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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.
