Goal Setting
• A statement of something a person needs or wants to do
related to finances/money
Financial Goals
SMART GOALS
• Need to have a
definite end
• Non-example: I
want to save more
money.
• Example: I want to
have $100 in my
savings account.
S- Specific
• Need to have a
way to tell if
progress has been
made
• Non-example: I
want to be a better
student.
• Example: I want to
improve my GPA
by .2 points.
M- Measurable
• Need to use action
words to describe
• Non-example: I
want to be
employed.
• Example: I want to
apply for jobs.
A- Action-oriented
• Need to be able to be
reached
• Non-example: I want
to earn $1 million by
Christmas.
• Example: I want to
earn $500 working a
seasonal job by
Christmas.
R- Realistic
• Goals should be achievable
in a reasonable amount of
time
• Non-example: I want to be
a millionaire some day.
• Example: I want to save up
enough money for my first
year of college by the end
of the school year.
T- Timely
TIME FRAMES
• Goals that can be
accomplished in
a few hours or
days
• Example:
Earning an “A”
on a test.
Short-term
• Goals that can be
accomplished in
one to six
months
• Example:
Achieving a 4.0
for the semester
Intermediate-term
• Goals that are
accomplished in
six or more
months
• Example:
Graduating from
high school
Long-term
WHAT KIND OF GOAL?
• Save up $100 to buy a new bike in
the next two months.
Intermediate-term
• Be on time to your next class.
Short-term
• Save enough for retirement to live
off the interest.
Long-term
• Passing all your classes at midterms
Intermediate-term
• Find a job in the next month.
Intermediate-term
• Save the money to take a family
vacation to DisneyWorld
Long-term
• Prepare a rough draft of a 10-page
research paper.
Intermediate-term
• Entering the career of your choice.
Long-term
• Beat a stage or level on a video
game.
Short-term
• Read a book over the weekend
Short-term
• Read 15 books this year
Long-term
• Graduating from college with a
degree in nuclear engineering
Long-term
• Do your homework for tomorrow
Short-term
• Save your change from today in
your piggy bank
Short-term
• Save $20 a week until Hanukkah
Intermediate-term
WHY WE MAKE OUR FINANCIAL
DECISIONS
•
•
•
•
•
They Need It
They Want It
Advertising/Marketing
Peer Pressure
Emotional Shopping
Reasons People Buy
Things
SO HOW DO WE KNOW WHAT
TO BUY?
Decision making- The process of considering and
analyzing information in order to make a choice.
• Scarcity- the conflict that arises because
people have unlimited wants and limited
resources
• Which means?
• We can’t have everything we want
• Opportunity Cost- the highest valued
alternative one must give up to pursue a
decision
Economic Concept
Needs
Wants
• Goods that are
necessary to live
• Ex: Food, water,
shelter,
transportation
• Supplementary
goods that might
improve quality of
life
• Ex: fancy car,
brand name
clothing, new iPod
• The beliefs and
principles a person
considers important,
correct, and desirable.
Values
• What do you value?
ADVERTISING
• Helps consumers become aware of your
product
• Example:
Why It Works
• Uses suggestion- a psychological concept
involving association of two ideas
• Appeals to emotion
• Example: Have a celebrity endorse a
product. If you like the celebrity, you have
good feelings toward the product.
Why It Works
• Uses repetition to help consumers
remember the product
• Example: Geico can help you do what?
Why It Works
• Plays on societal trends in order to target
the appropriate audience
• Example: Michael Phelps sponsoring
products right after he won gold medals in
Beijing.
Why It Works
EXAMPLES OF ADVERTISING
Sketcher’s Ad from last superbowl
CONSEQUENCES
Pros
Cons
• You get what you
want
• Immediate
gratification
• Excessive debt
• Less money for needs
• More worry about
how to pay for things
• Impulse buying
• Bankruptcy(?)
Possible Consequences of
Emotional Buying (Instant
Gratification)
Pros
Cons
• Security
• Ability to afford
needs
• Ability to achieve
goals
• Less worry
• Delayed gratification
• Lifestyle change (?)
Possible Consequences of
Financial Planning (Delayed
Gratification)
• Legal inability to pay debts
• Chapter 7- Liquidation- works to eliminate (wipe
off the record) existing debt by getting rid of all
assets
• Chapter 13- Reorganization- court approves a
repayment plan that does not require the person
to give up their assets as long as they have steady
income
Bankruptcy
• Harder to get loans after filing for bankruptcy
• Interest rates are much higher on loans
• Some debt cannot be eliminated through
bankruptcy (i.e. back taxes, alimony, student
loans, child support, and debts incurred through
fraud)
Why it’s not good
CREATING A FINANCIAL PLAN
A blueprint or plan for managing all aspects of
a person’s money.
1. Determine the current financial situation
2. Develop financial goals
3. Identify all options
4. Evaluate alternatives
5. Create and use a financial plan of action
6. Review and revise the plan
Steps
• Greg currently has $100 in his checking account.
He works a part-time job and makes about $100 a
week. He is trying to save up to go on trip to
Europe this summer that costs $2000, but he is
not very good at financial planning.
• What are some possible options?
• Which option should he choose?
• How would he implement this plan?
• How might the plan change?
Example- Identify the steps