Assignment !

Step 2 Analyze Information:

1-2: Where Does Your Money Go?
YOU 30-Day
CAN Countdown The second step in the financial planning process is to find out where your
DO IT! to Goal
finances currently stand, so you can see exactly how much money you’re
getting and how much you’re spending or saving.

Now choose one short-term Let’s start with your income. Where do you get money from? Do you
receive an allowance? Do you have a job or your own business? How
financial goal you want to much do you earn each week?
achieve by next month. Next, how much money do you spend each week and on what are you
spending it? Do you owe money to anyone for the stuff you’ve bought?
Keep track of your progress
Whether you got a loan to buy your first car or you borrowed money from
over the next 30 days and your parents to buy a new jacket, you owe money to others and need to
be aware of that debt.
see how you did!
Questions like these are critical because their answers have a direct impact
on your ability to achieve your financial goals.

! Think Fast! Assignment 1-3: My Personal Spending Log

How much money did you 121 Track your spending for a week, and assess how
your spending matches your financial goals. Try to
spend in the past week? Think
YOU fill in the table for the last seven days. If you can’t
CAN remember every dollar you spent or received, that’s
about it and write down your DO IT! OK. Just do the best you can.
best guess of the total amount.
Week of: INCOME +$ SPENDING -$
(A) (B)
Don’t worry—most people don’t
know off the top of their head how Sunday
much they’ve spent. That’s why a
Personal Spending Record can be Monday
a handy tool for tracking your cash
Tuesday
flow. Cash flow simply measures
the money you receive and the
Wednesday
money you spend. We’ll talk more
about it in Unit 2. For now, it’s Thursday
important to know that how you
manage your cash flow affects Friday
if, when, and how you reach
your goals. Saturday

So to find out where your finances Totals

currently stand, complete the
Personal Spending Record that Difference
follows. Then copy the form in
(A minus B) $
Assignment 1-3 as a model to
But from now on, log your income and purchases on a daily basis.
track your money for the next
We’ll make use of this information later in Unit 2. Finally, compare
several weeks. your entries to how teens on average spend their money.

8 UNIT ONE Your Financial Plan: Where It All Begins

 ! Step 3 Create a Plan:
? Your Financial Roadmap

Did You Know? So what if the amount you need to save each week in Assignment 1-1
is more than you receive? It’s a common situation that nearly everyone
faces. The solution is to analyze the situation and make the best
How do other teens spend their decision you can.
money? A recent study shows:

Top 5 Items Guys Last Bought Making Decisions

With Their Own Money
Financial planning requires making many decisions, and making decisions
about money can be particularly challenging because so many things
Food......................................30%
come into play. For one, you have the facts of the situation, such as
your spending log. But there are many other things that can affect your
Soda or Soft Drinks....................26% decisions as well—your mood, values, culture, habits, and opinions of
your friends and parents.
Candy....................................24%
Some decisions are easy, such as deciding which movie to see. Of
Clothes..................................21% course, others are more complicated and require more thought. But
whether the decision is easy or hard, there’s a basic process everyone
CDs or Recorded Music.............19% follows—the six stages of decision making that you may not even realize
you already go through. So let’s see how this works by analyzing an easy
decision. Pretend you’re going to see a movie with your friends and it’s
Top 5 Items Girls Last Bought
sold out. What do you do?
With Their Own Money

Clothes.......................................43% 1 Identify your goal. Yes, you still want to see a movie.

Candy.........................................34% 2 Establish your criteria. Consider what type of movie you want to
see, when you want to watch the movie, and how much money you
Soda or Soft Drinks...................32% want to spend. By identifying your expectations in advance, you can
eliminate choices that don’t meet your wants and needs.
Food..........................................31%
3 Examine your options. Think about whether you want to buy tickets
(Tied) Salty Snacks now for a later showing of the sold-out movie, see another one that
and Lunch..................................22% will be starting soon, or rent a movie to watch at home.

Source: NOPWorld 2003. Survey based on

4 Weigh the pros and cons. Consider how your options meet your
teens ages 13 to 17.
criteria. You really don’t want to wait a couple of hours, and there’s
another film playing that you want to see.
Now that you have some idea of
where you are (your financial
5 Make your decision. Decide which option best meets your criteria.
resources) and where you want to Decide to buy the tickets for the movie that is playing now.
go (your goals), the next step is to
figure out how to get there. 6 Evaluate results. Afterward, talk with your friends about
whether you liked it.

! When it comes to the decision-making process, two of the most

important elements are examining your alternatives and analyzing your
outcomes. So let’s look at these two elements a little further.

To learn more, visit hsfpp.nefe.org. 9

 Say your friend Rob has two short-
term goals he wants to meet. Exercise 1D:
What Should Rob Do?
• Goal A: save $5 per week for Work with a partner to complete Exercise 1D to
the next four weeks to buy a help Rob decide what to do to reach his goals.
new video game.
Use the chart to list the criteria and possible
• Goal B: save $10 per week for options for Rob’s situation.
the next nine weeks to buy a
new pair of shoes. Criteria Option A: Option B: Option C:

However, Rob’s Personal Spending

Record shows that he has only $5 get a job
left over each week. So he asks
you what to do—choose Goal A
or B?
Because Rob’s limited resources
mean he can’t accomplish both of Notes
his goals in the desired time frame,
he has to make some kind of
trade-off. Economists call this the
deoff
opportunity cost of the decision. Of course, not all decisions are created equal. Some are just a blip on the
If Rob chooses to save for only the radar screen, while others will have a lasting impact on your life. In fact,
video game right now, it means that
he’s giving up the opportunity to some of the personal and financial decisions you make today will affect
buy those sneakers nine weeks decisions you will make far into the future. For example, if you take out a
from now. loan to buy a car, you could be making payments on it for the next five years.
So for the next 60 months, you will have less money to put toward other
Rob has several options for trying to
reach his goals. In situations like things you may want.
this, making a decision chart can
help. Just remember that many Often a major decision leads to several smaller ones, sometimes called
times there is no “right” answer. The satellite decisions. Once you’ve decided to buy a car, you have to decide
best decision is simply the one that what kind of car to buy, how much money to put down, what dealer to buy it
feels like the best choice based on i
from, and when to buy it. These are satellite decisions, which may lead to
your criteria and all the information
you have. Use Exercise 1D to help even more satellite decisions. Let’s say you know which car you want. Now
Rob establish criteria for making you have to decide which color and options package to get.
his decision.

Exercise 1E:
Satellite Decisions Major
In Exercise 1E, pretend your high Decision:
school class wants to see the Class Trip
Macy’s Thanksgiving Day Parade®
in person. What decisions will the
class members need to make?
And what new decisions will those
decisions create? Remember, the
decisions will likely involve who,
what, where, when, and how.

10 UNIT ONE Your Financial Plan: Where It All Begins