Budgeting and Setting Goals

Personal Financial Advisor

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History of Money

• Many, many years ago, people did not use money. They bartered, which means they traded things that they had (like milk from their cows or eggs from their chickens) for things that they needed.

• Today we use dollar bills and coins.

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Interest and Saving

• When you open a savings account at a bank, they will pay you money – called interest.

• You earn extra money just by saving money.

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So Why Do You Save $$?

• You save money to buy something you want that you cannot immediately afford. – iPhone or a digital camera

• Could you buy it another way?

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Credit….

• Sure….you could put it on your credit card, but…

• Then, the bank charges YOU interest. 5

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iPhone example

• If you buy the iPhone for $299, the cost on your credit card will be $324 (due to tax).

• You HAVE to pay $18.92 every month.• Take almost 4 years to pay off debt• Owe extra $123 in interest.

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Do you think that is a good idea?

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Saving and Planning

• No one ever has enough money to buy everything they want.

• So you have to plan for purchases and save.– Have to determine “needs” and “wants”– Have to prioritize “wants”

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Needs and Wants

Needs•Goods or services that are necessary for living

– food– clothing– shelter

Wants•Goods and services that are not necessary for living

– toys– games– entertainment– designer jeans– candy

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Prioritize Your Wants

• Put your wants in order– Ask the following questions:

• Do I need this?• If not, do I really want it? (will I still really want it

tomorrow?)• Is this something that I must buy now? Should I think

about it some more?• Will I use it (or wear it) a lot? or just once?

– Could I borrow it from a friend to use just once?• If I buy it now, will I have money left over to buy the

things I need?

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Watch the Gimmees!!!

• Now, look at your #1 “Want.” You need to start saving for that.

• Don’t let the “Gimmees” get you!!! Ignore that little voice in your head that says “I WAAAANT it!!” You will keep more money in your pocket for something better or later.

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Short-Term and Long-Term Goals

• Short-Term Goals are things that you want in less than a year.

• Long-Term Goals are things that you want in about 10 years.

• Write down your #1 Short-Term Goal• Write down your #1 Long-Term Goal

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What are Your Goals?

• What are your goals?– Draw them out and estimate how much they will

cost.

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Now What?

• We Have – Needs– Wants– Goals

• How do you earn money? Write down how much money you earn in a week/month?

• Could you earn more?• How will you divide your money among your

needs, wants and goals? 14

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But remember…..

Save some money (the amount is up to you) to spend now. Enjoy life, but save for your

dreams and goals!!!

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Teacher Notes:• In this game, the teacher is going to play the role of a Personal Financial Advisor to

the client's) – the classroom. This is a very simplistic version of what a Personal Financial Advisor will do with a client; however, this is something that a student can employ in his/her daily life.

• The clients (aka the classroom) have a problem – they do not have enough money to buy all the things they want – house, a new car, fancy clothes, the brand new iPod Nano, etc. This is the main reason most people see a Personal Financial Advisor.

• The first thing you are going to do is explain the concept of savings and making a budget. You can use the PowerPoint presentation attached. Then, you will walk all your “clients” through an exercise in determining needs and wants and prioritizing them.

• Pass out to each student a form titled “Figuring Out Needs and Wants” after you discuss Slide #9. Then walk your students through the exercise…telling them to ignore (for right now) the column marked “Prioritize.”

• After everyone is done, introduce Slide #10, and then have the students prioritize their “Wants” on the “Figuring Out Needs and Wants” sheet.

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