Week 1: Personal Finance

Week 1: Personal Finance

Introduction to Personal Finance … Evaluating Financial Websites … Human Capital and Investing in Yourself
(Source URL)

Summaries

  • Week 1 > Module 1: Introduction to Personal Finance > Welcome!
  • Week 1 > Evaluating Financial Websites > Finding Reliable Information on Personal Finance
  • Week 1 > Evaluating Financial Websites > Choosing Credit Cards
  • Week 1 > Module 2: Human Capital and Investing in Yourself > What Is Human Capital?
  • Week 1 > Module 2: Human Capital and Investing in Yourself > Investing In Yourself
  • Week 1 > Module 2: Human Capital and Investing in Yourself > Comparing Quality Indicators

Week 1 > Module 1: Introduction to Personal Finance > Welcome!

  • ANN WITTE: Hi. I’m Ann Witte, and I’ll be your guide to a better financial life.
  • It’s about learning how to use the educational, economic, and financial systems to achieve your goals, rather than having these systems use you to achieve their goals.
  • So what tools and concepts will help you understand the financial implications of your decisions? ANN WITTE: Spreadsheets will help you compare the financial options available.
  • ANN WITTE: So what decisions will these tools help you make? They’ll help you select and pay for college or a training program.
  • They’ll let you understand and choose among different job offers.
  • They’ll help you invest effectively for retirement and education.
  • They’ll help you select health, life, and disability insurance.
  • Finally, they will show you how to lower your taxes by taking full advantage of untaxed benefits and income, tax credits, and tax deductions.
  • ANN WITTE: So how will the course work? You’ll be doing readings, you’ll be viewing videos, you’ll be using websites and spreadsheets, you’ll be watching avatar families demonstrate how these tools and websites can be combined to make good financial decisions.
  • ANN WITTE: We’ll be monitoring that forum, and we’ll be putting responses to commonly asked questions in our announcements section of the course.
  • I’ll also be scanning the horizon for new ideas, new websites, and new ways of thinking about financial issues.
  • ANN WITTE: So why are we using avatar families? We’re using them so you can see how the tools and concepts provided in personal finance can be used in diverse family settings.

Week 1 > Evaluating Financial Websites > Finding Reliable Information on Personal Finance

  • ANN WITTE: In this module, we’re going to show you how to find and use reliable financial information.
  • You need such information to make good financial decisions.
  • Oh, you might say, the web and other sources have tremendous amounts of financial information.
  • General rule, always assess the biases and motivations of the organizations providing financial information.
  • When I need to make financial decisions, I use a simple system to identify good financial information.
  • I’ll show you how it works by finding information on credit cards.
  • I look, and I see a number of government organizations that provide some information on credit cards.
  • We learn when we go to the Consumer Financial Protection Bureau that they have a lot of information about credit cards.
  • “Know Before You Owe” will provide you with general information.
  • They provide information on credit card complaints, credit card agreements, and surveys of credit card plans.
  • Before you use any site, even a federal government site, you want to learn a little bit about the site.
  • I click on inside the Consumer Financial Protection Bureau and then click on About Us. And I could look at the video.
  • I move down and see that one of the goals of the Consumer Financial Protection Bureau, CFPB, is to educate and inform consumers the first line of defense against abusive practices.
  • Going to their search box, I type in Credit Cards, and I search.
  • I click on this, and it gives me a great deal of information.
  • Scrolling down, we see information about when our rates can rise.
  • I click on the one that says “Federal Reserve, Understanding Your Credit Card Offers,” because I know about the Federal Reserve and know it’s usually a good site.
  • I could limit my search to dot gov sites as I’ve done here, but I wouldn’t get the kind of information I’m looking for.
  • In general, governments do not provide that kind of information.
  • It’s a secure dot com site, but it’s a dot com site, and I know nothing about this particular site.
  • Let me just read you some and show you why I actually think this is a good site for reviews.

