Goal Setting

Financial Goals

• A statement of something a person needs or wants to do related to finances/money

SMART GOALS

S- Specific

• Need to have a definite end• Non-example: I

want to save more money.• Example: I want to

have $100 in my savings account.

M- Measurable

• Need to have a way to tell if progress has been made• Non-example: I

want to be a better student.• Example: I want to

improve my GPA by .2 points.

A- Action-oriented

• Need to use action words to describe• Non-example: I

want to be employed.• Example: I want to

apply for jobs.

R- Realistic

• Need to be able to be reached• Non-example: I want

to earn $1 million by Christmas.• Example: I want to

earn $500 working a seasonal job by Christmas.

T- Timely

• Goals should be achievable in a reasonable amount of time• Non-example: I want to be

a millionaire some day.• Example: I want to save up

enough money for my first year of college by the end of the school year.

TIME FRAMES

Short-term

• Goals that can be accomplished in a few hours or days• Example:

Earning an “A” on a test.

Intermediate-term

• Goals that can be accomplished in one to six months• Example:

Achieving a 4.0 for the semester

Long-term

• Goals that are accomplished in six or more months• Example:

Graduating from high school

WHAT KIND OF GOAL?

Intermediate-term

• Save up $100 to buy a new bike in the next two months.

Short-term

•Be on time to your next class.

Long-term

• Save enough for retirement to live off the interest.

Intermediate-term

• Passing all your classes at mid-terms

Intermediate-term

• Find a job in the next month.

Long-term

• Save the money to take a family vacation to DisneyWorld

Intermediate-term

• Prepare a rough draft of a 10-page research paper.

Long-term

• Entering the career of your choice.

Short-term

•Beat a stage or level on a video game.

Short-term

•Read a book over the weekend

Long-term

•Read 15 books this year

Long-term

•Graduating from college with a degree in nuclear engineering

Short-term

•Do your homework for tomorrow

Short-term

• Save your change from today in your piggy bank

Intermediate-term

• Save $20 a week until Hanukkah

WHY WE MAKE OUR FINANCIAL DECISIONS

Reasons People Buy Things

• They Need It• They Want It• Advertising/Marketing• Peer Pressure• Emotional Shopping

SO HOW DO WE KNOW WHAT TO BUY?Decision making- The process of considering and analyzing information in order to make a choice.

Economic Concept

• Scarcity- the conflict that arises because people have unlimited wants and limited resources• Which means? • We can’t have everything we want

• Opportunity Cost- the highest valued alternative one must give up to pursue a decision

Needs• Goods that are

necessary to live• Ex: Food, water,

shelter, transportation

Wants• Supplementary

goods that might improve quality of life• Ex: fancy car,

brand name clothing, new iPod

Values

• The beliefs and principles a person considers important, correct, and desirable.

• What do you value?

ADVERTISING

Why It Works

• Helps consumers become aware of your product• Example:

Why It Works

• Uses suggestion- a psychological concept involving association of two ideas• Appeals to emotion• Example: Have a celebrity endorse a

product. If you like the celebrity, you have good feelings toward the product.

Why It Works

• Uses repetition to help consumers remember the product• Example: Geico can help you do what?

Why It Works

• Plays on societal trends in order to target the appropriate audience• Example: Michael Phelps sponsoring

products right after he won gold medals in Beijing.

EXAMPLES OF ADVERTISING

Sketcher’s Ad from last superbowl

CONSEQUENCES

Possible Consequences of Emotional Buying (Instant Gratification)

Pros• You get what you

want• Immediate

gratification

Cons• Excessive debt• Less money for needs• More worry about

how to pay for things• Impulse buying• Bankruptcy(?)

Possible Consequences of Financial Planning (Delayed Gratification)

Pros• Security• Ability to afford

needs• Ability to achieve

goals• Less worry

Cons• Delayed gratification• Lifestyle change (?)

Bankruptcy

• Legal inability to pay debts• Chapter 7- Liquidation- works to eliminate (wipe

off the record) existing debt by getting rid of all assets

• Chapter 13- Reorganization- court approves a repayment plan that does not require the person to give up their assets as long as they have steady income

Why it’s not good

• Harder to get loans after filing for bankruptcy• Interest rates are much higher on loans• Some debt cannot be eliminated through

bankruptcy (i.e. back taxes, alimony, student loans, child support, and debts incurred through fraud)

CREATING A FINANCIAL PLANA blueprint or plan for managing all aspects of a person’s money.

Steps

1. Determine the current financial situation

2. Develop financial goals

3. Identify all options

4. Evaluate alternatives

5. Create and use a financial plan of action

6. Review and revise the plan

Example- Identify the steps

• Greg currently has $100 in his checking account. He works a part-time job and makes about $100 a week. He is trying to save up to go on trip to Europe this summer that costs $2000, but he is not very good at financial planning.

• What are some possible options?• Which option should he choose?• How would he implement this plan?• How might the plan change?