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s_2_100 | North Broad Press is a joint publishing project between Temple University Press and Temple University Libraries, publishing works of scholarship, both new and reissued, from the Temple University community. All North Broad Press titles are peer reviewed and freely available online. More information and all North Broad ... | 0 | 426 | 2 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_7_100 | All material in this work is licensed under a Creative Commons Attribution-NonCommercial 4.0 United States License unless otherwise noted. A copy of this license is available at https://creativecommons.org/licenses/by-nc/4.0/ | 0 | 226 | 7 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_37_100 | I am grateful to the people at North Broad Press, Annie Johnson, Alicia Pucci, and Mary Rose Muccie, for all their excellent help in this book. I also thank my good friends at Temple University who helped significantly in this book, Fred Rowland and Jeff Rients. I also want to thank my peer reviewers, Karen Yancey (Com... | 0 | 453 | 37 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_41_100 | This book presents financial literacy in a real-world context. Therefore, I admit that some of the information is biased, based on my own experience. My experience includes thirty years as an executive in business, of which fifteen were spent running my own company in commercial real estate development. I bring that on... | 0 | 720 | 41 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_42_100 | This textbook is primarily written for a course in financial literacy for college undergraduates. However, they do not have to be business or economics majors. In my most recent class, using this book, there were Art History majors and Engineering majors who were quite comfortable with this textbook. The only math prer... | 0 | 471 | 42 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_43_100 | Admittedly, some of the information in this book may be already out-of-date by the time you read it. This includes time-sensitive material such as current prices on the stock market, current interest rates, the fiscal and monetary responses of the federal government, and the status of the Pandemic Recession. In each ca... | 0 | 519 | 43 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_44_100 | The economy’s performance in the Pandemic Recession, however, is a special case. As of the publication of this text, the Pandemic Recession is officially over, lasting only from February 2020 until April 2020. Thus, I have been able to discuss it from beginning to end and examine in detail the partial recovery of the 2... | 0 | 340 | 44 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_45_100 | Overall, the advice in this book is based on sound economic theory, which has certainly stood the test of time. While there are some disagreements among economists, they are generally not about the fundamental principles of economics. The major disagreement among economists is between those that are Keynesian economist... | 0 | 1,395 | 45 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_46_100 | The first two chapters will upend most of what you have been told about how to find a job. My thanks especially to Dr. Eric Shlesinger, retired Director of Human Resources for The World Bank (and a Temple alumnus), for guiding me in the discussion on how to find a job. According to Ben Bernanke, former Chair of the Fed... | 0 | 531 | 46 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_47_100 | According to current psychological research, money is both a tool and an addictive drug. It is a tool in that we see money as the ability to fulfill our needs, wants and fantasies. It is a drug in that we are addicted to money. So, in Chapters 3 and 4, we discuss what money is, and we use Behavioral Economics to discus... | 0 | 384 | 47 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_48_100 | Chapters 5 and 6 will help you understand where you stand financially and how to become and stay financially healthy. Unfortunately, many people—either through necessity or bad habits—deposit their paycheck in their bank account and spend it until they run out of money in the account. These chapters will help with simp... | 0 | 452 | 48 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_49_100 | Consider these statistics about personal debt in America. More than 191 million Americans have credit cards. The average credit card holder has at least 2.7 cards. The average household credit card debt is $5,315. Total U.S. consumer debt is at $14.9 trillion. That includes mortgages, auto loans, credit cards and stude... | 0 | 423 | 49 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_50_100 | In order to make good decisions about money, we need to understand it and learn how to deal with it rationally. We need to think like an economist. Very few people have been taught that, even by their parents. Chapters 9 and 10 will teach you to think like an economist. | 0 | 270 | 50 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_51_100 | Owning a home is the American Dream. However, a home is both a nest and an investment. Chapters 11 and 12 will examine how to buy a home, how to finance a home, and how to insure a home (and your other physical assets). | 0 | 220 | 51 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_52_100 | Almost everyone dreams about becoming a millionaire in the stock market. This is actually a very easy thing to do. Chapters 13, 14, and 15 will teach you how to invest and how to avoid all the traps of the stock market and other investment markets. Finally, chapter 16 explains the range of government policy that can be... | 