Category Chapter 1

Sep 16 2023

UNDERSTANDING YOUR MONEY SCRIPT

A money script, based on a person’s early experiences with finances, can create a better understanding of financial behavior. Researchers using psychology and sociology have identified four money scripts:

  1. Money avoidance involves negative ideas related to finances and wealth. These people tend to not allow themselves to do well or save much, believing that having less is morally good.
  2. Money worship concerns people who believe wealth is the key to solving their problems and finding happiness. Money worshippers overestimate the sense of satisfaction and meaning obtained from buying things.
  3. Money status, these status seekers mix their net worth and self-worth. Those who grew up in households with financial struggles tend to use money to seek status and are prone to overspend and often have higher credit card debt.
  4. Money vigilance involves those who are alert, watchful, and concerned about their financial health. They believe that having enough money is important with an emphasis on saving.

Frustrations with your financial life can be reduced by reflecting on money attitudes and behaviors obtained in childhood. Take time to talk to family members and others. Try to determine reasons for family beliefs about money.  Awareness of these past beliefs can help to modify a person’s current relationship with money.

For additional information on money scripts,

Link #1

Link #2

Teaching Suggestions

  • Have students talk to family members or others to learn about their personal money attitudes and financial behaviors.
  • Have students create a visual proposal (poster, slide presentation, or video) to suggest actions that would help people better manage their finances based on each of the four money scripts.

Discussion Questions 

  1. How could knowing your money script help a person make better financial decisions?
  2. Describe actions people might take to better understand their money attitudes and financial behaviors.   
Aug 5 2023

RICH VS. POOR MONEY HABITS

Successful money management can result from simple actions.  A major difference between the rich and the poor is their habits and attitudes toward money. Increased financial literacy and changed behaviors can result in increased prosperity. A transformed financial future can result from these actions:

  • Believe you can control many aspects of your life rather than viewing yourself as a victim of circumstances.
  • Create goals to clearly maintain your focus and an action plan to build wealth.
  • Focus on opportunities looking for new ways to create value and grow wealth rather than being preoccupied with problems and barriers.
  • Avoid jealousy; learn from those who have already achieved wealth.
  • Emphasize cash-flow assets; acquire investments that generate income to build lasting wealth.
  • Commit to an increasing net worth and a positive cash flow.
  • Continue to learn since knowledge is power; seek to expand an understanding of finances, investments, and business.

In addition, people who are successful in managing their finances avoid spending money on these things:

  • bank fees
  • credit card interest
  • lottery tickets and other gambling
  • late fees
  • extended warranties
  • designer label clothing
  • impulse purchases
  • video games, televisions 
  • prepaid cash cards with various fees

For additional information on the money habits of rich and poor people, go to:

Link #1

Link #2

Teaching Suggestions

  • Have students interview a family member or another person to determine recommended actions for successful money management.
  • Have students create a visual proposal (poster, slide presentation, or video) with actions a person might take for reduced spending and for an improved financial situation.

Discussion Questions 

  1. Which attitude or behavior discussed in the article do you believe could make a difference in the financial life of most people?
  2. Describe actions a person might take to change attitudes and behaviors that could result in an improved financial situation.
Jul 8 2023

CHAT GPT FOR MONEY MANAGEMENT

You may ask if artificial intelligence (AI), such as ChatGPT, can be beneficial to guide your money management activities and financial decisions. AI is assisting students and others with everything from identifying research topics and preparing reading summaries to creating recipes and translating foreign languages.

ChatGPT and similar platforms are designed to understand and respond to questions and creative inquiries. When asked a question or given a prompt, a reply is generated based on the previous learning of the AI program.

Using ChatGPT for personal finance can provide a person with easy-to-understand information as well as suggested money actions related to budgeting, saving, and investing.  However, beware not to depend completely on AI advice since:

  • responses may contain fictionalized information or a biased point of view.
  • results can produce grammatically correct text but with flawed logic or facts.
  • up-to-date tax information and current financial data may be lacking.
  • citations may not be correct and may include made-up sources.
  • calculations may lack accuracy due to limited math algorithms.

ChatGPT and similar AI programs can be useful in your personal financial planning with:

  1. Understanding basic financial concepts.  As a starting point, ask how to improve financial literacy and inquire about fundamental personal finance topics related to budgeting, debt, insurance, and investing.  If a response is too complex for your current level of understanding, ask for a simplified explanation. Or, if a response is too general, resubmit your inquiry with more specific parameters.
    Sample ChatGPT prompt: What advice from financial planners might be the basis of wise money management?

