Decision Making

 Definitions of decision making

• Incentives: Things that motivate you to do or choose something
• Utility: Satisfaction
• Opportunity Cost: The value or positives of what you COULD have/ What you loose.
• Trade-offs: Choices

Decisions related to Economics
Every day there are numerous decisions that are being made world wide. Economics is one of the biggest parts in society where decision making has a great impact on on how people succeed and how our country succeeds as a whole. If the decisions that need to be made are not looked at closely and thought about thoroughly the out come could be catastrophic. The fact that most of the decisions we have to make involve money makes decision making one of, if not the biggest aspect of economics.

Tips On Making Decisions 

1. Always examine the possible outcomes of each choice thoroughly
2. Don't let others be a negative influence on the decisions you make
3. Try to make decisions that are the best for you, without harming anyone involved

NEWS ARTICLE:  http://www.boston.com/news/nation/articles/2006/02/17/thought_for_thinkers/

DECISION MAKING VIDEO: http://academicearth.org/lectures/how-do-you-establish-decision-making-process

Buying a car

Buying something that is really expensive can be a hassle, whether it is paying for college, getting a home or buying a car. If you don't have the cash upfront you will need to get a loan. When thinking about getting a loan, it can be important to look at the situation from the bank's perspective. The bank makes a lot of money off the loans they give out. When you get a loan the bank is writing you a check to spend on say a car, and over time you will have to repay them back.

Process to get a loan

1. Pre-qualification: is when a lender gets information about the financial status of the person who is getting the loan, such as income and previous debts.
2. Application: This is when you actually apply for the loan (Day 1-5)
3. Processing: is when the person who is giving out the loan looks at your credit history (Day 5-20)
4. Underwriting: when the processor determines if the loan off is okay to give the borrower (Day 21-30)
5. Mortgage insurance: is when the loan is now submitted to a private mortgage guaranty insurer and this person provides extra insurance to the lender in case of default
6. Pre-closing: when a closing time is scheduled for the loan (Day 25-30)
7. Closing: is where the loan is closed with a cashier's check. This is the time when the borrower finishes the loan process (Day 30-45)

What is a down payment?

Down payments are the difference between the loan amount and the purchase price, usually paid immediately upon purchase with cash or a trade in. These are important because it is the part of making a major purchase like a car or home. A down payment is a sum of the money that is subtracted from the purchase of your price.

The value changes over time with buying a car because a car is not as good as it was when it first came out the more years that go by the better cars get and the more expensive they get so on one will want to buy a car for just as much as a brand new car.

Three things that every person should know about to buy a car is:
1. Make sure you either pay in cash or get a loan and make sure that you pay off the loan.
2. Get a good down payment
3. If you are going to buy a car and sell it make sure you do it in good time so that the car still has good value.

Information: http://www.investopedia.com/articles/younginvestors/07/loans.asp

Article: https://www.roadloans.com/applying_for_used_car_loans.aspx

Video: http://www.cnn.com/video/#/video/politics/2008/11/24/cttb.campbell.brown.loans.cnn?iref=videosearch

http://www.no-credit-check-advice.com/images/No-Credit-Check-Personal-Loans.jpg

http://mortgagesandloans.org/wp-content/uploads/2010/12/business-loan.png

Retirement

     Both IRA’s and 401k’s allow people to save up for their retirement. 401k’s are considered traditional because they are sponsored by the employer so employees choose an amount of their paycheck to have put into their retirement fund that is managed by the employer. An IRA  provides tax advantages by allowing individuals to place money for their retirements into an account with a life insurance group.

     Social Security: a tax funded program that provides retirement funds to those who are retired but do not have sufficient retirement funds on their own. It is a big issue today due the fact that taxpayers today feel that their hard earned money is going to someone who is living a nice, comfortable, and relaxing retirement for someone else.

    Retirement relates to personal savings by being able to retire you must have some sort of personal savings to retire on. Savings can help out a lot with a person's retirement and being able to live a good life after you are done working.
    It is important that working people think about retirement funds as an investment so that we may save up for later in life when we won’t have the ability to continue working. It has been proven that if a person begins saving for retirement when they are 18 rather than when they are 28, they will earn more money because of interest to live on when they retire and they will live a good life.

