Unit 1B - SMART Goals & Decision Making
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Transcript of Unit 1B - SMART Goals & Decision Making
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Mr. ElsesserIntroduction to Financial
Management
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NEFE High School Financial Planning ProgramNEFE High School Financial Planning ProgramUnit One - Your Financial Plan: Where It All Begins
Objective:
• Define the purpose of Decision Making
and creating a Financial Plan
• Analyze trade offs of an economic decision
• Identify economic risk factors to consider in the decision making process
Do Now:
How does the process of Decision Making relate to your SMART Goals project?
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The Decision- Making The Decision- Making ProcessProcess
EvaluateEvaluateResultsResults
Make a DecisionMake a Decision
Identify YourIdentify YourGoalGoal
Weigh Pros Weigh Pros and Consand Cons
EstablishEstablishCriteriaCriteria
Monitor & ModifyMonitor & Modifythe Planthe Plan
Implement Implement the Planthe Plan
Set GoalsSet Goals
Create a PlanCreate a Plan
AnalyzeAnalyzeInformationInformation
The Financial The Financial Planning ProcessPlanning Process
Decision Making and Financial PlanningDecision Making and Financial Planning
1-L1-L
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NEFE High School Financial Planning ProgramNEFE High School Financial Planning ProgramUnit One - Your Financial Plan: Where It All Begins
Alternatives
Consequences
Opportunity Cost
Risk
Financial Planning also means....Decision Making…
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NEFE High School Financial Planning ProgramNEFE High School Financial Planning ProgramUnit One - Your Financial Plan: Where It All Begins
You Know What You WantYou Know What You Want
1-M1-M
In order to make a good decision you must be informed of In order to make a good decision you must be informed of what you need to do to achieve it!what you need to do to achieve it!
What is What is opportunity costopportunity cost??
A possibility that you give up whenA possibility that you give up whenyou make one choice insteadyou make one choice insteadof another.of another.
Example: Example: You can buy You can buy coffee every day or coffee every day or
save save money and get a data money and get a data planplan
for your phone. for your phone.
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NEFE High School Financial Planning ProgramNEFE High School Financial Planning ProgramUnit One - Your Financial Plan: Where It All Begins
Opportunity Cost“Consequences of Choices”
**A Trade off…...
**Refers to what you give up when a decision is made or the cost of giving up one thing in order to get something that you want more;
**The cost may involve your time, money, and/or effect
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NEFE High School Financial Planning ProgramNEFE High School Financial Planning ProgramUnit One - Your Financial Plan: Where It All Begins
Identifying More Examples:
Personal: For example time spent on studying usually means lost time for hanging out with your friends.
Financial:For example, the purchase of an item with money from your savings means your will no longer earn interest on that money
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NEFE High School Financial Planning ProgramNEFE High School Financial Planning ProgramUnit One - Your Financial Plan: Where It All Begins
Consequences
**Outcomes or results of a decision;
**What will happen depending upon what you choose to do.
**These are determined by your actions or lack of actions
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NEFE High School Financial Planning ProgramNEFE High School Financial Planning ProgramUnit One - Your Financial Plan: Where It All Begins
Alternatives
**Choices….
**Different ways to solve a problem;
**Opportunities to choose between several courses of action
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NEFE High School Financial Planning ProgramNEFE High School Financial Planning ProgramUnit One - Your Financial Plan: Where It All Begins
Risk
**The possibility that your decision will result in a negative outcome;
**Taking a chance;
**Risk may involve losing money
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NEFE High School Financial Planning ProgramNEFE High School Financial Planning ProgramUnit One - Your Financial Plan: Where It All Begins
Risk
1) Inflation Risk2) Interest Rate Risk3) Income Risk4) Personal Risk5) Liquidity Risk
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NEFE High School Financial Planning ProgramNEFE High School Financial Planning ProgramUnit One - Your Financial Plan: Where It All Begins
Inflation Risk
Inflation is the rise in the level of prices
for goods and services over time
Inflation Risk Example:If you wait to buy a car until next
year, you accept the possibility that the price may increase.
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NEFE High School Financial Planning ProgramNEFE High School Financial Planning ProgramUnit One - Your Financial Plan: Where It All Begins
Interest Rate Risk
Interest is the price that is paid for theuse of another’s money
Interest Rate Risk Example: Interest rates go up and down, which may affect the cost of borrowing or the profits you earn when you save or invest
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NEFE High School Financial Planning ProgramNEFE High School Financial Planning ProgramUnit One - Your Financial Plan: Where It All Begins
Income Risk
Income Risk – you may lose your job due
to unexpected health problems, familyproblems, an accident, or changes in
your field of workHow Can you prepare? Prepare and save – build up 3-4 months
ofsavings to cover cost of living
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NEFE High School Financial Planning ProgramNEFE High School Financial Planning ProgramUnit One - Your Financial Plan: Where It All Begins
Personal Risk
Personal Risk: Risk you assume yourself based upon your actions or choices.
Personal Risk Example – Driving for eight hours on icy mountain roads may not be worth the money youwould save on airfare.
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NEFE High School Financial Planning ProgramNEFE High School Financial Planning ProgramUnit One - Your Financial Plan: Where It All Begins
Liquidity Risk
Liquidity is the ability to easily convertyour financial resources to cash without aloss in value
Liquidity Risk Example: Some long-term investments, such as a
house or an antique doll collection, can be difficult to convert to cash quickly.
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NEFE High School Financial Planning ProgramNEFE High School Financial Planning ProgramUnit One - Your Financial Plan: Where It All Begins
Other InfluencesOther Influences
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NEFE High School Financial Planning ProgramNEFE High School Financial Planning ProgramUnit One - Your Financial Plan: Where It All Begins
People
OtherPublications
Agencies
Magazines Books
Social Media
In Order to Make a Good Choice…
Find Advice; Find Information Find Advice; Find Information Making a good choice equals using…Making a good choice equals using…
Internet