2. Tracking spending and budgeting. Controlling your finances and knowing where your money is going are the foundation of financial success. Creating a budget (spending plan) allows you to tell your money where it needs to go. ChatGPT can suggest appropriate budget categories and amounts as well as possible adjustments when needed. Other AI uses may include use of the 50/30/20 budget rule and guidelines for using the envelope method or budgeting apps.
Sample ChatGPT prompt: What budget categories and allocated amounts are recommended for a household of four people with an income of $67,000?

    One person’s experience with creating a budget using Chat GPT may be viewed at:  https://www.youtube.com/watch?v=hl6pOtaSMR4

    3. Monitoring and improving your credit score.  Your credit score can influence many aspects of your financial life. ChatGPT is available to suggest actions for improving a credit score. Also of value would be information on how to dispute errors in a credit report.
    Sample ChatGPT prompt: Propose a plan to pay off $6,400 of credit card debt.

    4. Achieving savings goals. Long-term financial success is dependent on saving money.  ChatGPT can recommend financial goals based on your life situation and finances. In addition, ask for an explanation of compound interest and how it applies to your savings plan.
    Sample ChatGPT prompt: Recommend a step-by-step action plan to create an emergency fund of $8,000 within the next two years.

    5. Investment advice and retirement planning.  The array of investment vehicles overwhelms most people. ChatGPT can explain stocks, bonds, exchange-traded funds, cryptocurrencies, derivatives, and others in simple terms.  For long-term investing, retirement planning options and estimated future living needs can be the basis for suggested savings amounts.
    Sample ChatGPT prompt: Propose a diversified investment portfolio for a 30-year-old person with plans to retire in 35 years.

    6. Preparing for filing your taxes. To overcome the intimidation associated with taxes, ChatGPT is available to remind you of deductions, tax credits, and needed documents for your financial situation. AI can also guide you with the best sources for filing your taxes. 
    Sample ChatGPT prompt: What is the difference between tax-deferred income and tax-exempt income?

    7. Wise spending and shopping suggestions. Guidance for buying can range from meal planning and shopping location to coupon sources and travel schedules. The suggestions offered can prevent overspending through carefully planned buying.
    Sample ChatGPT prompt: Create a one-week grocery shopping list of nutritious foods for three people with a weekly food budget of $160.

    For the Personal Finance classroom, consider using ChatGPT to:

    • Obtain creative in-class activities and field research projects.
    • Generate discussion prompts and questions.
    • Develop rubrics to evaluate assignments.
    • Create assessments and quizzes.
    • Implement state and national curriculum standards.
    • Construct trivia questions and classroom games.
    • Suggest ideas for skits or role-play scenarios.
    • Create personalized writing prompts based on student interests and abilities.
    • Use as a personal tutor to explain complex concepts or calculations

    Will AI create wiser consumers and more effective money managers?  Yes, but only if a person follows the advice offered after carefully considering the validity of the suggestions.

    For additional information on ChatGPT for money management, go to:

    Link #1

    Link #2

    Teaching Suggestions

    • Have students talk to others about how they might use ChatGPT and other AI platforms to increase their financial literacy.
    • Have students research alternatives to ChatGPT and obtain reviews to determine other AI platforms they might consider.

    Discussion Questions 

    1. What benefits and concerns are associated with ChatGPT and other AI platforms?
    2. Describe actions that might be taken to verify the responses received when using AI.
    Jun 10 2023

    BUDGETING AND SAVING WITH “CASH STUFFING”

    Before credit cards, debit cards, and apps, people used budget envelopes to see where their money was going. Today, a variation called cash stuffing is being used by many, especially young people who became familiar with the system through online videos. This system is helping people cope with inflation and other financial difficulties by controlling their spending.

    The main benefits of cash stuffing are: (1) increased spending awareness; (2) reduced credit card use to prevent debt; (3) controlled spending – once cash is gone for a budget item, you can’t spend any more – which can result in higher amounts for saving; (4) improved budgeting for holiday spending, birthday gifts, and children’s school activities; and (5) decreased stress with a greater sense of financial control.

    Possible drawbacks of cash stuffing include: (1) the danger of lost or stolen cash; (2) the time needed to withdraw, sort, and organize cash into envelopes; (3) the temptation to overspend by moving cash to other budget items; and (4) lost interest by not having the money in a bank account.

    When using cash stuffing, consider these steps:

    1. Allocate your income, based on recent spending patterns, into budget categories, including fixed expenses, variable expenses, debt repayment, and savings.  

