Intro to Finance: Unit 1 - Budgeting

1. Mr. Elsesser
Introduction to Financial Management

2. NEFE High School Financial Planning Program
Unit One - Your Financial Plan: Where It All Begins
Objective:
• Define the purpose of Decision Making
and creating a Financial Plan
• Analyze trade offs of an economic decision
• Identify economic risk factors to consider in
the decision making process
Do Now:
How does the process of Decision Making
relate to your SMART Goals project?

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

4. NEFE High School Financial Planning Program
Unit One - Your Financial Plan: Where It All Begins
Financial Planning also means....
Decision Making…
Opportunity Cost
Alternatives
Risk
Consequences

5. NEFE High School Financial Planning Program
Unit One - Your Financial Plan: Where It All Begins
You Know What You Want
In order to make a good decision you must be informed of
what you need to do to achieve it!
What is opportunity cost?
A possibility that you give up when
you make one choice instead
of another.
Example: You can buy
1-M
save
plan
coffee every day or
money and get a data

6. NEFE High School Financial Planning Program
Unit One - Your Financial Plan: Where It All Begins
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

7. NEFE High School Financial Planning Program
Unit One - Your Financial Plan: Where It All Begins
Identifying More 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

8. NEFE High School Financial Planning Program
Unit One - Your Financial Plan: Where It All Begins
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

9. NEFE High School Financial Planning Program
Unit One - Your Financial Plan: Where It All Begins
Alternatives
**Choices….
**Different ways to solve a problem;
**Opportunities to choose between several
courses of action

10. NEFE High School Financial Planning Program
Unit One - Your Financial Plan: Where It All Begins
Risk
**The possibility that your decision will
result in a negative outcome;
**Taking a chance;
**Risk may involve losing money

11. NEFE High School Financial Planning Program
Unit One - Your Financial Plan: Where It All Begins
Risk
1) Inflation Risk
2) Interest Rate Risk
3) Income Risk
4) Personal Risk
5) Liquidity Risk

12. NEFE High School Financial Planning Program
Unit One - Your Financial Plan: Where It All Begins
Inflation Risk
Inflation is the rise in the level of prices
for goods and services over time
Inflation Risk Example:
If you wait to buy a car until next
year, you accept the possibility that the
price may increase.

13. NEFE High School Financial Planning Program
Unit One - Your Financial Plan: Where It All Begins
Interest Rate Risk
Interest is the price that is paid for the
use of another’s money
Interest Rate Risk Example:
Interest rates go up and down, which
may affect the cost of borrowing or the
profits you earn when you save or invest

14. NEFE High School Financial Planning Program
Unit One - Your Financial Plan: Where It All Begins
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
How Can you prepare?
Prepare and save – build up 3-4 months of
savings to cover cost of living

15. NEFE High School Financial Planning Program
Unit One - Your Financial Plan: Where It All Begins
Personal Risk
Personal Risk: Risk you assume yourself
based upon your actions or choices.
Personal Risk Example –
Driving for eight hours on icy mountain
roads may not be worth the money you
would save on airfare.

16. NEFE High School Financial Planning Program
Unit One - Your Financial Plan: Where It All Begins
Liquidity Risk
Liquidity is the ability to easily convert
your financial resources to cash without a
loss in value
Liquidity Risk Example:
Some long-term investments, such as a house or an
antique doll collection, can be difficult to convert to
cash quickly.

17. Other Influences
NEFE High School Financial Planning Program
Unit One - Your Financial Plan: Where It All Begins

18. NEFE High School Financial Planning Program
Unit One - Your Financial Plan: Where It All Begins
In Order to Make a Good Choice…
Find Advice; Find Information
Making a good choice equals using…
People
Internet
Magazines
Books
Social Media
Agencies
Other
Publications