0 | 398 | 52 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_57_100 | Everyone wants to find their dream job, but it might take you a few tries before you actually get it. A number of successful people in business, philanthropy, and the arts have told me they had to have a few different gigs before they landed their dream job. | 0 | 258 | 57 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_58_100 | So what is a “dream job”? Simply put, it is a job you love. And, as the saying goes, “Choose a job you love, and you will never have to work a day in your life.” But even if you do not get it on the first try, you can still find a job you at least enjoy. The key is to match your character strengths (what makes you who ... | 0 | 351 | 58 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_59_100 | Dr. Martin Seligman from the University of Pennsylvania emphasizes how important it is to identify your top character strengths. In his book Authentic Happiness, he states that if you find a career that utilizes your strengths, you will have higher job satisfaction. | 0 | 266 | 59 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_60_100 | Dr. Seligman has made it easy to figure out those strengths by providing the VIA Survey of Character Strengths. I strongly recommend you also take the Authentic Happiness Inventory and the Grit Survey. Click on the Questionnaire Item on the menu at the top of the page. Take the questionnaire titled, “VIA Survey of Char... | 0 | 714 | 60 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_61_100 | Once you find out your top character strengths, discuss them with your family, friends, and advisors. Ask them what they think of the findings (you will be surprised how much they agree with the results), and then ask them to help you think of careers that would utilize these strengths. For example, if you like science... | 0 | 538 | 61 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_62_100 | If you do not figure out your top character strengths before you search for a career, you will have no real criteria for choosing the kind of job you want. When you chose your major, you already took some steps in defining your career interests. However, your major is not always a reliable indicator of where you will ... | 0 | 453 | 62 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_64_100 | Now that you know your top character strengths, it is time to start looking for a job. In What Color Is Your Parachute for Teens, Carol Christen lays out four basic steps to finding your dream job: | 0 | 198 | 64 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_72_100 | Since this is a book about financial literacy, this is likely your first or second job, and you will need to learn some of the fundamentals. First, you should remember that a job is immersed in a social setting. You have to get along with people—especially your boss and co-workers! Unfortunately, there is no manual for... | 0 | 336 | 72 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_73_100 | Instead, you have to use your people skills. Listen to your supervisor and do what they direct you to do. Do not question a supervisor’s orders; you will need to earn their trust before you can do that. With your co-workers, be willing to listen and to not be so vocal with your opinions. In the beginning, you are there... | 0 | 404 | 73 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_75_100 | R.I. Dunbar states that “Analyses of freely forming conversations indicate that approximately two thirds of conversation time is devoted to social topics, most of which can be given the generic label gossip” (2004). This gossip is what you need to get connected to in your workplace, and you can find it by making friend... | 0 | 405 | 75 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_76_100 | When you are with your co-workers, you should listen more than you talk. Your co-workers can tell you things like which bosses are mean, which co-workers will stab you in the back, and which men are sexual harassers. This gossip will also tell you who has power in the organization. For example, often a personal assista... | 0 | 395 | 76 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_77_100 | More than just providing gossip, friends at work also increase your well-being. Remember that work is not just about doing your job but getting along with your co-workers. Modern organizations are built around teamwork, but more importantly, people who report that they consider a co-worker their best friend are much mo... | 0 | 370 | 77 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_79_100 | You not only need friends, though; you also need networks, both inside and outside of work. Adam Grant, a professor of Industrial Psychology at the University of Pennsylvania, talks about the importance of networks in his book, Give and Take: | 0 | 242 | 79 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_80_100 | By developing a strong network, people can gain invaluable access to knowledge, expertise, and influence. Extensive research demonstrates that people with rich networks achieve higher performance ratings, get promoted faster, and earn more money. (2013) | 0 | 253 | 80 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_81_100 | Interacting in networks (or teams) involves giving and taking, and Grant states that there are three different styles of reciprocity: giving, taking and matching. Each of these has a different type of network. A “taker” likes to get more than they give to a network or relationship. A “giver” (admittedly a rare breed in... | 0 | 447 | 81 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_82_100 | Our personality is 50% the result of nature (or