Financial Planning for Young Adults (FPYA), developed in partnership with the CFP Board, is designed to provide an introduction to basic financial planning concepts for young adults. The FPYA course is organized across eight separate modules within a 4-week window. Topics covered include financial goal setting, saving and investing, budgeting, financial risk, borrowing and credit. Because financial planning is such a personal topic, you will be encouraged to define your own financial goals and objectives while we discuss concepts and provide tools which can be applied in helping you reach those goals. Within each module, you will view a combination of traditional lecture style videos along with video vignettes that introduce financial topics for discussion among participants. The video vignettes provide a unique and exciting component to this course. Each vignette introduces a real-world scenario where financial decisions must be made and financial planning concepts can be applied. You will be challenged to think critically about each scenario and decide how you might come to a resolution if ever faced with a similar situation. Finally, the course also includes material throughout which is focused on career opportunities in financial planning, including video interviews with actual CFP® professionals and other professionals working in this exciting and growing career area. The final module in the class is devoted to the topic of financial planning as a career.
Lecture: What Influences Our Financial Decisions?
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En provenance du cours de University of Illinois at Urbana-Champaign
Financial Planning for Young Adults
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À partir de la leçon
Module 1: Setting Financial Goals and Assessing Your Situation
In this module, you'll explore the "personal" in personal finance, use financial tools to assess where you are currently with your finances, and begin setting goals for where you'd like to be in the future.
Rencontrer les enseignants
Nicholas PaulsonAssociate Professor
Department of Agricultural and Consumer Economics
Kathryn L. SweedlerConsumer Economics Educator
University of Illinois Extension
Charles R. ChaffinDirector of Academic Programs and Initiatives
Certified Financial Planner Board of Standards
[MUSIC]
Hi, let's talk today about what influences our financial decisions.
Do you spend and
save money the way your neighbors do, your friends or even your siblings?
Have you ever wondered why some people are big spenders and
others tend to be extremely frugal?
Let's take some time today to think about what influences our financial decisions
and how that might become a part of our financial management in the future.
Of course, there are some things that we need to purchase to take care of our basic
needs, like food and shelter.
But once our needs are met, then we have other financial decisions to make.
So what is really influencing us when we make those decisions?
So think about this.
If you were given $1,000 as a gift, what would you do with it?
Your answer would likely be influenced by your values and
by the things that are important to you, the things that you want to prioritize.
You can see on the screen a list of values that someone might have.
If you are asked to prioritize these and
make them a list, what would be your top three values?
If security was your top value, then if you are given that $1,000 as a gift,
you might be inclined to save it away for some future needs.
But if friendship was a top value for you, then may be
you'd want to spend it on some activity that you could do with your friends.
Maybe take a trip or do something else that was special.
Values are very personal and there's really no right or wrong to them.
And there's of course, many more than are listed in this list that we see here.
But it can be helpful to clarify your values and
what's important to you as the first step in financial planning.
When you understand what is important to you and
what you value, then you can be sure that what you're doing with your money
is helping you work towards the things that are important to you and
supporting the values that you want to support.
So how do we gain these values?
How do they become part of us?
Well really they evolve over time.
Probably the first place that we are influenced is with our family and
as we're growing up.
But then they can change as we meet new people, we make new friends,
our friends also have an influence on our value.
If you think about it, the things around us in our environment like our own
society, maybe our spiritual beliefs, these also come into play with our values.
And then of course, media, how could we forget media in today's world?
We're always hearing things on different forms of media and
often it's in advertising.
Telling us, typically to buy, buy, buy.
These things all come into play and
start to influence our values and perhaps our financial decisions.
So if you think about it, as we mature and we have more practice in spending and
saving and handling money, we develop habits and
attitudes about finances and these things affect our decision.
Sometimes these habits and attitudes, actually they're good, and
they help us achieve our goals and they're very efficient, and
other times they might hold us back.
So it's good to be conscious of these habits and attitudes and
to think about them at the conscious level and not just react.
Let me give you an example of this.
Let's say that your attitude, or somebody you know,
might be that they think that taking on debt is really a very bad thing.
Maybe it's even almost to the point it's extreme or it's evil.
So when an opportunity comes to take on debt, to maybe take a loan of some type,
that person's first reaction would be no, I don't want that, I'm not doing that.
Well, that could be good in a lot of situations.
It probably means that somebody who's avoiding debt doesn't have a lot of credit
card debt and
they're not going to be paying out a lot in interest fees over their lifetime.
So that's an advantage to it.
But it could also be a disadvantage in other situations.
If you think about it, maybe that person thinks they would like to start their
own business, or go back to school and get more education.
But that would require a lump sum of money and involve taking on debt.
If that person just reacts and uses their developed habits and
attitudes without thinking it through,
that attitude of avoiding debt could be a negative in that situation.
