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Financial Decisions

Financial Decisions. FINE 3000 – Personal Finance. What Surprised You After College?. How much money it takes to live on your own How hard it is to save money How many financial decisions have to be made How hard it is to pay bills How little I knew about taxes. Major Financial Decisions.

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Financial Decisions

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  1. Financial Decisions FINE 3000 – Personal Finance

  2. What Surprised You After College? • How much money it takes to live on your own • How hard it is to save money • How many financial decisions have to be made • How hard it is to pay bills • How little I knew about taxes

  3. Major Financial Decisions • How much to save for emergencies • How much to save for retirement • How much I can afford to spend on a house • How much I can afford to spend on a car • Paying off student loans • Credit cards • Insurance decisions (life, auto, home, health) • Setting aside money to pay taxes

  4. Setting Financial Goals • Goals should always be • Realistic • Measurable • Determined by your actions • Actionable • Goals can be • Changed over time • Critical or aspirational • Private or shared

  5. Factors that Influence Financial Planning and Decision Making • Personal Values • Life-cycle Stage • Employment Situation / Career • Economic Environment

  6. Three Key Questions for Every Financial Decision • How will this decision affect my present finances? • How will this decision affect my future finances? • What risk(s) will I be taking with this decision?

  7. Additional Issues with Financial Decisions • Cash flow • Opportunity costs • Hidden costs • Timing (now vs. later) • Impact on others • Impact on my time

  8. Case Study #1 – Paul Buys a Television • Paul has decided to buy a 72-inch, high-definition, state-of-the-art television. Use the internet to find the range of prices for this type of television. What do you think is a fair price, and how could you determine if you are getting a good deal? • Spending this amount of money on a television has an opportunity cost. With this amount of money available to spend, what would your priorities be?

  9. Case Study#2 – Buy Now, Pay Later • How much does the use of Rebecca’s credit card add to the price of every single cup of coffee? Do you think she is paying a fair price for her coffee and muffin? • Which do you think has a bigger impact on Rebecca’s long-term wealth: her use of a credit card or her decision to buy a coffee and a muffin each day versus making it at home?

  10. Case Study #3 – Sam has an Accident • Sam tells you his story in the hope that you will help him make a good plan for paying off his $5,000 in obligations in the most cost-efficient manner. What suggestions would you make to him? • In addition to helping Sam with his current predicament, suggest some strategies for the future that would make dealing with such an emergency easier.

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