Opportunity Costs

10 Reasons You Will Never Get Out of Debt

Posted on September 12, 2015 by Melissa Hart

“Do you feel as if you’ll be in debt forever?  You’re not alone.”

According to a CreditCards.com survey, 13 percent of Americans say they’ll never pay off all their loans, and another 8 percent say they won’t pay off what they owe until they’re 71 years old.  While the results of the survey are discouraging, this Kiplinger article describes the following 10 reasons people can’t get out of debt and also provides suggestions for getting out of debt.

  1. You don’t know how much you owe.
  2. You pay only the minimum.
  3. Your mortgage is too big.
  4. You took out too many student loans.
  5. You can’t say no to your kids.
  6. You don’t have money for emergencies.
  7. You feel a sense of entitlement.
  8. Your car loan is too long.
  9. You rack up late fees.
  10. Your interest rates are too high.

For more information, click here.

Teaching Suggestions

You may want to use the information in this blog post and the original article to

  • Explain how people get in trouble when they make financial decisions without considering the consequences.
  • Go into more detail about how each of the 10 reasons described in this article affect an individual’s financial future.

Discussion Questions

  1. How do you plan to balance your objective of creating an enjoyable and entertaining life with the objective of building a secure financial future?
  2. Based on the 10 reasons in this article, what steps can you take to improve your financial planning for the future.
Categories: Chapter 1, Chapter_11, Debt, Investments, Opportunity Costs, Time Value of Money | Tags: , , | Leave a comment

Quiz: What’s Your Financial SPF Factor?

Posted on July 4, 2015 by Melissa Hart

“So put aside that beach read for a few minutes and take this quiz to assess your financial SPF factor.”

While most people recognize SPF as standing for sunscreen, SPF–as defined in this article stands for Save, Protect, and Fund.  After a brief explanation of each SPF financial term, the article asks 11 questions that someone can use to help gauge their financial knowledge and financial planning skills.

At the end of the quiz, you are also told how your answers stack up and then the article provides suggestions about how to improve not only your score, but also your ability to plan for your financial future and retirement.

For more information, click here.

Teaching Suggestions

You may want to use the information in this blog post and the original article to

  • Stress the importance of effective financial planning over your lifetime.
  • Begin a discussion about the benefits of long-term investments.
  • Review time value of money calculations.

Discussion Questions

  1. How can financial planning help you obtain your goals and objectives?
  2. Why should you begin investing sooner rather than later?
  3. A common problem for some people is they don’t have the money they need to begin an investment program. Given your current circumstances, what steps can you take to “find” the money to start an investment program?
Categories: Chapter 1, Chapter 2, Chapter_11, Financial Planning, Investments, Opportunity Costs, Time Value of Money | Tags: , , | Leave a comment

The New Grad’s Guide to Student Loan Debt

Posted on July 1, 2015 by Melissa Hart

“Finishing college is surely cause to celebrate—but it is also time for some hard realities to hit.” 

This article provides information about what happens after graduation and you have to start paying back student loans.  Specific information includes:

  1. When you will start making payments
  2. How much you will pay and which repayment option to consider
  3. How to make your payments
  4. What happens if you want to change your repayment plan
  5. The importance of making a budget that includes your loan payments.

Note:  There are also links to a “very informative” video and additional articles at the bottom of this article that provide even more information about student loans and what happens if you don’t make payments.  Definitely worth a click.

For more information, click here.

Teaching Suggestions

You may want to use the information in this blog post and the original article to

  • Help students understand that student loans are one way to finance their education, but loans should not be considered free money that doesn’t have to be repaid.
  • Illustrate what can happen if student loans are not paid back.

Discussion Questions

  1. Many students obtain student loans to help pay for their college education. Are there other options that can be used to pay for college?
  2. Assuming that you decide a student loan is the best way to obtain the money you need to pay for college, what steps can you take to understand the conditions of the loan agreement that you will sign in order to obtain the loan money?
  3. What happens when someone finishes college, but doesn’t make the student loan payments that are required?
Categories: Debt, Opportunity Costs, _Appendix A | Tags: , | Leave a comment

Why Should I Invest?

Posted on May 27, 2015 by Melissa Hart

“Simply put, you want to invest in order to create wealth.  It’s relatively painless, and the rewards are plentiful. “

This article from The Motley Fool website explains why investing is a smart idea.  The article begins with information about the importance of goals.  Then asks the question, “What are you saving for?”.  The article also explains the power of compounding and provides specific examples to illustrate how time, rate of return, and age can make a tremendous difference.

The article also summarizes 9 common pitfalls to avoid including: doing nothing, starting late, investing before paying down credit card debt, etc.

Note:  this is one of a series of articles provided by The Motley Fool website.  Hopefully, students will use this article as a starting point and will use more of the educational materials available on this site.

For more information, click here.

Teaching Suggestions

You may want to use the information in this blog post and the original article to

  • Stress the importance of beginning a savings and investment program sooner rather than later.
  • Explain the power of compounding examples in this article to illustrate the difference in potential returns.
  • Discuss the 9 common pitfalls that often keep people from starting a savings and investment program.

Discussion Questions

  1. What are the advantages of starting an investment program sooner rather than later?
  2. Where can you get the money you need to begin a savings and investment program?
  3. What do you consider the biggest pitfall that keeps you from starting a savings and investment program?
Categories: Chapter 1, Chapter_11, Investments, Opportunity Costs, Time Value of Money | Tags: , , | Leave a comment

How Much You Have to Earn to Be Considered Middle Class in Every US State

Posted on May 9, 2015 by Melissa Hart

“Pew defined middle class households as those earning 67%-200% of a state’s median income.”

