY CREATES
VALUE
Things that are less available for consumers hold a greater
value.
Examples:
• Diamonds
• Coins
• Classic Cars
• Gold
• Comic Books—Original 1963 Spider Man, originally .12,
todays value 40,000.00
ECONOMICS
PEOPLE’S CHOICES INVOLVE COSTS…
•
OPPORTUNITY COST: The alternative you give up when you make a
choice.
•
OPPORTUNITY COSTS do NOT always involve money.
• I want to go to the basketball game but I need to do my homework. If I choose
to go to the basketball game my opportunity cost is my homework. If I choose to
do my homework, my opportunity cost is the basketball game.
• I want to continue to stand in the hall and talk to my friends but I need to get to
class so I will not be tardy. If I stand in the hall and talk my opportunity cost is
being tardy. If I go to class on time, my opportunity cost is talking to my friends.
•
What are some examples of OPPORTUNITY COSTS that teenagers may
be faced with?
ADVERTISING &
MARKETING
• Clearance Sales
• Sales People
• Holiday Sales
• Attractive Décor
• Coupons
• Background Music
• Rebates
• Product Placement
• Contests
• BOGO
• Frequent Shopper Card
• Most profitable items are
placed in prominent
positions
• Items most commonly
purchased are in the back of
the store
IMPULSE PURCHASE
• An impulse purchase or impulse buying is an unplanned
decision to buy a product or service, made just before a
purchase. One who tends to make such purchases is
referred to as an impulse purchaser or impulse buyer.
• What promotes impulse buys?
•
•
•
•
•
Emotions
Product Location
Allure of a “Good Deal”
Gender
Age
IMPULSE BUYS &
EMOTIONS
DECISION MAKING
STRATEGIES
• SPONTENATITY
• Choosing the first
option that comes
to mind; giving
little or no
consideration to
the consequences
of the choice.
DECISION MAKING
STRATEGIES
• COMPLIANCE
• Going along with
family, school,
work or
expectations.
DECISION MAKING
STRATEGIES
• PROCRASTINATION
• Postponing thought and
action until your options
are limited.
DECISION MAKING
STRATEGIES
• AGONIZING
• Accumulating so
much information that
analyzing the options
becomes
overwhelming.
DECISION MAKING
STRATEGIES
• INTENTION
• Choosing an option
that will be both
intellectually and
emotionally satisfying.
DECISION MAKING
STRATEGIES
• DESIRE
• Choosing the option
that might achieve the
best result, regardless
of the risk involved.
DECISION MAKING
STRATEGIES
• AVOIDANCE
• Choosing the
option that is
most likely to
avoid the worst
possible result.
DECISION MAKING
STRATEGIES
• SECURITY
• Choosing the option
that will bring some
success, offend the
fewest people and post
the least risk.
DECISION MAKING
STRATEGIES
• SYNTHESIS
• Choosing the option that has a good chance to
succeed and which you like the best.
GOALS
SMART GOALS
S
Specific
M
Measurable
A
Attainable
R
Relevant/Reasonable
T
Time Bound
SPECIFIC
A SPECIFIC goal will usually answer the five
'W' questions:
• What: What do I want to accomplish?
• Why: Specific reasons, purpose or benefits of
accomplishing the goal.
• Who: Who is involved?
• Where: Identify a location.
• Which: Identify requirements and constraints.
MEASURABLE
A MEASURABLE goal will usually answer
questions such as:
• How much?
• How many?
• How will I know when it is accomplished?
ATTAINABLE
An ATTAINABLE goal will usually answer
the question “How”?
• How can the goal be accomplished?
• How realistic is the goal based on other constraints?
RELEVANT/REASONABLE
A RELEVANT goal can answer yes
to these questions:
• Does this seem worthwhile?
• Is this the right time?
• Does this match our other efforts/needs?
• Are you the right person?
TIME BOUND
A TIME-BOUND goal will usually answer
the questions:
• What can I do six months from now?
• What can I do six weeks from now?
• What can I do today?
• WHEN will this goal be accomplished?
Examples of a SMART
Goal…
Broad Goal: I want to grow my business.
•
Specific: I will acquire three new clients for my consulting business.
•
Measurable: I will measure my progress by how many new clients I bring on, while
maintaining my current client base.
•
Attainable: I will ask current clients for referrals, launch a social media marketing
campaign and network with local businesses.
•
Relevant: Adding additional clients to my business will allow me to grow my business
and increase my revenue.
•
Time-Based: I will have three new clients within two months.
SMART Goal: I will acquire three new clients for my consulting business within two
months by asking for referrals, launching a social media marketing campaign and
networking with local businesses. This will allow me to grow my business and increase
my revenue.
LONG TERM AND SHORT
TERM FINANCIAL GOALS
LONG TERM
GOAL
SHORT TERM
GOAL
• Goal set to be
accomplished
in a year or
MORE.
• Goal set to be
accomplished
in a year or
LESS.
COMPONENTS OF A
FINANCIAL PLAN
Goals
•What do I want to accomplish with my spending?
Budget
•How do I plan to spend the money I have?
Net Worth Statement
•Money you have minus the money you owe.
Insurance Plan
•Health, Automobile, Life, and Home Owners/Renters Insurance.
Investment Plan
•How should I invest my money to plan for retirement (401K and IRA)?
Savings Plan
•How will I save money for unexpected expenditures and for items that I want to purchase in the future?