Beginning Your Financial Journey: The Interior Finance POV
Financial Literacy
● Financial Literacy is how well you understand and use personal
finance information
Your Internal View of the Financial World
● Financial knowledge
Is the ability to understand personal finance information
● Financial risk tolerance
Your willingness to engage in financial endeavors that
have uncertain outcomes
● Feelings of control
Reflects the amount of control you have when making
financial decisions
Allocating Your Scarce Resources
Scarcity
● Means that finite amount of resources can be used to produce
a maximum amount of goods
For individuals, scarcity means you do not have enough money, time,
or physical resources to produce or consume all that you want.
Families organization businesses and governments face the same
challenge of scarcity
The Journey to Financial Well-Being
1. Keep good records
2. Earn money
3. Manage taxes
4. Spend carefully
5. Save wisely
6. Invest strategically
7. Maintain appropriate insurance
, 8. Plan for the future
Human Capital
● Your ability and willingness to work, learn, earn, and make wise
decisions about how to save and invest money
Social Capital
● How well you are able to form connections with other people
You can optimize your human and social capital to help you increase
your financial well-being and achieve your financial goals
Your education and earnings
Your earnings are an indicator of the value of your human capital in
the labor market and are closely related to your level of formal
education,
Other Influences
● Your health
● Your willingness to relocate to higher-paying job markets
● Continuing professional education and skill development
Production Possibility frontier ( PPF)
● Visual tool economists use to illustrate different combinations
output that can occur with given resources
Social Capital
● Not found in individuals themselves but rather in the space
between individuals , or the network of connections among
people
Informal Networks
● The interpersonal relationships you form with your family and
close friends
Formal Networks
Financial Literacy
● Financial Literacy is how well you understand and use personal
finance information
Your Internal View of the Financial World
● Financial knowledge
Is the ability to understand personal finance information
● Financial risk tolerance
Your willingness to engage in financial endeavors that
have uncertain outcomes
● Feelings of control
Reflects the amount of control you have when making
financial decisions
Allocating Your Scarce Resources
Scarcity
● Means that finite amount of resources can be used to produce
a maximum amount of goods
For individuals, scarcity means you do not have enough money, time,
or physical resources to produce or consume all that you want.
Families organization businesses and governments face the same
challenge of scarcity
The Journey to Financial Well-Being
1. Keep good records
2. Earn money
3. Manage taxes
4. Spend carefully
5. Save wisely
6. Invest strategically
7. Maintain appropriate insurance
, 8. Plan for the future
Human Capital
● Your ability and willingness to work, learn, earn, and make wise
decisions about how to save and invest money
Social Capital
● How well you are able to form connections with other people
You can optimize your human and social capital to help you increase
your financial well-being and achieve your financial goals
Your education and earnings
Your earnings are an indicator of the value of your human capital in
the labor market and are closely related to your level of formal
education,
Other Influences
● Your health
● Your willingness to relocate to higher-paying job markets
● Continuing professional education and skill development
Production Possibility frontier ( PPF)
● Visual tool economists use to illustrate different combinations
output that can occur with given resources
Social Capital
● Not found in individuals themselves but rather in the space
between individuals , or the network of connections among
people
Informal Networks
● The interpersonal relationships you form with your family and
close friends
Formal Networks
