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Essential Standard 1.00: Understand economic activities of individuals and families. Objective 1.02 Understand characteristics of financial goals, steps in decision making and factors that affect financial decisions. Slide 2 Essential Questions What are the steps in goal setting and decision making? How do individuals needs, wants, values, standards, and priorities affect financial goals and decisions? Slide 3 FINANCIAL GOALS Financial goals are accomplished through and give direction to financial planning. Learning to set financial goals is an important part of learning to live independently. Financial Goals should be SMART: Specific Measurable Attainable Realistic Time-bound Slide 4 Decision Making Steps 1. Identify the problem & decision to be made 2. Identify resources and gather information 3. Identify the options (alternatives) *team members brainstorm 4. Identify the pros and cons of each option 5. Choose the best option 6. Put the decision into action..just do it! 7. Evaluate the outcomes of the decision Slide 5 Do the Positives (+) outweigh the Negatives (-)? 5 Six Steps in Economic Decision- Making Process + Advantages Disadvantages Use T-account to determine positives and negatives Slide 6 Good Decision Making Following logical steps when making decisions helps individuals make informed choices. When decisions are made from habit or on impulse, there is a greater likelihood of negative outcomes. Good decisions lead to the achievement of goals and a feeling of self-control and self-confidence. Good decisions are a key to successful independent living. Who makes those decisions? Be sure YOU are making the best decisions! Slide 7 FACTORS THAT AFFECT FINANCIAL DECISIONS Family factors Cultural factors Social factors Societal and demographic factors Economic factors Technology The media The marketplace Legal and moral factors Personal factors Slide 8 Personal Factors Breakdown Needs and wants Distinguishing wants from needs helps individuals and families set more realistic goals and make better decisions. Values Understanding and prioritizing values helps individuals and families set goals and make decisions that lead to greater personal satisfaction. Standards --- Measures of quality or excellence With regard to standards for success, individuals have different views of what it means to be successful. Priorities Each individual or family needs to set priorities by deciding what is more important at any point in time. Slide 9 Principles of Financial Planning from the Jump$tart Coalition Money doubles by the Rule of 72 Your credit past is your credit future Start saving young Stay insured Budget your money Dont borrow what you cant repay Map your financial future Dont expect something for nothing High returns equal high risks Know your take-home pay Compare interest rates Pay yourself first http://www.jumpstartcoalition.org/files2010/2010_J$_Calendar.pdf Slide 10 Factors Affecting Decisions Family structure Income level Lifestyle Size Age Stage of life cycle Health status Emergencies Slide 11 Cultural factors Cultural and ethnic groups impact Values Beliefs Lifestyle Family structures Clothing choices What are the advantages and disadvantages of cultural diversity within a family, a school, a workplace, a community? Slide 12 Social factors Education level Family structure Immigration Ethnicity Rural, urban, suburban community Peer pressure Community relationships and involvement Slide 13 Societal and Demographic Factors Demography is the statistical characteristics of a population Age Sex Race Birth, marriage, death rates Where people live Slide 14 Economic Factors Employment rate Kind and number of jobs available Inflation A period of rapid increase in the price of goods and services Recession An extended period of slow economic growth * Review the Business Cycle-prosperity, recession, depression, recovery Government Regulations & Spending Fiscal policies affect personal & business spending Cash for clunkers, stimulus $, tax rates Slide 15 Technology The use of mechanical or electronic devices to manipulate Information (Computers, Ipads, Fax machines, fiber optics, GPS systems, smart phones) Objects (i.e Robots, automated assembly lines, hybrid cars) On going change impacts Training needs Replacing obsolete technology Types of jobs available Slide 16 The Media Impacts the ways people and businesses communicate and operate locally, nationally, and globally. Communications that reach large audiences with the aid of publication devices that include Internet Television Voice, text, & data transmissions Publications Slide 17 The Marketplace Supply Goods and services available to the consumer Demand Consumer desire to purchase as compared to availability Market response How quickly the market adjusts to supply versus demand Slide 18 Legal and Moral Factors Laws that impact spending Taxation Investment and Retirement Accounts Insurance requirements Beliefs in what is right and wrong What is appropriate behavior of employers, employees, and individuals at home, work, and within the community. Charitable Giving and Community Service Slide 19 Personal Factors Needs Items to survive food, clothing, & shelter Wants Not essential but desirable cell phone, Music CDs, Values A persons belief about what is important and desirable