 Article: http://retireplan.about.com/od/planningbythedecade/a/top_retirement_planning_stories_decade.htm

  Video: http://money.cnn.com/video/pf/2009/02/20/money.revell.munnell.ss4.moneymag/





   



 

Credit Cards

 Credit cards are small, plastic cards that consumers can use as payment. With credit cards, people are able to purchase goods and services. Money accumulated will keep adding up. Some charges associated with credit cards are interest rates, APR, late fees, and over charge. If the bill is not paid fully at the end of the month, you will have to still pay off the remaining amount at some point, which can add up to be a lot of money at the end of the year. APR is the annual percentage rate. It is the the rate of interest for the whole year. Late fees are given to people who have not paid the full amount in the certain amount of time. Over charge is when you spend more then how much money you do have in your credit account.


       How to apply:
 

• You must first choose a company.

•  You can apply online

• Then the steps are laid out for you to follow

   
      Pros and Cons:

     Pros:

• Can spend more money than you have 
• can receive rewards
• can build up good credit

     Cons:

• Fraud
• debt
• over charge

     Tips people should know:

• Credit cards are good ways to buy things
• Be smart with making decisions when spending
• Pay full amount of bill at the end of every month

NEWS ARTICLE:
http://www.naturalnews.com/024365_credit_card_store_groceries.html

VIDEOS: http://cnn.com/video/?/video/business/2011/05/09/help.desk.credit.cards.cnn

Investment

Different Types of Investment
Stocks: Ownership in a Company that you gain from buying shares worth various amounts of money. Usually bought and sold through a broker
Mutual Funds: A set of stocks that are, for the most part, stable and are used to gain money over a longer amount of time.
Bonds: Long term investment. Bonds are bought at a certain price and have a set time for which they will be allowed to mature to higher price than what they were bought for.

Risk
Investing your money comes with a reasonable amount of risk. The risks that are involved with investing are mainly centered around the possibility of loosing money. If you invest in a company through stocks and that company ends up performing badly, you will end up with less money than you originally invested. The different types of investing have different levels of risk. The ranking from the most risk to the least goes like this: Stocks, mutual funds, and bonds.

Time
Throughout the process of investing, time can be the most important aspect to gaining money. Long term investing is a good way to gain decent amounts of money but it also takes more time and is gained through little amounts over time. While investing in stocks, a day can make the difference between making huge profits or loosing money.

Tips for Investing: 1) plan ahead in order to make the best possible profits. 
2) Don't take risks that you can't afford. 
3) Make sure to pay attention to your investments.
4) Try to have fun with it


News Article: http://www.investmentnewsarticles.com/investment_articles/2011/04/online-spread-betting-resource-helps-traders-and-investors-find-success-208848.htm

Video: http://www.investmentnewsarticles.com/investment_articles/2011/04/online-spread-betting-resource-helps-traders-and-investors-find-success-208848.htm

Budget

http://www.rsa.neu.edu/wordpress/?p=1447 

http://imransarwar.com/wp-content/uploads/2011/01/budget1.jpg

1..  Why it is important to save

• The more you save now the more you will have for your future. setting aside a certain amount of money each month or year for your retirement will help you have a stable amount of money to help you when your done working. Also saving money and putting it into a separate account could help you out if there ever is an emergency. If I were you I would set aside a small amount of money every month and that money can go towards buying a house or car for your future or even help pay college loans. Spending now is okay, but make sure you don't waste all of your money right now. Think of what is to come in your life. 

2. Know the difference between fixed and flexible income

• Fixed Income: Income that you pay on a regular basis, such as a car payment or house payment
• Flexible income: More of a luxury payment such as gas bill or grocery store.

3. Know the difference between simple and compound interest

• Simple interest: interest that is added on from the initial payment
• Compound interest: interest that builds on top of the new balance after a previous interest payment

• http://www.bills.com/staying-out-of-debt/ 
• Three ways to help budget your money (video)

http://www.bing.com/videos/watch/video/nbc-today-show-3-ways-to-help-budget-your-money/cdd6a5df15fc7d0586fdcdd6a5df15fc7d0586fd-677214684181?q=how+to+budget+your+money&from=LKVR5&gt1=LKVR5&form=LKVR7&playersize=Large