Financial Literacy Final

Instructions: You've learned about many different financial topics this year. It's time to reflect on a few of these topics and practice giving some advice to friends and family.. You do not necessarily need to respond to every detail in the prompt; these are suggestions to help guide your response.

Note: I am not looking for specific answers and I don't want you to tell me what I want to hear. I'm more interested in whatyou have learned, how you will apply your learningmoving forward.

Each prompt is 20 Points

Prompt #1 Budgeting

Your friend, Kacey, wants to start saving up for a new car because their Geo Metro nicknamed "Ol' Reliable" is starting to not live up to its name. So, they decide to revisit their existing budget to see if they can find a way to start saving $400 per month towards a new car. They ask for your help updating their budget to make room for this new savings goal. Reviewing their current budget and spending habits, then write out your recommendations.

Kacey's current budget:

Kacey's current spending habits:

• Kacey works in retail and earns additional money doing data entry for a temp agency. They have some control over their work hours.
• Their food spending fluctuates from $275 to $435 per month
• Kacey has a 2-bedroom apartment and uses the second bedroom as a gaming room.
• Their utility expenses include electricity, trash, cellphone, internet, and cable TV.
• Their entertainment expenses include subscriptions to Netflix and Spotify.
• Their transportation expenses include gas, car maintenance, and bridge tolls to get to work. It does NOT include saving for a new car - yet!

How can Kacey adjust their budget in order to meet this new $400 savings goal?

1. At least one change to a fixed expense
2. At least one change to a variable expense
3. At least one strategy Kacey can use to stay on budget
4. An explanation of WHY this plan is the best approach for Kacey

Response #1:

Prompt #2 Student Loans/Financial Aid

Your little sister Camille is a junior in high school and is just starting the process of researching colleges. Because you've learned about the process of paying for college, she turns to you for advice.

Details about Camille:

• Camille tells you that she looked at several colleges, including:
  • A private university with annual tuition of $55,000
  • An out-of-state public university with annual tuition of $26,000
  • A in-state public university with annual tuition of $12,250
• Camille knows that she has to fill out the FAFSA but doesn't know when it's due and is kind of intimidated by the process
• Camille started reading about loans but wasn't sure if she would need them or which type she should choose
• Camille's classmate told her that she might be eligible for multiple scholarships, but this is the first time she's ever really thought about it.

Help Camille understand the important things to consider regarding paying for college.

1. What factors should Camille consider when deciding which college to attend?
2. Are there any alternative paths to get a degree that might save money as a backup if she is not awarded as much as she needs in scholarships?
3. What advice can you share with Camille about the FAFSA, including when to file and what information she'll need to have ready?
4. After choosing a college and receiving an award letter, which types of financial aid should Camille prioritize and accept first?
5. Any other suggestions about how she could further reduce the cost of attending college.

Response #2:

Prompt #3 Investing

Your friend Samir asks you for advice about investing. He knows you've taken a financial literacy class and hoped you might be able to help him outline a plan to get started. You ask him for some background on what he knows and what his goals are and he shares the following information.

Samir:

• My parents never invested because they said it was too risky and you should try to avoid risk at all costs when it comes to your money. They want me to just keep my money in a savings account because it's FDIC insured.
• I have a part-time job. After I pay for necessities, save for my emergency fund, and save for senior graduation dues, I only have about $30 left that I could invest per month. I'm thinking I should wait until I'm older and make some more money before I really start investing.
• I don't know anything to invest IN! Could you help me understand some of my options about where to invest?
• I have never been a very risky guy (I always order vanilla ice cream at the shop), so the idea of putting all my investments at risk makes me a little nervous. Is there any way to avoid that feeling?
• How do I know what investments to choose for my portfolio? There are so many options, and I don't want to make the wrong choice!

Outline your advice to Samir using the following details:

1. Address the needs and concerns he brought up.
2. Why could investing be a good idea for Samir? What financial concepts support your reasoning?
3. What types of products could Samir invest in?
4. How can Samir go about choosing and diversifying his investments?

Response #3:

Prompt #4:

Your co-worker Brian has been having a hard time trying to get a new car loan at the dealership and calls you for advice since they know you just bought a new car recently.

Details Brian shares:

• Brian was denied a loan at the bank and the first two dealerships he went to
• Brian finally found a dealership that would offer him a loan but was offered a 5-year loan with a 13% APR. He is confused because the lender advertised a 5-year loan with APRs as low as 3.5%
• Brian mentioned hearing that his FICO score is 500 but doesn't know if that's good or bad
• Brian recently opened a few credit cards which he maxed out to pay for a graduation trip to Europe and a new professional wardrobe for his job. He hasn't been able to pay much off on those yet and isn't sure how that is affecting his credit.
• Every month, Brian pays the minimum balance on his credit cards.
• Brian feels confused and like he is a failure after facing so much rejection. He doesn't know what happened or what he should do next
• Brian knows it's important to save, so he's managed to save up a $3000 emergency fund. He's wondering if he should use that money somehow now.

Outline your advice to Brian based on what you learned in this unit. In your response, be sure to address the needs and concerns he brought up and to include the following...

1. What is a likely reason Brian had such a high APR and was rejected for the loans?
2. What are some concrete steps Brian should take to manage his debt and improve his credit score?
3. What information or advice could you share that might help Brian deal with the negative emotional side of the experience?
4. What would you recommend Brian do with his emergency fund money? Explain your reasoning.
5. If you could go back in time, what advice would you give Brian in college?

Response #4:

Prompt #5:

Your friend Vira is sharing with you how she has recently been buying a lot of items after seeing them on social media. She knows things are getting a bit out of hand and she'd like to curb her spending without needing to delete her social media accounts.

Details she shares:

• Recently I've been seeing so many ads for cute clothes and I end up buying them on the spot!
• Also, you know how I like painting? I follow some amazing artists and just last week a few of them were promoting some really cool paint sets that were on sale - I didn't want to miss out on the deal so I bought those too.
• I haven't been keeping track of all of my spending but my bank account balance tells me that I've been spending way more than usual.
• The other day, I was at the local coffee shop and logged into my account on my phone to make sure I had enough to cover my snack!
• I don't want to stop using social media, but I'm worried that if I don't change my spending habits soon, I'm going to have to! What can I do?

Outline your advice to Vira based on what you learned in this unit. In your response, be sure to address the needs and concerns he brought up and to include the following...

1. What is a likely reason she is falling for social media advertising?
2. What types of social media marketing is she viewing? Give the examples and show you understand what they are.
3. What are some concrete steps she should take to manage her situation?
4. What other techniques should she be weary of that she may not have seen yet?
5. What information or advice could you share that might help her deal with the negative emotional side of the experience?

Response #5: