Economics plays a role in personal finance. Describe the role that economics plays in your personal financial plan. Also, the use of credit plays a role in a personal financial plan. Describe the advantages and disadvantages of credit and explain how you will use it as part of your financial plan. Specifically address the following required elements:
• Explain the role the government plays in personal finance (focus on regulations, laws, economic policy, governmental assistance, etc.).
• Explain the impact of the tax system on personal finance (how do various taxes impact you on a personal level, related to your financial plan).
• Discuss basic economic data, how to access it, and how it can be used to make decision and plan for the future.
• Discuss the use of credit, and explain the cost of credit
• Determine the sources of credit available and the types of credit that you will use as you develop your budget and financial plan (where can you get credit, advantages and disadvantages of the types).
• The U.S Treasury Department sets tax collection policy and tax laws. A branch of the U.S. Treasury is the Internal Revenue Service (IRS) that has adjusted tax brackets for the next year, which moves you into the next higher tax bracket than where you are now. Also, the federal government has released cost of living numbers and determined the inflation rate to be 4% annually. Both of these situations impact your budget and your financial plan. What parts of your budget and plan need adjusting? What alternatives are available to reduce taxes? How will you ensure the modifications to your budget and plan are effective?

You will use the 5-step critical thinking problem-solving process, IDEAS, to work through any problems to determine a solution for a given problem and for any other problems you encounter.

I – IDENTIFY the Problem and Set Priorities (Step 1)
D – DEEPEN Understanding and Gather Relevant Information (Step 2)
E – ENUMERATE Options and Anticipate Consequences (Step 3)
A – ASSESS the Situation and Make a Preliminary Decision (Step 4)
S – SCRUTINIZE the Process and Self-Correct as Needed (Step 5)

Step 1: You are to identify your problem and set priorities. As you begin to examine the characteristics of the problem, you will be able to begin to clarify the priorities. You need to describe the problem in at least a paragraph and establish priorities in a separate paragraph. Along with the problem, you need to write a problem statement. A problem statement describes what is currently going on and why the problem needs to be resolved. You should include how long the problem has existed and what measurable item(s) are affected. A problem statement is something that is written in the Lean Six Sigma Process. We won’t spend time in this class learning this process, but if you are interested in investigating Lean Six Sigma, click on the following YouTube video on an introduction to Lean and Six Sigma concepts: http://www.youtube.com/watch?v=ACmkVb_BtgU

Step 2: For the 2^nd step of the critical thinking problem-solving process, “D”, you will deepen your understanding as you gather relevant information about your own financial situation. As you deepen your understanding about any problems you may have, it will help you to determine what information might be relevant in coming up with a solution. You need to gather several reliable sources for this step. Listen to both sides – both the pros and the cons before you evaluate the situation. If new information arises about the company’s problem(s), you need to consider those as well. Once it is time to evaluate, you need to do it with an open mind. – set your biases aside as you move through this process.

Step 3: For Step 3 of the critical thinking problem-solving process, “E”, you will enumerate options and anticipate the consequences. You need to enumerate (detail or list) genuine options because they will help you to focus on the possible consequences that could be likely to occur. You need to be very realistic in this stage. Being practical or realistic will help you eliminate wasted time and energy. Have the courage to ask the hard questions even if they lead to additional problems. Be sure to include both your options and possible consequences in your summary.

Step 4: For Step 4, “A”, you will assess your financial situation and make a preliminary decision. By taking a good look at the entire situation, you should be able to make a tentative decision that will help you determine what steps may need to be taken to resolve the problem. You may need to seek informed and unbiased opinions/information from other sources. You need to treat all of the options equally before making your preliminary decision.

Step 5: For the final step of the critical thinking problem-solving process, “S”, you will scrutinize the process and self-correct as needed.

Scrutinizing the whole process enables us to see possible flaws and gaps in our thinking so that we can correct ourselves before we make a mistake. In turn, self-correcting can lead us to necessary reconsiderations of any aspect of our problem-solving process: We may realize that we should reassess the nature of the problem, rework our priorities, gather more information, identify a new option, more carefully anticipate likely consequences, reassess our expectations, and, in the end, make a better decision. This final step is our assurance that the problem has been resolved sufficiently for the current time and circumstances. (Facione, Gittens p.47)

Be sure that you are reflecting on the entire process – were you partial or fair-minded? Did you look at both sides? Did you gather enough relevant information? Did you completely think through the entire process? Did you make the best decision under the circumstances? Did you make a timely decision? Are you willing to make adjustments or revise your decision if outcomes are not attained?

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Answer rating: 100% (QA)

Econom ics plays a major role in personal finance Economics is the study of how individuals businesses and governments make decisions in order to allocate their resources efficiently It is important t... View the full answer