Personal Finance

• Credit is the ability to obtain goods or services now and pay later.
• 1. Personal Finance – All of the decisions and activities of an individual or family regarding their money, including spending, saving and budgeting, etc.
• • Consumer – A person or organization that uses a product or service
• • Debt – An obligation of repayment owed by one party (the debtor/borrower) to a second party (the creditor/lender); in most cases this includes repayment of the original loan amount plus interest.
• • Economy – A system by which goods and services are produced and distributed
• • Financial Literacy – The knowledge and skillset necessary to be an informed consumer and manage finances effectively
• • Interest – A fee paid by a borrower to the lender for the use of borrowed money; typically interest is calculated as a percentage of the principal.
• • Loan – A debt evidenced by a “note,” which specifies the principal amount, interest rate and date of repayment.
• Personal Finance is 80% behavior and 20% head knowledge.
• 3 Levels of Financial Well-Being


  1. Survival: There is income, bills, and hope that there is enough money to get you to the end of the month (or next paycheck)
  2. Comfort: You have a basic understanding of money management. There are still income and bills but you pay yourself first.
  3. Secure: You arrange you finances so that your wealth is your income. Your money is working for you.
• Goals


  the result or achievement toward which effort is directed / aimed.
• Assets


  Savings, investments, things you OWN.
• Liabilities 


  Debts, things you owe.
• Values


  beliefs and principles you consider important, correct and desirable.
• Needs


  Something you must have to survive.
• Wants


  Something you'd like to have.
• Opportunity Cost


  making choices about how you spend your money. (Ex. if you spend money at the mall, now you cannot use that money for something else).
• Types of Goals

  Short Term: 3 months or less.

  Intermediate: 3 months to a year.

  Long Term: longer than one year.
• SMART Goals

  S - Specific

  M - Measurable

  A - Attainable

  R - Realistic

  T - Timely / Time-Bound
• Economy 


  The ways people make, distribute their goods and services.
• Market Forces


  Supply: goods / services available for sale.

  Demand: goods / services people are willing to buy
• Fed Reserve System 


  Regulates money supply and determines interest rates.
• Consumer Prices


  Over time, price of most products goes up.
• Inflation 


  Rise in goods and services over time.
• Consumer Spending


  Affects the economy buyhelping to create and maintain jobs.
• Interest


  Is the price that is paid for the use of someone else's money.
• Interest Formula


  Interest = Principal * Interest Rate (in deci --> then add to the original amount)

  Principal: original amount
• Compounding Interest


  Interest paid on interest that was previously earned.
• Time Value of Money


  increase of an amount of money due to earned interest.
• Steps to Achieve Your Financial Goals


  1.) Obtain - obtain financial resources by working, investing or property.

  2.) Plan - plan how you will spend the money.

  3.) Spend Wisely - spend less than you make.

  4.) Save - save money on a regular basis.

  5.) Borrow Wisely - borrow only when necessary (ex. house / car).

  6.) Invest - to help increase current income.

  7.) Manage Risks - protect your resources (by insurance).

  8.) Retirement - when, where and how.