Module 1 Introduction to Personal Finance A penny

Module 1: Introduction to Personal Finance “A penny here, and a dollar there, placed at interest, goes on accumulating, and in this way the desired result is attained. It requires some training, perhaps, to accomplish this economy, but when once used to it, you will find there is more satisfaction in rational saving than in irrational spending. ” -P. T. Barnum Copyright © e. Nest. Egg Press, LLC.

Learning Objectives: �What is Personal Finance? �Identify the 8 basic Financial planning activities �Identify Social and Economic influences on personal financial goals and decisions. Copyright © e. Nest. Egg Press, LLC.

Question Cluster 1 - Initial knowledge questions Copyright © e. Nest. Egg Press, LLC.

Personal Finance skills are lacking Financial Literacy Quiz US Survey Data at a Glance Copyright © e. Nest. Egg Press, LLC.

LO 1. Need for Financial Security • Maslow’s Hierarchy of need is a pyramidshaped representation of human needs and wants. • Beginning with our basic needs— food, water, sleep, sex, homeostasis—Maslow suggests that our physiological needs are primary motivators and must be satisfied before moving on to higher-level need (you probably would not be concerned with Instagram followers if you were unable to breath. ) • In a society that is not preoccupied with fulfilling basic physiological needs—food, water, and shelter—happiness and esteem are sought after relentlessly. Copyright © e. Nest. Egg Press, LLC.

What is it? What is personal finance? Personal finance is all financial decisions and actions of a person. Very simply, almost any decision that involves spending or making money. � This could include insurance, budgeting, savings, investing, mortgages, debt servicing and more. In general financial planning consist of evaluating your current financial position and predicting short-term and long-term needs. Personal financial planning: � Is managing money in order to reach both the short term and long term financial goals of an individual. � For additional information visit: Investopedia- Personal Finance What is a financial plan? � A complete assessment of an investor's current and future financial state by using current variables to forecast future cash flows, asset values and withdrawal plans. Financial plan: � A formal report that shows where you are, what you need, and which way to go. Copyright © e. Nest. Egg Press, LLC.

LO 2. 8 Basic Financial Planning Activities �Obtaining- Making money �Planning- Have a plan and stick to it �Saving- Setting aside fund for later �Borrowing- Control your credit �Bankruptcy-A legal process involving a person or business that is unable to repay outstanding debts. (Maintain control of you debt) Copyright © e. Nest. Egg Press, LLC.

8 Basic Financial Planning Activities �Spending- Make smart purchases �Managing Risk- Insuring yourself against the unknown �Investing- Placing your money into stocks, bonds, mutual funds real-estate, etc. �Retirement/Estate Planning- To provide for retirement and on Copyright © e. Nest. Egg Press, LLC.

Question Cluster 2 Copyright © e. Nest. Egg Press, LLC.

Our Inner Caveman �In prehistoric times cavemen struggled to survive from one day to the next. �Ex: Being eaten by tigers, starvation & disease. �The day to day need to survive gave cavemen a very short view of the world. �The average caveman was dead by the age of 33 while today the average American lives to the age of 78. �Planning for the distant future was not a primary concern of cavemen. This resulted in us not being programed to plan for todays world, where these kind of threats are not as popular. Copyright © e. Nest. Egg Press, LLC.

Why personal financial planning? �A guide to help us get where were going. �Less stress from insufficient funds for rent, bills, and other living expenses. �Better relationships with family and friends. �Increased ability to obtain, spend, invest and protect our money. �Overall improved standard of living. �The freedom to pursue new things. �Improved health and well-being. �Security against unforeseen things in the future such as lost job, illness, or even death. Reading assignment: “Your Most Valuable College Class: Personal Finance 101” Copyright © e. Nest. Egg Press, LLC.

Successful Financial Planning �Involves sacrificing today’s spending to save for the future �A balanced view towards money and happiness. �Money: �A tool to enjoy life � Security against an uncertain world � A way to achieve future dream Our perspectives and views regarding money are influenced by our surrounding environment. Copyright © e. Nest. Egg Press, LLC.

Question Cluster 3 Copyright © e. Nest. Egg Press, LLC.