Maybe taking on that debt's a good idea, maybe not, but thinking about it and
thinking through it is probably a good idea.
So, much research and discussion has taken place over time about this idea of habits
and attitudes and how they affect our financial decision making.
And to help people really think about this,
people start talking about money personalities.
And they categorize these different personalities so
to help us kind of think what are these personalities like?
Is this something that I recognize?
So we're going to talk about those personality types today and
we're going to use some categories that have been developed by Olivia Mellan,
who's a really well-known professional who works in the area of money and
relationships and helps people with conflicts that come up or
might come up because of money personalities.
So the money personalities we're going to move on to here, they're titled to show
the extreme and typically undesirable qualities of these money personalities.
And this is really done to help us understand how these attitudes could
negatively affect someone or people that they're involved with,
people that they care about and interact.
But remember, most people aren't one of these extremes,
we're usually a mix of money personalities.
But this is just used as a way to help us understand a bit and to think about it.
So let's take a look at what some of these money personalities might look like.
The first one we want to talk about is money hoarder.
Now the money hoarder is somebody that really likes to save money.
And actually they're probably a person that likes to create a budget and
maybe play with it daily, weekly, a lot, all right?
Now, they may also find a hard though to spend money on themselves or
especially to buy gifts for other people.
And things that other people might think purchasing an item would make sense,
they might see those purchases as unnecessary or maybe even frivolous.
So if you can think about it,
money hoarding might not cause a problem for somebody.
It kind of depends on their relationships with other people and
how they feel about it.
But if a person feels too worried or anxious about spending money all the time,
then it may be a good idea towards modifying this behavior and
attitude somewhat and finding a balance in their life.
Okay, so that's the money hoarder.
What about the spender, okay, kind of the opposite effect here.
This is somebody who likes to buy things and they like to enjoy them right now.
So they're going to be spending likely, probably all the money they earn and
they're not going to necessarily be able to save any money.
In fact, they might even find that they carry a lot of debt.
So again, this is a really good example of when somebody can be kind of conscious of
their money personality and they say maybe I fit into this spender.
It can help them if they want to change their spending and
saving behavior just by recognizing it.
Now we're going to talk about the money worrier.
The money worrier tends to worry about money pretty much all the time.
They want to have control of their money and so they may spend a lot of their time
checking account balances, seeing where their money is.
Interesting enough, having more money doesn't tend to make them worry less.
So that's kind of an interesting aspect to think about.
So again, being concerned about money and knowing where it stands,
that can be healthy.
But if the worry takes over your life and
you find that you're doing it all the time, then it might be a good point in
which to think about whether you want to take some steps and
take control of these feelings so that it isn't something that is overwhelming you.
Okay, what about the money avoider?
You might know people like these, I know I do.
A money avoider is somebody who's probably late paying bills because they don't
want to have anything to do with money and they don't want to think about it.
They likely don't know how much money they have, nor
do they know how much money they're spending.
And really to them if you ask them, money sounds boring and maybe overwhelming too.
In fact, they may not feel competent to really manage their money.
So, but what we do know is that with education and practice, a money avoider
can gain confidence and the competency to handle their own finances and kind of
find that balance again, so they're not in trouble with paying their bills late.
The money monk, I think this one is one of the more interesting ones.
At first you might think, who would feel this way?
But if you think on it, I think you might recognize some people.
Money monk believes that money is bad and the cause of all problems.
They don't want to accumulate money.
In fact, it can be very challenging for them if they, for example, inherit a lump
sum of money or they get a promotion and get a higher salary increase.
That could make them feel very uncomfortable and
they likely avoid investing money.
On the flip side, we have the amasser.
They like to have a lot of money.
And in fact, they're always working to accumulate money.
And that might make it difficult to find a life balance, if you think about.
If they're always working to create more wealth,
they may not have enough time to spend with others that are important to them.
And they may really only feel fulfilled when they're working to make more
money and to accumulate it.
They might, as you can imagine, find it difficult to spend money as well.
So these money personalities that we've gone over very quickly just give you
a taste of sort of the extremes that affect people's financial spending and
saving behaviors.
We didn't discuss all the different kinds of money personalities that
are out there in the research.
For example, some people are status seekers and
that affects their financial decisions.
Others may be types of people who really want to always be buying things for
other people to try to make them happy.
So there's lots of different possibilities.
And remember these money personalities typically have both good and not so
good attributes to them in how they affect our financial decisions.
So we're not saying that one is better than another.
What I'm saying is, think about what is the piece that might sound like you?
Bring it to your conscious level when you're making financial decisions and
make sure it's a good fit.
And that you're making decisions that help you move towards your goals and
not just reacting because that's the habits and
the attitudes you've developed over your lifetime.
So as we end this particular piece, think about, did you recognize yourself or
any others in these money personality types?
Is your money personality helping you reach you goals or
is it standing in your way?
[MUSIC]
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