A recent analysis from Pew Charitable Trusts’ Stateline blog found that the middle class shrunk in every state in the U.S. between the years of 2000 and 2013–the most recent data available.  This article by Libby Kane and Andy Kiersz also provides a detailed table that displays the median income and middle class incomes for each of the 50 states.  Finally, the information in this article points out that the definition of middle class often depends on where you live.  For example, you can feel middle class even if you earn$250,000 a year in some areas of the country which is about five times the $52,250 median income for the entire United States.

For more information, click here. 

Teaching Suggestions

You may want to use the information in this blog post and the original article to

  • Discuss what it means to be middle class in the United States.
  • Stress how income relates to financial planning, investing, and the time value of money.

Discussion Questions

  1. While the median income for the United States is $52,250, the median income and the middle class incomes for each state vary. What factors account for the difference in these income amounts from one state to the next?
  2. Assume you are offered a new position within your company that will pay $6,000 more than your current annual salary. If you take the new position, you will have more responsibility and it will require that you work longer hours and travel away from home and family on a regular basis.  Do you feel the extra money is worth the changes that will be required if you take the new position?
  3. If you decide to take the new higher-paying position, what would you do with the extra money?
Categories: Chapter 1, Chapter_11, Economy, Investments, Opportunity Costs | Tags: , , , | Leave a comment

How This Couple Retired in Their 30s to Travel the World

Posted on May 6, 2015 by Melissa Hart

This is a very interesting interview that describes how one young couple decided to take charge of their finances, pay off their debts, and accumulate a nest egg to fund an early retirement.    

When Jeremy graduated from college, he started working for Motorola and earned $40,000 a year.  But his desire to keep up with his friends, family, and co-workers led him to buy a new car and a three-bedroom home.  He was quickly in debt, but fortunately he realized he wanted to live debt free.

Using an interview format, this article describes the steps Jeremy (38) and Winnie (33) took to save enough money to retire while they were in their 30s.  It also describes their current lifestyle and how they spend their money and time since they retired.

For more information, click here.

Teaching Suggestions

You may want to use the information in this blog post and the original article to

  • Explore why people often feel the need to keep up with friends, family, and co-workers.
  • Discuss the specific steps that Jeremy and Winnie took to take control of their finances.

Discussion Questions

  1. What steps did Jeremy and Winnie take to get out of debt? Would you be willing to take these steps in order to live debt free?
  2. Once Jeremy and Winnie were debt free, what techniques did they use to save and invest their money?
  3. Jeremy and Winnie retired in their 30s. Does the idea of retiring in your 30s or 40s, or 50s appeal to you?  Explain your answer.
Categories: Chapter 1, Chapter_11, Investments, Opportunity Costs, Retirement Planning, Time Value of Money | Tags: , , | Leave a comment

Great Ways to Save

Posted on December 13, 2014 by Melissa Hart

“Can running shoes save you money?  Yes – and we have six more ideas to help you save.”

Let’s begin with the answer to the above question.  As the article points out, buying running shoes can save you money because running reduces the risk of heart disease and stroke, lowers blood pressure, and can help prevent other health problems that can cause huge medical bills and even loss of employment or your life.

The above is just one of the suggestions in this article that describes ways to increase savings and provide additional money for investments by taking simple steps that you can make in your everyday life.  Additional suggestions (and the reasons behind the suggestions) include maxing out your savings, saving spare change, choice of gasoline for your car, getting the best value when choosing a hotel, encouraging your kids to save, and bundling communication bills.

For more information go to http://money.cnn.com/2005/06/02/pf/smartest_saving_0507/index.htm

Teaching Suggestions

You may want to use the information in this blog post and the original article to

  • Stress the fact that savings can be easier than you think by taking advantage of everyday opportunities to increase the amount of money you save and invest.
  • Use the example in the article about how increasing the amount of money contributed to your 401(k) retirement account can significantly increase the amount available when you retire.
  • Note: This article is just one of a series of articles in the Money series “50 Smartest Things to Do With Your Money.”  You may want to (or have your students) visit this web site for other articles on money management.

Discussion Questions

  1. Some people say that saving small amounts of money doesn’t really help accomplish their long-term financial goals. Do you agree or disagree?
  2. How can one of the suggestions in this article help you increase the amount you save or invest?
Categories: Chapter 2, Chapter_11, Investments, Opportunity Costs | Tags: , | Leave a comment

Here’s How to Become a 401k Millionaire

Posted on October 15, 2014 by Melissa Hart

“If your job offers you a 401k or similar retirement plan, you’ve got one of the very best investment tools at your disposal.”

To become a 401k millionaire, all you need is a paycheck, reasonable options in your retirement plan, and time.  This article also explains that once you start putting money into the plan, the tax-deductible investments grow and are tax-deferred until you begin to withdraw money from your 401k account.  As an added bonus, your employer may match all or part of the money you contribute to your 401k account.

A very useful table that shows how many years it will take for you to become a millionaire based on how much you (and your employer) invest each month with different rates of return is also included in this article.  And there are also suggestions for increasing the amount that you save or invest in a 401k account or other savings or investment accounts.

For more information go to http://www.fool.com/retirement/401k/2014/09/27/heres-how-to-become-a-401k-millionaire.aspx

Teaching Suggestions

You may want to use the information in this blog post and the original article to

  • Stress the importance of beginning an investment program sooner rather than later.
  • Discuss ways to save the money needed to start an investment program.

Discussion Questions

  1. Why is it important to begin saving and investing sooner rather than later?
  2. Assume you (and your employer) invest $250 a month in your 401k account. How long will it take for you to become a millionaire if your investments earn annual returns of 10 percent?  (Note:  Using the table in the article, the answer is 35.5 years.)
Categories: Chapter 1, Chapter_11, Investments, Opportunity Costs, Time Value of Money | Tags: , , | Leave a comment

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