Result of not planning your finances: �The number of pro athletes with financial troubles within 5 years of retirement: - 78% of NFL players (Average yearly Salary $1. 9 million) - 60% of NBA players (Average yearly salary $5. 15 millions) �Similar to pro athletes, lottery winners often spend extravagantly because they believe that they deserve luxuries. �There are many reasons for these astounding numbers including a lack of financial knowledge, over spending, and poor judgment. Copyright © e. Nest. Egg Press, LLC. Source: The Richest

How the world around us affects our decision making in Financial Planning: �Domestic (in the U. S. ): �Business, labor, and the government are all economic influences on financial planning. �The Federal Reserve affects the U. S. economy by keeping interest rates and prices at appropriate levels in attempt to maintain an adequate money supply for businesses and consumers. Copyright © e. Nest. Egg Press, LLC.

How the world around us affects our decision making in Financial Planning: �Foreign Factors (Outside the U. S. ): �Globalization- Business and investment opportunities have rapidly moved beyond domestic markets. The world has seen a marked increase in trade and cultural exchange in the recent future. �Jobs are being moved overseas �Cheaper labor �Cheaper goods Copyright © e. Nest. Egg Press, LLC.

Question Cluster 4 Copyright © e. Nest. Egg Press, LLC.

LO 3. How the events in our life affect our financial situation? Copyright © e. Nest. Egg Press, LLC.

What are your financial goals at each point in your life? Excel worksheet assignment: Where do you want to be? Copyright © e. Nest. Egg Press, LLC.

Question Cluster 5 Copyright © e. Nest. Egg Press, LLC.

Values and Financial Planning: �A persons values shape what they consider to be important in their life and the principles and standards of behavior that support these. Your values can determine career choice, saving behavior, purchasing behavior, tolerance for risk, and even your desired fiscal legacy. � Ex. Someone who values their job satisfaction over money may leave a job which makes them wealthy, but unhappy for a job they enjoy more and pays less. Copyright © e. Nest. Egg Press, LLC.

Attitude and Financial Planning �A persons attitude shape how they view the world around them, including their own personal and financial situation. �For example you may hate doing paper work or being organized. Your attitudes about something are unlikely to change therefore you must learn to adapt and work around these pitfalls. Everyone has their own strengths and weaknesses. Copyright © e. Nest. Egg Press, LLC.

Life is Expensive Here are some possible large expenses you may experience within your life time: �Cost of a divorce (Reading “Gain and Loss: Marriage and Wealth Changes Over Time” by Julie M. Zissimopoulos) �Cost of funeral �Cost of wedding �Cost to retire �Geographic (Moving to other places) �Home Ownership �Car calculator �Cost of Food (per month) �Cost of college Personal and Financial Investment Quiz Copyright © e. Nest. Egg Press, LLC.

Life is full of Hassles Everyday life hassles: minor annoyances and common conflicts are the greatest source of stress in our lives due to their frequency and duration. �The top ten common hassles consist largely of items that can be improved or eliminated through financial security. Copyright © e. Nest. Egg Press, LLC.

Did you know? Copyright © e. Nest. Egg Press, LLC.

Money Reduces Hassles �A good paying job making living expenses less burdensome: �Buying a car �Buying a house �Paying for college �A good paying job provides money to pay for hassles: �home maintenance �yard work �hiring an assistant Copyright © e. Nest. Egg Press, LLC.

Money is not always Happiness �Research finds richer people as a whole are more satisfied than poorer people. �Higher incomes are related to increased levels of happiness and subjective well-being—up to a point. �http: //www. forbes. com/sites/susanadams/2013/05/10/moneydoes-buy-happiness-says-new-study/ Copyright © e. Nest. Egg Press, LLC.

The price of well-being Copyright © e. Nest. Egg Press, LLC.

Life satisfaction and income Copyright © e. Nest. Egg Press, LLC.

Did you know? Copyright © e. Nest. Egg Press, LLC.

"Money, if it does not bring you happiness, it will at least help you be miserable in comfort. " -Helen Gurley Brown (former editor of Cosmopolitan) Your personal financial plans need to be taken seriously. How you handle your personal finances will have a major impact on what you will be able to do with your life. Attaining personal economic satisfaction is an ongoing and long-term process. Copyright © e. Nest. Egg Press, LLC.

End of Module 1 Introduction to Personal Finance Copyright © e. Nest. Egg Press, LLC.