PERSONAL FINANCE

Intro to Modern Personal Finance Section 1-0

We Spend Most of Our Lives on 3 things

 Create goals that align with your desires
 Align your behavior to achieve your goals
 Avoid “big mistakes”

Personal Finance → A vehicle to pursue your dreams

Linking Personal Goals to Personal Finance Section 1-1

Personal finance is about providing you the tools to achieve your goals. What are your goals?
2 Most Important Things in Personal Finance
1. Life is amazing
2. Spend less than you make

Section 1-0
Ted Talk – Adam Baker
What is the question each of us need to ask ourselves?
What does freedom mean to you?

What is currently a booming industry in the US? Why is that the case?
Storage space 2.2 billion square feet. Acquiring things in our life in pursuit of things will grant us
security, peace, or happiness. We start to identify ourselves by our physical things.

What does Adam value?

Freedom

What item do we need to ______ next?

Upgrade

How does Adam challenge the feelings of security and happiness?

He and his wife sell all of their belongings down to just a backpack each that they could carry with
them. They paid off their $18.000 in debt.

How have we broken or changed the normal purchasing cycle?

We have added debt.
 Formatting Personal Goals and Life Design Section 1-2

Ted Talk – Clay Christensen “How Will You Measure Your Life?”

The reason why successful companies fail, is they invest in things that provide the most immediate and tangible
evidence of achievement.

God will measure my life, is the individual people whose lives I blessed.

Ted Talk – Bill Burnett “Designing Your Life”

People really get stuck and then they don’t know what to do and they don’t seem to have any tools for getting
unstuck.

Dysfunctional beliefs — things they believe that are true that actually aren’t true. And it holds them back.
 What is your passion. Less than 20% of the people have any one singular identifiable passion in their
lives.
 Well you should know by now, right? Don’t you know where you’re going? Let’s start from where you
are. You’re not late for anything.
 Are you being the best possible version of you? There are many many versions of you that you could
play out all of which would result in a well-designed life.

Connecting the Dots - who you are, there’s what you believe and that’s what you do in the world. If you can
make a connection between these three things, if you can make that a coherent story, you will experience your
life is meaningful.
When you can connect your life view and your work view together in a coherent way you start to experience
your life as meaningful. That’s the idea number one.

People get Stuck – Gravity problems (something you can’t change)

Make a Good Decision Well It’s about paying attention to what you’re doing and keeping your peripheral
vision open, because it’s in your peripheral vision that those interesting opportunities show up, right, that you
were not expecting.

When you have too many choices you have no choice.

Make decisions irreversible.

Five Ideas
 Connecting the dots to find meaning
 To work in life views
 Stay away from gravity problems
  Do three plans never one
 Choose well - There’s no point in making a good choice poorly.

Get curious, talk to people, and try stuff. And you will design a well lived and joyful life.

Ted Talk – Adam Liepzig “Know Your Life’s Purpose in 5 Minutes”

1. who they are 2. what they did 3. who they did it for, 4. what those people wanted or needed, and 5/
what they got out of it, 6. how they changed as a result.

Risk Management and Financial Literacy Section 1-3

Risk - a possible situation that could materially affect your operation.

Required level of response is driven by 2 factors:
1. Likelihood of occurrence
2. Size of the impact
4 Techniques to Manage Risk
1. Avoidance - aim at reducing the likelihood that a risk will occur. * Can be most powerful

Examples:
- Operations – risk that we will be late or over budget because we don’t know about “x”
Avoidance technique: Bring in a consultant with experience in “x”

- Technology – risk that implementing a new feature may cause us to be late.

Avoidance technique: Delay the implementation of the feature to a later date.

- Everyday life – risk that I will get hit by a car

Avoidance technique – look both ways

2. Mitigation - aim at reducing the impact that a risk will create if it occurs.

Examples:
- Operations - Risk that we will not have enough capacity to take customer orders.
Mitigation technique - setup of a variable contract support structure that I will only

- Technology - Risk that my application will not receive the correct data from a client (calling
application)
Mitigation technique - creation of exception processing to deal with these situations without
crashing.
 - Everyday Life – Risk that I will get badly hurt if in a car accident.
Mitigation technique – Wear a seatbelt and install an airbag.

3. Transfer - move the impact of a risk (if it occurs) to an external party. Impact can be measured by a 3rd
party.

Example:
- Everyday Life – Risk that I may incur large healthcare costs.
Mitigation technique – Purchase health insurance.

4. Acceptance - process of actively deciding that you will accept the consequences (impact) of a risk if it
occurs.

Example
-
- Everyday Life - Risk that I may get a ticket if I speed on a road but deciding the benefit of going
faster is greater than the combination of the ticket price and chance of getting caught.

Risk management – picking your technique based on the size and structure of the risk.

Article “Fiancial Literacy”

2/3 of Americans can’t pass a basic financial literacy exam and has gotten worse since the recession.
The groups that are doing the worst are:
African-Americans
Hispanics
Women
Millennials
People lacking a high school education

Podcast “Do you have $400?”

40% of Americans could not obtain $400 if needed for an emergency.

11% could not even come up with it including being able to borrow it.
27% would have skipped medical care because they could not afford it.
22% were not able to make a full payment on some of their bills
Least are low income without a college degree.
Numbers are getting better.
__________________________________________________________________________________________
Game “Spent”
10 days
-