evolution, which equals genetics) and 50% the result of nurture (or the interaction of our genetics with our environment). However, where Grant takes these types as a given, Kurzban and Houser used experiments to establish that evolution has created a relatively stable mi... | 0 | 419 | 82 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_83_100 | I do not think I can stress enough how important Kurzban’s and Houser’s work is to how we can understand and develop professional networks. For example, if you have to work on a randomly assembled team, you will encounter a mix of cooperators, reciprocators, and cheaters. Grant reports that each of these reciprocity ty... | 0 | 367 | 83 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_84_100 | Givers give a lot more than they receive. This is a key point: takers and matchers also give in the context of networks, but they tend to give strategically, with an expected personal return that exceeds or equals their contributions. When takers and matchers network, they tend to focus on who can help them in the near... | 0 | 578 | 84 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_85_100 | However, Grant reports that even though takers and matchers get ahead, givers end up creating the widest network and become the most successful (as long as they do not end up as doormats for takers). If you are a giver, gossip once again comes in handy; matchers and other givers do not appreciate takers and will share ... | 0 | 367 | 85 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_86_100 | Unfortunately, takers are fakers, and that can make them hard to identify. Everyone talks like they are a good member of the team so be sure to watch closely and remember that being agreeable is not the same as contributing. | 0 | 224 | 86 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_87_100 | Of course, sometimes you cannot avoid working with a taker. To help you understand what strategy you should use, we need to acquaint you with some economic game theory, specifically a strategy called tit for tat. This is usually a matcher strategy, as it requires you to match what the other player does. It will maximiz... | 0 | 465 | 87 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_88_100 | To understand how this strategy works, we can talk in terms of cooperating with or not cooperating with your teammate. The strategy works like this: | 0 | 148 | 88 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_97_100 | Behavioral Economics uses psychology, neuroscience and economics to examine how humans make economic decisions. It includes the process of studying the biases, rules of thumb, inaccurate or incomplete information, propaganda and other influences that interfere with our making optimal decisions. It also presents prescri... | 0 | 447 | 97 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_98_100 | To begin to understand this field, we should look at one of the most pervasive and consequential biases that has affected our entire economy: the oft repeated belief that a company’s purpose is to “maximize its profits” and to only look out for the owners’ and shareholders’ interests. This idea has roots in the writing... | 0 | 433 | 98 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_99_100 | …there is one and only one social responsibility of business—to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud (1970). | 0 | 278 | 99 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_100_100 | The University of Chicago Department of Economics, where Friedman taught, was (and still is) the center of conservative free market economics in the United States. His general argument was that any employee of a business or corporation is an agent of the owner or its stockholders and has no right to spend their money i... | 0 | 1,056 | 100 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_101_100 | Corporations and partnerships must apply to a state to receive the permission to incorporate. This is not a right but a privilege. For example, according to Pennsylvania state laws, the state grants the right to incorporate for the “good of the Commonwealth.” | 0 | 259 | 101 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_102_100 | Freidman’s view was not the majority view when he voiced it. In the mid-twentieth century, firms were an integral part of their communities and the prevailing view was that firms had a responsibility to their shareholders, employees and communities (Wells, 2020). | 0 | 263 | 102 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_103_100 | The “free market competition” that Friedman envisioned in his theory does not exist in most markets, It is a fiction made up by economists. | 0 | 139 | 103 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_107_100 | Money is most often defined as “a medium of exchange with no intrinsic value.” This essentially means that what people accept as money can be used as money. If you go back in history, you will see that people have used a number of different things as money, some that had intrinsic value (such as gold and silver), and m... | 0 | 745 | 107 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_108_100 | In the past, money was backed by silver (the silver standard) or gold (the gold standard). However, that came with its own set of problems. It meant that you had to have silver or gold equivalent in value to the amount of total money you had in circulation. This made it difficult to increase the supply of money in your... | 0 | 754 | 108 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_109_100 | So, in a way, all paper money is fake! It is, of course, backed by “the full faith and credit” of the country that issued it, but that’s the only