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Glencoe Personal Finance
Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
Chapter
3
Personal Financial Planning
Section 2 Opportunity Costs and Strategies
Personal Opportunity Cost
Personal Resources Require Management
Health
Glencoe Personal Finance
Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
Chapter
3
Personal Financial Planning
Section 2 Opportunity Costs and Strategies
Financial Opportunity Cost
To help make choices, consider
the time value of money.
time value of money
the increase of an amount of money due to
earned interest or dividends
Glencoe Personal Finance
Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
Chapter
Personal Financial Planning
3
Opportunity Cost
An opportunity
cost is what you
give up to get
something else.
Source: www.collegeboard.com
Glencoe Personal Finance
Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
Chapter
3
Personal Financial Planning
Section 2 Opportunity Costs and Strategies
Financial Opportunity Cost
Calculating Interest
principal
the original amount of money on deposit
Glencoe Personal Finance
Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
Chapter
3
Personal Financial Planning
Section 2 Opportunity Costs and Strategies
Financial Opportunity Cost
Calculating Future Value
Multiply the principal by the annual interest rate
and then add that interest amount to the principal.
future value
Glencoe Personal Finance
Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
Chapter
3
Personal Financial Planning
Section 2 Opportunity Costs and Strategies
Financial Opportunity Cost
What is present value?
present value
Glencoe Personal Finance
Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
Chapter
3
Personal Financial Planning
Section 2 Opportunity Costs and Strategies
Achieving Your Financial Goals
Strategies
1
5
Obtain financial records.
2
6
3
7
4
8
Invest to increase current
income and for long-term growth
Plan for retirement.
Glencoe Personal Finance
Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
Chapter
Personal Financial Planning
3
Glencoe Personal Finance
Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
Chapter
3
Personal Financial Planning
Section 2 Opportunity Costs and Strategies
A common piece of financial advice is “Do not live beyond your
means.” Explain the meaning of this statement. Do you think it
is good advice? Why or why not?
Glencoe Personal Finance
Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.