    2. Label envelopes, folders, or a pocket portfolio with your spending categories.

    3. Each payday, obtain cash to place into each category.

    4. As you spend money for each category, be sure the envelope doesn’t become empty before the end of the month.

    5. Repeat this process each month; adjust amounts as your needs and spending changes.

    Paying cash for everything is often not practical, such as online payments for rent, utilities, or other items. Instead, consider a hybrid or blended method, in which you use cash stuffing for only some spending areas. This would allow you to make online payments and earn interest on money on deposit while controlling spending for some budget categories. Also consider budgeting apps that simulate envelopes so you can visually see how your money is being spent.

    Other items to note when using cash stuffing:

    • Consider starting small, using the system for three or four budget items for which you would like to better control.
    • Be safe in keeping and carrying large amounts of cash. You might use slips of paper or play money (that you can buy online) in your budget envelopes, which will still give a tangible experience.
    • Search for “cash stuffing” online videos. These often feature colorful, personalized cash binders with compartments labeled for different categories — such as rent, food, savings and sinking funds. 
    • Make a commitment. Cash stuffing will not stop you from overspending. You must commit to only spending the amount you set. Use the system you create to be able to trust yourself.

    For additional information on cash stuffing,

    Link #1

    Link #2

    Teaching Suggestions

    • Have students talk to two or three others to learn about the budgeting systems they use to control their spending.
    • Have students create a visual (poster, slide presentation, or video) with suggestions for effective budgeting.

    Discussion Questions 

    1. What benefits and difficulties are associated with cash stuffing (budget envelopes)?
    2. Describe actions a person might take to effectively use cash stuffing. 
    Apr 15 2023

    BEING A SUCCESSFUL SAVER

    If you desire to create/expand your emergency fund or to save for a financial goal, consider these actions:

    1. Identify a specific goal. You should have both a why and a what for your savings goal. A specific amount should be determined. Too general of a goal often results in failing to follow through.

    2. Track your progress. Start by budgeting an amount each month (or week) for your savings goal. This will help you move forward. Next, use a chart or a graph (or a money jar for young people) to see your progress.

    3. Visualize the result.  Photos or other visuals showing your vacation location, new furniture, or other item can help keep you focused. Or write down the importance of an emergency fund, and read it out loud each day.

    4. Obtain help from others. Sharing your goals with a family member or friend can help you stay accountable. Talk about the excitement when you reach your goal.  Others can offer encouragement, savings tips, or information on buying an item at a discount.

    For additional information on successful saving, click here.

    Teaching Suggestions

    • Have students talk to others to obtain suggestions for identifying and achieving a savings goal.
    • Have students create a visual that might be used to monitor progress toward a savings goal.

    Discussion Questions 

    1. Which actions in this article would be most beneficial to you for achieving your savings goals.
    2. Describe your experiences related to achieving a savings goal.   
    Feb 18 2023

    FINANCIAL EMERGENCY KIT

    In case of a natural disaster or a cyber-attack, a financial emergency kit allows you to keep running your life. These documents would prepare you for the what-ifs of life. Bottom of Form

    The kit starts with knowing where your vital paperwork is stored, and where are copies kept. Two suggested storage methods are: (1) a portable, fireproof, waterproof safe, and (2) digital storage with an electronic record of account numbers and sensitive information. This information can then be accessed on your phone. Also backup your data on both an external hard drive and on a cloud service.

    The important documents that you should have in both a physical and digital format are:

    • Insurance policies, insurance contact information; prescriptions, medical records
    • Birth and marriage certificates; passports; driver’s license; Social Security cards
    • Mortgage information; car registration
    • Recent tax returns; employment information
    • Wills and deeds; stocks, bonds and other negotiable certificates
    • Bank, savings. Investment, and retirement account numbers
    • Pet medical records; pet identification tags
    • Recent utility bill, school registration to prove your legal place of residence

    In addition to your financial documents, also plan to have these items in your emergency kit:

    1. Water; non-perishable food; first aid kit; multi-purpose tool
    2. Flashlight; battery-powered radio; extra batteries; cellphone, charger
    3. Medications, medical items; sanitation, personal hygiene items
    4. Extra cash; contact information of family and friends
    5. Emergency blankets; maps of the area

    Consider a hand-crank flashlight and radio to be able to use and charge when there’s no power.

    To connect with family and others in emergency times, text instead of calling to avoid network congestion.  Use apps, social media when cell networks are overloaded.  Update your voicemail message to tell your location and status.

    Be prepared with these simple things that require minimal money and a small-time investment.