thing backing it. That means that unstable countries might end up with currency that cannot be used as payment for oil or food. Even if it is accepted, it is only at a greatl... | 0 | 776 | 109 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_111_100 | Some economies in the past did not use money; instead, they used the barter system. It is a simple system. Let’s say that I have two extra bushels of corn, and I need some wheat. I will swap you my two bushels of corn for two bushels of wheat. | 0 | 243 | 111 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_112_100 | The problem is that the barter system depends on what is called a coincidence of wants. Now let’s say that I have three extra pigs, and I ask my neighbor ask to trade them for a cow. However, he does not have any cows he wants to trade, and he does not want any more pigs. That means I have to go searching for someone w... | 0 | 576 | 112 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_115_100 | It is a medium of exchange. A medium of exchange is something that can be traded for goods and services. As we showed above, it solves the problem of the coincidence of wants. | 0 | 175 | 115 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_116_100 | It is a store of value. Money’s function as a store of value allows you to hold on to money and buy something in the future, and the money is still accepted. If you are going to hold onto money, you should, of course, not hide it under your pillow, but put it in a savings account and earn some interest on it. When we s... | 0 | 473 | 116 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_117_100 | It is a unit of account. Money functions as a universal yardstick that expresses the value of goods and services in a single measure. For example, your labor might be valued at $15 per hour and then you can take that money you earn and buy a dozen eggs at $1.98 per dozen. | 0 | 272 | 117 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_121_100 | Some students may have received advice from their parents or other adults ranging from how to ride a bike to which fork to use at a formal dinner. However, many parents are reluctant to talk to their children about financial management. And if you got financial advice, it might be wrong, as so much has changed since th... | 0 | 562 | 121 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_122_100 | The rules have changed…Americans entering the workforce in the decade since the financial crisis face a starkly different landscape than their parents did at the same age. They often have far higher student loan debt. Housing eats up a bigger chunk of each paycheck. And young households have lower incomes and fewer ass... | 0 | 379 | 122 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_123_100 | Given these new conditions, Carpenter feels we need new rules. Below, I have listed these rules along with my commentary. | 0 | 121 | 123 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_127_100 | In 2018, the average starting salary of a college graduate was about $60,000, while the average salary for a high school graduate was $28,000. On average, students complete their undergraduate degrees in five years; however, at more than a third of U.S. colleges, only half of the students will earn their degree in eigh... | 0 | 550 | 127 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_128_100 | If you plan to go to graduate school, remember that if your starting salary after the degree equals the debt incur then it is probably a good investment. You want to be able to pay your living expenses and still have enough left over to pay off your loans in about ten years. If you think about it, “buying” an education... | 0 | 448 | 128 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_132_100 | Owning a house is still part of the American Dream, but it might not make financial sense for you. For example, you might work in a city with a hot housing market. You might not be able to afford a down payment, or you could wind up depleting your entire savings. On top of that, if you do not expect to stay in a city f... | 0 | 507 | 132 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_136_100 | You should compare your salary (or potential salary, based on the average for your field) to a city’s cost of living. Many people think it would be cool to live in New York City or San Francisco, but the cost of living is so high that your salary has to be proportionate. Otherwise, you can find yourself commuting an ho... | 0 | 983 | 136 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_137_100 | As a result of the Pandemic, remote work has increased substantially. The U.S. Census Bureau recently released its annual 2021 American Community Survey a survey of household behavior (September, 2022). According to the Census Bureau, between 2019 and 2021, the number of people primarily working from home tripled from ... | 0 | 383 | 137 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_138_100 | However, remote work is not evenly distributed around the country. In metropolitan areas, 19% of employees worked from home (with Washington, D.C. at 48% remote workers and Silicon Valley at 35% remote workers as outliers). Outside metro areas, only 9% of employees were working from home in 2021. | 0 | 297 | 138 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_139_100 | The opportunity for remote work is a factor to consider when seeking a position. It has its advantages, including working flexible hours and saving on commuting time. It also has its disadvantages, including the loss of comradery of office work and not being visible to your superior to take advantage of bonding and adv... | 0 | 325 | 139 