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Financial Decisions and Planning: Needs, Wants, and Making Good Choices

Learn about the difference between needs and wants, how to measure income and wealth, and how to make good financial choices. Develop communication skills and expand your vocabulary.

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Financial Decisions and Planning: Needs, Wants, and Making Good Choices

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  1. Chapter 4 Financial Decisions and Planning

  2. What Are Needs and Wants? • Needs are things you must have. • Examples: food, clothing, shelter • Wants are things people desire. • Examples: new cars, vacations, luxury items • Financial resources are used to acquire goods and services. 4-1 Resources and Choices Slide 2

  3. How Are Income and Wealth Measured? • Personal cash flow statement lists cash inflows and outflows. • Inflows = income • Outflows = expenses • Personal net worth statement shows a person’s net worth based on assets and liabilities. • Assets = money or items of value • Liabilities = debts 4-1 Resources and Choices Slide 3

  4. How Is Wealth Measured? Net Worth 4-1 Resources and Choices Slide 4

  5. How Can You Make Good Financial Choices? Decision-Making Process • Define the need. • List options for meeting the need. • Compare the options. • Consider the opportunity cost—the value of your next best option. • Make a decision. • Take action based on your decision. • Reevaluate your choice. 4-1 Resources and Choices Slide 5

  6. Building Communications Skills Reading Vocabulary • Try to learn the meaning of a word by seeing how it is used in a sentence. • Divide a long word into parts. • Look up a word in the dictionary. • Look up a word in the glossary. • Practice using new words in conversation or writing. 4-1 Resources and Choices Slide 6

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