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DECISION MAKING

DECISION MAKING. Creating a Plan Your Financial Roadmap. DECISION MAKING: The process of gathering and analyzing information in order to make a decision. Steps for Decision Making. Identify your goal Establish your criteria Examine your options Weigh your pros and cons Make your decision

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DECISION MAKING

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  1. DECISION MAKING

  2. Creating a PlanYour Financial Roadmap • DECISION MAKING: The process of gathering and analyzing information in order to make a decision.

  3. Steps for Decision Making • Identify your goal • Establish your criteria • Examine your options • Weigh your pros and cons • Make your decision • Evaluate the results Source: NEFE, Page 9

  4. Penny Puzzle Activity Form a square with 5 pennies on each side using ALL 12 pennies.

  5. Penny Puzzler Eliminate Unnecessarily Restrictive Thinking

  6. My Decision

  7. Choosing Brand Name JeansOver No-name Jeans Cost More Better Fit Look good Will Look Like Everyone Else Feel Better About Myself Can Only Afford One Pair

  8. Types of Influences on Financial Behavior • Cultural • Language, the way someone is raised, geographic location • Social • Peer pressure, fads, marketing, advertising • Emotional • Binge spending, comfort shopping, fear of making a decision

  9. Peer Pressure • The influence others have on an individual’s personal decisions.

  10. Peer Pressure Forms of peer pressure • Friends • Newspapers • Magazines • Telephone Directories • Direct Mail • Commercials • Catalogs • Radio Advertisements Emotional Factors • Gossip • Acceptance • Disapproval • Insecurities • Boyfriend/Girlfriend • Sarcasm • Fear • Clubs • Athletics • Cliques • Rich/Poor

  11. Limited Financial Resources Writing Prompt: Tommy is 17 and lives with his single mother who is unemployed. Tommy works at the video store after school and on weekends to help her pay rent. Prom is in three weeks and he really wants to take his girlfriend. However, his paycheck is barely enough to cover the necessities for him and his mother. What are the sources of pressure that Tommy is feeling? What would you advise Tommy to do? What would you do?

  12. Scarcity “Scarcity is an economic principle stating that because of limited resources, an economic system cannot possibly produce all the goods and services that people want; therefore, choices must be made about how the limited resources will be used.” -Consumer Economics & Education, Glencoe, 2003

  13. Economy Today http://wimp.com/budgetcuts/

  14. Opportunity Cost • Refers to the best alternative you give up when you make a choice. • This cost, often called a trade-off, may involve one or more of your resources: • Time • Money • Effort

  15. Inflation • An increase in the price of goods and services. A dollar in the future won’t buy as much as a dollar today. • Did you know… • Inflation usually averages between 3% and 4% each year. • Inflation has influenced our economy for decades ranging from .5% to 18%. • In 1971 a first class stamp cost 8 cents.

  16. Debt • The entire amount of money a person owes to lenders.

  17. Bankruptcy • A legal process to get out of debt when you can no longer make all your required payments. Source: NEFE

  18. Bankruptcy Consequences of • Influences financial freedom • Limits choices • Pay more for credit • Other people absorb your debt Types • Chapter 7 • LIQUIDATION • Chapter 13 • REORGANIZATON

  19. Changes to Bankruptcy Law • New law in effect October 17, 2005. • New limits on personal bankruptcy. • Requires those filing to get counseling before they are allowed to file. • Bars filers with above-average income from filing Chapter 7 (liquidation). • Those who have $100/month left over after paying certain debts and expenses have to submit repayment plan under Chapter 13 guidelines (reorganization).

  20. Reasons for Bankruptcy Source: Consumer Bankruptcy Project III; bankruptcy filing data from Administrative Offices of the U.S. Court, 1999. Salt Lake Tribune DEBT

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