Personal Finance:

Buying Decisions
Pamantasan ng Lungsod ng Muntinlupa
College of Business Administration
Learning Objectives:

• Learn how to design a Buying Plan.

• Getting started with a credit.
• Computing the costs of Credit.
In The Know !
Do this, Not That!
To be financially responsible:
• Live within your means
• “Pay yourself first”, or set aside some money for saving.
• Know how to budget; avoid overspending.
• Pay your bills on time.
• Use credit wisely, don’t overextend your credit.
How Can You Be a Responsible Shopper?
Systematic Decision Making. The process of making
choices that reflect your goals by considering all of the pros
and cons along with the costs.
Financial Responsibility. Occurs when you plan your
earning, spending, and saving so that you meet your financial
goals.
Financial Irresponsibility. Failing to live up your financial
obligations to meet your goals and needs.
Financially responsible people are able to achieve
the following goals:

 Live a comfortable lifestyle.

 Provide for their own wants and needs.
 Enjoy vacations and leisure time.
 Save money for known and unknown future events.
 Pursue interest, hobbies, and cultural events.
Financial irresponsibility symptoms:

 Bills are not paid in a timely manner.

 There is inadequate food, clothing, and shelter to live a
comfortable lifestyle.
 Money is spent on luxury items while basic needs are not
being meet.
 A month’s worth of pay checks do not last in the entire
month.
 Borrowed money is not repaid in a timely manner or at all.
What is a Buying Plan

A buying plan is an
organized method for
making good buying
decisions. It will help you
stretch your limited
resources.
 Creating a Buying Plan

Step 1. Define Your Spending

Goal. Any item you buy should
be selected to meet your wants
and needs.
 Creating a Buying Plan

Step 2. Choose the Item to

Buy. You can then choose
the item that will meet your
goals.
Creating a Buying Plan

Step 3. Define Criteria.

Set criteria for the item.
Criteria are standards
or rules by which
something can be judged.
Creating a Buying Plan

Step 4. Set a Timeline. For

each item you want to buy,
decide how soon you want
to make the purchase.
Timeline sets the time
frame for making your
decisions.
Creating a Buying Plan

Step 5. Set a
Spending Limit. The
maximum amount you
are willing to pay for
an item.
What Types of Credit Can Consumers Get?

Credit. Is the ability to borrow money and pay it back later.

Creditor. Is a person or business that loans money to
others.
Debt. The money that must be repaid.
Debtor. The person who borrows money.
What Types of Credit Can Consumers Get?

Credit Card. Plastic card

linked to a credit account that
can be used to make
purchases, These are available
from banks and other
companies. (ex.VISA,
Mastercard)
What Types of Credit Can Consumers Get?

Consumer Loans. A direct

loan of cash made to a
consumer at a fixed interest
rate for a set period of time.
Advantages of Credit

• Increased purchasing power.

• Security.
• Convenience.
• Leverage.
• Benefits (Rewards program).
Disadvantages of Credit

• Finance charge. An item

purchased on credit and
paid for overtime costs more
because of the finance
charge.
Disadvantages of Credit

• Reduction of future
buying power. When you
use credit, you tie up future
income by committing to
make payments.
Disadvantages of Credit

• Overspending. Buying on
credit can lead to
overspending.
Disadvantages of Credit

• Identity theft. Having a

credit card means that you
run the risk that your
account information could
be stolen.