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Glencoe Personal Finance Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
Personal Opportunity Cost
Section 2 Opportunity Costs and Strategies
Personal Financial Planning
Personal Resources Require Management
Health
Chapter
3
Glencoe Personal Finance Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
Financial Opportunity Cost
Section 2 Opportunity Costs and Strategies
Personal Financial Planning
To help make choices, consider the time value of money.
time value of moneythe increase of an amount of money due to earned interest or dividends
Chapter
3
Glencoe Personal Finance Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
Opportunity Cost
Personal Financial Planning
An opportunity cost is what you give up to get something else.
Source: www.collegeboard.com
Chapter
3
Glencoe Personal Finance Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
Financial Opportunity Cost
Section 2 Opportunity Costs and Strategies
Personal Financial Planning
Calculating Interest
principalthe original amount of money on deposit
Chapter
3
Glencoe Personal Finance Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
Financial Opportunity Cost
Section 2 Opportunity Costs and Strategies
Personal Financial Planning
Calculating Future Value
future value
Multiply the principal by the annual interest rate and then add that interest amount to the principal.
Chapter
3
Glencoe Personal Finance Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
Financial Opportunity Cost
Section 2 Opportunity Costs and Strategies
Personal Financial Planning
What is present value?
present value
Chapter
3
Glencoe Personal Finance Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
Achieving Your Financial Goals
Section 2 Opportunity Costs and Strategies
Personal Financial Planning
Strategies1
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5
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Obtain financial records.
Invest to increase current income and for long-term growth
Plan for retirement.
Chapter
3
Glencoe Personal Finance Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
Personal Financial PlanningChapter
3
Glencoe Personal Finance Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
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?
Section 2 Opportunity Costs and Strategies
Personal Financial PlanningChapter
3