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Good Morning!

Good Morning!. Objective : Define the purpose of Decision Making and creating a Financial Plan Do Now : Complete the SMART Goals handout To Be Discussed. Set Goals. Identify Your Goal. Analyze Information. Establish Criteria. Create a Plan. Weigh Pros and Cons.

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Good Morning!

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  1. Good Morning! Objective: Define the purpose of Decision Making and creating a Financial Plan Do Now: Complete the SMART Goals handout To Be Discussed

  2. Set Goals Identify Your Goal Analyze Information Establish Criteria Create a Plan Weigh Pros and Cons Implement the Plan Make a Decision Monitor & Modify the Plan Evaluate Results The Decision- Making Process Decision Making and Financial Planning The Financial Planning Process 1-L

  3. Financial Planning also means.... Decision Making… Opportunity Cost Alternatives Consequences Risk

  4. You Know What You Want In order to make a good decision you must be informed….. What is opportunity cost? A possibility that you give up when you make one choice instead of another 1-M

  5. 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

  6. 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

  7. 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

  8. Alternatives **Choices…. **Different ways to solve a problem; **Opportunities to choose between several courses of action

  9. Risk **The possibility that your decision will result in a negative outcome; **Taking a chance; **Risk may involve losing money

  10. Risk • Inflation Risk • Interest Rate Risk • Income Risk • Personal Risk • Liquidity Risk

  11. Inflation Risk Inflation is the rise in the level of prices for goods and services over time Inflation Risk: If you wait to buy a car until next year, you accept the possibility that the price may increase

  12. Interest Rate Risk Interest is the price that is paid for the use of another’s money Interest Rate Risk: Interest rates go up and down, which may affect the cost of borrowing or the profits you earn when you save or invest

  13. Income Risk Income Risk – you may lose your job due to unexpected health problems, family problems, an accident, or changes in your field of work Prepare and save – build up 3-4 months of savings to cover cost of living

  14. Personal Risk Personal Risk – Driving for eight hours on icy mountain roads may not be worth the money you would save on airfare.

  15. Liquidity Risk Liquidity is the ability to easily convert your financial resources to cash without a loss in value Liquidity Risk: Some long-term investments, such as a house or an antique doll collection, can be difficult to convert to cash quickly.

  16. Other Influences

  17. The Facts of the Matter… Find Advice; Find Information To make a good choice equals… Agencies People Other Publications Magazines and Books Internet Wrap up on NBK

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