Week 1 > Evaluating Financial Websites > Choosing Credit Cards

  • It says to know and compare different credit card options and provides you with definitions of the things that you need to compare.
  • Just as an aside, credit unions are often very good financial institutions, and you should check out your local credit union to see if that will be a good place for you to do your banking and get your credit cards.
  • You’ll be surprised how often the banks and credit unions will meet the offer of another firm if you bring it to their attention.
  • You would have your interest you pay, the APR- which is the interest you pay- for balance transfers, your penalty annual percentage rate, or APR, and any fees that the card might impose.
  • Then across the columns, I’m going to have my current credit card- and I’ll get information on each of these for my current card- the card from my bank or credit union, a card from Capital One, and a card from Chase.
  • We have added columns for Capitol One and Chase, because many credible reviews indicate that these two providers generally provide competitive credit cards.

Week 1 > Module 2: Human Capital and Investing in Yourself > What Is Human Capital?

  • ANN WITTE: In this module, we’re going to be talking about human capital.
  • Your human capital is likely to be your most important asset throughout your life, and certainly while you are young.
  • What is human capital? Human capital is your innate abilities, your health, and other attributes embodied in you.
  • The concept of human capital was developed by Gary Becker at the University of Chicago.
  • What are investments in human capital? There are many ways in which you can invest in your human capital.
  • An investment in human capital is something that increases your productivity.
  • So what are the returns to investment in human capital? There are two types of returns.
  • So what are the non-monetary, or intangible benefits to human capital investment? Well, the non-monetary or intangible benefits are increases in your life skills, for example better health, more fulfilling relationships, and better child-rearing.
  • What can you do with your human capital? Well, human capital is embedded in you.
  • Your investment portfolio then consists of human capital, and all other assets that earn monetary returns.
  • As you’re investing in human capital, carefully consider both the costs and the benefits of your human capital investment.
  • There’s a more subtle cost that often is the majority of the cost of your human capital investment.
  • If the next best use of that time was to be working, then the opportunity cost of your human capital investment is the salary and benefits that you forego by spending your time in class and studying.
  • In addition to cost, you need to think about the returns to your human capital investment.
  • The returns to human capital investment, like the returns to other elements of your portfolio such as stocks and bonds, occur in the future.
  • That means that your investment in human capital, like your investment in any other asset such as a stock or a bond or a piece of real estate, has both returns and risks.

Week 1 > Module 2: Human Capital and Investing in Yourself > Investing In Yourself

  • ANN WITTE: In this video, we’re going to give some advice on when to invest in human capital, where to invest in human capital, and how to invest in human capital.
  • First of all, let’s look at when to invest. Sooner rather than later is the best advice.
  • Why? Well, because you’ll have many more years to recap the gains from human capital investment.
  • Another good time to invest is when you hit a career dead end.
  • It can allow you to change careers and to make more money.
  • Another consideration is the opportunity cost of your time.
  • If you’re unemployed, the opportunity cost of your time can be very low. So when you’re unemployed can be a very good time to make a human capital investment.
  • Even better, if somebody offers to pay for your education, by all means say yes.
  • Many large employers provide education subsidy and the military even provides and pays for the full cost of some education programs.

Week 1 > Module 2: Human Capital and Investing in Yourself > Comparing Quality Indicators

  • Natalia is a senior in high school and will be choosing a college to go to.
  • Here, we’re going to provide some information that could be helpful to Natalia and her aunt, Anna Maria, as they choose a school to go to.
  • As you’ll learn next week, Natalia decides to compare and decide between two schools, The University of Florida and Wellesley College.
  • First of all, we have a hyperlink to College Navigator, and column E tells us that when we get to College Navigator, the information that we need to fill in these two blanks will be under a tab called General Information.
  • Wellesley College comes up and I click on Wellesley College.
  • I have the number of instructional faculty, 333, and I have the number of instructional faculty that are part time, 56.
  • I type the number of full time instructional faculty and I divide that by the number of total faculty, just as the hint to the right told me to do.
  • TYPING] ANN WITTE: And I find out that 86% of Wellesley’s instructional faculty are full time.
  • This is a very high number and you’re likely to find a much lower number at the University of Florida.
  • I’ll leave that for you to do, and you should fill out the rest of this Quality Indicator spreadsheet for the University of Florida and Wellesley College since you’ll use them in a discussion question in week three.

Return to Summaries

(image source)

Leave a Reply

Your email address will not be published. Required fields are marked *