    For additional information on financial emergency kits, go to:

    16 Items To Pack in Your Financial Emergency Kit

    Teaching Suggestions

    • Have students identify situations in which this type of emergency kit would be appropriate.
    • Have students create a visual proposal (poster or slide presentation) to communicate the elements of an emergency kit.

    Discussion Questions 

    1. What are reasons people might give for not preparing an emergency kit?
    2. Describe methods that might be used to store financial documents for emergency situations.
    Jan 21 2023

    PREPARING FOR A RECESSION

    If you stay ready…you don’t have to get ready!!  Whether or not a recession occurs, certain personal actions will be beneficial for your future.

    Job loss is the most common effect of a recession. This can occur due to a layoff, furlough, or company failure.  With many people all experiencing job loss, finding a new job is difficult. For those who keep their jobs, they may experience pay cuts, reduced benefits, and no pay raises. Another major concern is the decline in value of stocks, bonds, real estate, and other assets. 

    To be ready to cope if an economic downturn occurs, consider these financial strategies:

    • Monitor your monthly expenses. Know what it costs to live so there are no surprises. Be ready to pay items that occur only once a year.
    • Cut unnecessary spending. Look back at your spending to see what you could have done without. Add up what you could have avoided to make sure you spend less than you make. Possible areas to cut include cable TV, streaming services, gym membership, online music subscriptions, and a less expensive cellphone plan.
    • Start or expand your emergency fund.  No matter how small, be sure to set aside funds for poor economic times. To build your fund, have an amount automatically deposited in a saving account each month.   
    • Budget everything. Telling your money where it will go keeps you in control.    
    • Avoid debt. Just like saving, paying off debt can start small.
    • Be in contact with others to discuss possible late payments, reduced costs, cancel services, and other actions to cope financially.
    • Maintain retirement savings. Keep contributing to your retirement fund so it will be there when you need it. 

    For career planning during times of recession, consider the following actions:

    • Inventory your skills, especially those that relate to essential work for your current employers and other organizations. 
    • Expand your skills through online certifications, courses, and training programs. 
    • Be adaptable. Step up to take on tasks needed within your company. 
    • Network for freelance work. Connect with others in your industry for consulting opportunities.
    • Be prepared for the unexpected. Despite taking these actions, a layoff may still occur. If that happens, expand your skills, update your resume, and connect to others through LinkedIn and community service activities.

    For additional information on financial planning during a recession,

    Source #1

    Source #2

    Teaching Suggestions

    • Have students research current economic conditions to determine the status of employment and inflation.
    • Have students create a podcast to encourage others to act on the suggestions in the article.

    Discussion Questions 

    1. What are the benefits of these actions during every type of economic situation?
    2. Describe actions a person might take to better understand potential career opportunities.
    Jan 7 2023

    BUILDING WEALTH

    A research study that surveyed over 10,000 millionaires resulted in the following findings to help guide others to achieve a comfortable financial security:

    • 79 percent of the respondents did not receive any inheritance; 80 percent were from families at or below a middle-class income level.
      Conclusion:Building wealth is within your control and doesn’t depend on being born into a rich family.
    • 33 percent never made more than $100,000 a year; 31 percent made around $100,000.
      Conclusion: Wise spending, saving, and investing are more important than your salary level.
    • 94 percent live on less than they make; 75 percent reported never having a credit card balance.  
      Conclusion: Stay out of debt and keep expenses below your income to build a financial foundation.
    • 75 percent of those in the study indicated consistent investing over a long period of time as the reason for their financial success; 80 percent invested in their company’s 401(k) plan; none said one individual stock investment was a big factor in their financial success. 
      Conclusion: You don’t need to find that one stock that will make you rich. Invest consistently in broad-market index funds over a long period of time.

    88 percent of those who responded graduated from college, compared to 38 percent of the general population. And over half (52%) of the millionaires in the study earned a master’s or doctoral degree, compared to 13% of the general population. Almost two-thirds (62%) graduated from public state schools, while only 8 percent went to a prestigious private school.

    Most of the 10,000 millionaires studied achieved their wealth through consistent investing, avoiding credit card debt, and smart spending, along with…no lottery tickets… no inheritances…no six-figure incomes…no lucky stock picks. 

    Even when millionaires don’t have to worry about money anymore, they’re still careful about their spending. Over 80 percent reported using a grocery list in some format.

    For additional information on building wealth, click here.

    Teaching Suggestions

    • Have students talk to others to obtain information about actions they take to achieve long-term financial security.
    • Have students create an oral presentation or podcast that reports the findings of the study summarized in this article.

