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Personal Finance Ch. 20

Personal Decision Making
by

traci blanco

on 23 April 2013

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Transcript of Personal Finance Ch. 20

Ch. 20 Personal Decision Making Step 1 Define the problem or goal you wish to achieve Step 2 obtain accurate information:
gather information on all possible solutions
list all alternative solutions Step 3 compare choices Step 4 make a decision based on careful consideration Step 5 take action to implement your chosen solution Step 6 re-evaluate your decision to see what, if anything, you would change for the next time trade off sunk cost basic needs items necessary for maintaining physical life opportunity cost life-enhancing wants items beyond basic needs that add to your quality of life
(fancy cars, medical care, education, travel, luxury items) values the principles by which a person lives personal preferences your likes or dislikes discretionary income money left over after you have paid your necessary expenses leisure time time you get to spend doing things you like and enjoy collective values things that are important to society as a whole

ex. owning fuel efficient cars, reducing air pollution legal protection private property ownership and the right to make individual choices are part of our legal rights as U.S. citizens employment most people who are able to work, will work because it is expected in order to satisfy needs and wants in society progress technological advances and perceptions about the importance of those advances innovations new ideas, products, or services that bring about changes in the way we live quality of environment environmental quality is important to society as a whole, and individuals respond to this concern by acting and purchasing accordingly public goods goods and services provided by government to its citizens

ex. police, fire, national defense Factors that Influence Spending personal factors things that influence your consumer spending personal resources time, money, energy, skills and abilities, and available credit position in life age, marital status, gender, employment status, living arrangements, and lifestyle customs, background, and religion custom - long-established practice that takes on the force of an unwritten law values and goals values - intrinsic, commonly understood, and slow to change, but do change over time. Outside Factors the economy economy - all activities related to production and distribution of goods and services in a geographic area technological advances many people want to have the newest, most convenient, and interesting gadgets and willingly purchase them environment people are buying more products that are ecologically safe, biodegradable, recyclable, and organic social pressures social pressures often induce consumers to buy goods and services beyond their ability to pay for them questions to ask yourself cash or credit positive and negative consequences to both, be sure to examine both before choosing the method of payment research before buying comparison shop
price match
refund if item goes on sale after you buy
return policy quality and price check reviews online to see if it is a quality item, just because it is more expensive doesn't mean it is better than a less expensive counterpart Advertising primary goal is to the desire to purchase a product or service
can be informational or misleading
appears in a variety of media, to reach a specific consumer group product advertising advertising intended to convince consumers to buy a specific good or service target market specific consumer group to which the advertisements are designed to appeal company advertising advertising intended to promote the image of a store, company, or retail chain industry advertising advertising intended to promote a general product group without regard to where these products are purchased Pricing several factors are used to determine pricing:
supply / demand
discounts for buying in bulk
psychological aspects odd-number pricing the practice of setting prices at uneven amounts rather than whole dollars to make them seem lower sales to be sure that you are actually saving money by buying sale items you must comparison shop and know the regular price of the product loss leader item of merchandise marked down to an unusually low price, sometimes below the store's cost.

*used to get the customer in the door in the hopes they will buy other merchandise Promotion displays window displays
special racks
end caps contests and games retailers that depend on repeat customers often use contests and games to bring customers into the store coupons frequent buyer cards packaging customer loyalty cards sampling sampling enables customers to try a product for free micromarketing a marketing strategy designed to target specific people or small groups who are likely to want certain products psychographics information about a person's lifestyle, marital status, family, age, and buying habits giving up one option in exchange for another an expense that occurred in the past for which money was spent and cannot be recovered the value of your next best choice - what you are giving Steps in the Decision Making Process vs. goals - change often why do I want this product? How long will this product last? What substitutes are available and at what cost? If I don't buy it now, will I still buy it later? What additional costs are involved? what are the trade offs / opportunity cost of this purchase? What is the total cost of this product? business cycle - where economy is growing or slowing *customer who only buys loss leaders is called a cherry picker manufacturer coupons - offer a lower price on specific products and may be redeemed wherever the product is sold store coupons - offers discounts on specific products , usually for a short period of time, and only at a specific store mass marketing - an attempt to reach large numbers of consumers at once frequent punch cards
points enrolls consumers in a program in which they receive lower prices, rebates, or other valued services manufacturer's design packaging to appeal to the eye as well as to provide the necessary consumer information
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