    Discussion Questions 

    1. What actions do you believe to be most important for building wealth?
    2. Describe how you might communicate to others suggested actions for improved long-term financial security.
    Dec 17 2022

    Personal Finance Simulations for Budgeting and Investing

    Question:  What is a Personal Finance simulation? 

    Answer:  A Personal Finance simulation allows students to fine-tune their decisions when they encounter real-life scenarios while taking a Personal Finance course. 

    The authors of Personal Finance, 14e and Focus on Personal Finance, 7e have partnered with StockTrak.com to provide students with an interactive learning experience before they leave the classroom.   

    The simulation that accompanies the Kapoor Personal Finance texts includes two components–a personal budgeting simulation and an investing simulation.

    The Budgeting Simulation

    • Students assume the role of a full-time employee or part-time employee living on their own.
    • Over a virtual 12-month period, students review their estimated income and expenses, create monthly budgets and savings goals, and try to build an emergency fund. Each month takes about 20 minutes to complete.
    • Each month students manage their checking, savings, and credit card accounts as they deal with life’s expected and unexpected events that affect their budget.  
    • Within the simulation, additional personal finance tutorials are available to make sure students are learning about budgeting, banking, credit, employment, taxes, insurance, and more.
    • A class ranking based on net worth, credit score, and quality of life keep the students fully engaged and professors informed of each student’s progress.

    The Investing Simulation

    • Students receive a virtual $25,000 in a brokerage account.
    • They can research U.S. stocks, ETFs, bonds and mutual funds and create their own investment portfolio.
    • All investment trades are based on real-time market prices.
    • Within the simulation, interactive tutorials help students get started and provide additional information during the simulation.
    • Students can monitor their performance versus their classmates.  At the same time, professors can track each student’s progress.

    And BEST of ALL, with the new partnership between Stock-Trak and McGraw Hill, classes using the Kapoor Personal Finance textbook get a 50% savings when students register for the simulation – only $9.99 per student instead of retail price of $19.99.

    Teaching Suggestions

    • Visit StockTrak.com/kapoor to learn more about the Personal Finance Budgeting and Investing Simulation.  You can learn even more by watching a short video or accessing the Kapoor demo materials located toward the bottom of the above site. 
    • It’s easy to get started.  All you need to do is access the above site, register your classes for Spring 2023, and indicate the dates you want your student to have access to the Personal Finance Simulation.  The site will generate a unique link for you to give to your students.
    Dec 3 2022

    FINANCIAL EMERGENCY KIT

    In case of a natural disaster or a cyber-attack, a financial emergency kit allows you to keep running your life. These documents would prepare you for the what-ifs of life. Bottom of Form

    The kit starts with knowing where your vital paperwork is stored, and where are copies kept. Two suggested storage methods are: (1) a portable, fireproof, waterproof safe, and (2) digital storage with an electronic record of account numbers and sensitive information. This information can then be accessed on your phone. Also backup your data on both an external hard drive and on a cloud service.

    The important documents that you should have in both a physical and digital format are:

    • Insurance policies, insurance contact information; prescriptions, medical records
    • Birth and marriage certificates; passports; driver’s license; Social Security cards
    • Mortgage information; car registration
    • Recent tax returns; employment information
    • Wills and deeds; stocks, bonds and other negotiable certificates
    • Bank, savings. Investment, and retirement account numbers
    • Pet medical records; pet identification tags
    • Recent utility bill, school registration to prove your legal place of residence

    In addition to your financial documents, also plan to have these items in your emergency kit:

    1. Water; non-perishable food; first aid kit; multi-purpose tool
    2. Flashlight; battery-powered radio; extra batteries; cellphone, charger
    3. Medications, medical items; sanitation, personal hygiene items
    4. Extra cash; contact information of family and friends
    5. Emergency blankets; maps of the area

    Consider a hand-crank flashlight and radio to be able to use and charge when there’s no power.

    To connect with family and others in emergency times, text instead of calling to avoid network congestion.  Use apps, social media when cell networks are overloaded.  Update your voicemail message to tell your location and status.

    Be prepared with these simple things that require minimal money and a small-time investment.

    For additional information on financial emergency kits, click here.

    Teaching Suggestions

    • Have students identify situations in which this type of emergency kit would be appropriate.
    • Have students create a visual proposal (poster or slide presentation) to communicate the elements of an emergency kit.

    Discussion Questions 

    1. What are reasons people might give for not preparing an emergency kit?
    2. Describe methods that might be used to store financial documents for emergency situations.