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_143_100 | Your parents might have followed this old rule: be frugal until you save up enough for the down payment on a house. Unfortunately, with student debt and the higher cost of housing, it does not work to do simple things like pack your own lunch or hold off on a vacation. It’s part of the American Dream that couples rent ... | 0 | 780 | 143 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_144_100 | Under the gravity model of real estate, the center of gravity is downtown where there are a lot of jobs. Then, unless there are physical constraints such as mountains or a coastline, housing construction proceeds over the years in concentric rings around center city. In general, the closer the housing is to the center,... | 0 | 649 | 144 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_145_100 | Outside of housing, you will need to save for a number of things. You should an emergency fund of, ideally, at least six months’ salary in case you lose your job and begin contributing to your retirement as early as possible. If you intend to have children and expect them to attend college, you should begin putting asi... | 0 | 554 | 145 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_148_100 | The true measure of financial success isn’t how much money you make—it’s how much you keep. That’s a function of how well you’re able to save money, protect it, and invest it over the long term. Sadly, most Americans are lousy at this(Hube, 2019). | 0 | 247 | 148 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_149_100 | Two-thirds of Americans would have trouble coming up with $1,000 cash (not credit) to pay for an unexpected medical bill or emergency. Even more disturbing, seventy-five percent are not saving enough or investing correctly for their future retirement requirements. While there are a number of external factors that exace... | 0 | 473 | 149 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_150_100 | Parents are reluctant to talk to their children about money, and high schools and colleges lack financial literacy courses. Individuals are increasingly left on their own to decide how much to save and where to invest their savings. To help, Hube laid out ten rules for financial freedom that I present here, along with... | 0 | 335 | 150 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_154_100 | The first step is to set goals: short-term. medium-term, and long-term. For example, a short-term goal could be to save up six-months’ salary as an emergency fund. A medium-term goal might be to save up for a down payment on a house. Finally, a long-term goal would be to save for retirement. | 0 | 292 | 154 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_155_100 | The sooner you set your goals, the sooner you will begin trying to achieve them. Goals motivate us, and when you have your goals to think about, you will likely squirrel away the extra cash. | 0 | 190 | 155 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_159_100 | Always keep this question in mind: “Do I need this thing or do I just want it?” It is hard to resist something you really want, like a new pair of shoes or a new kind of tool. However, you should it is not a good idea to buy something just because it gives you a jolt of pleasure. | 0 | 280 | 159 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_160_100 | For example, my neighbor had a garage sale recently. Since my wife helped organize the sale, we got a preview on what was being sold. I saw three electric guitars, and I really wanted one. Luckily, my wife said, “You already have a guitar. You don’t need another one!” I must admit, it was hard to distract myself from t... | 0 | 372 | 160 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_161_100 | Look at your monthly after-tax income (disposable income), and add up all your expenses for the month. If your expenses exceed your income or if you are not saving any money monthly, you have to cut expenses. Finally, if you are buying things that you do not need or do not use (such as a gym membership or a particular ... | 0 | 367 | 161 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_165_100 | Pay into your savings, the same way you pay your electric bill: monthly and automatically. Assuming you have joined a credit union for your banking needs, (See Chapter 10, Banks and Financial Institutions.) arrange for automatic bill payment and have a specific amount transferred into your savings account every month.... | 0 | 523 | 165 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_166_100 | Begin saving early to take advantage of the compounding of interest. In simple terms, this means if you put $1,000 in a savings account, and in year one you earn 10% interest, this means you will have $1,100 at the end of the first year. If you leave the $1,100 in the account and continue to earn 10% interest, you will... | 0 | 507 | 166 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_167_100 | There are websites such as www.bankrate.com that give you compound interest calculators to estimate the value of your principle over time, but the Rule of Seventy can also calculate your money’s growth. Take the number 70 and divide into it the interest you earn. Assuming compounding of interest, the result is the numb... | 0 | 723 | 167 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_171_100 | If your employer provides a retirement plan, for example, a 401(k), and matches your contribution to it, always contribute the maximum your employer will match. If you really think about this, you are earning 100% return on your money; the employer is doubling the money you contribute. You should even give up your lunc... | 0 | 384 | 171 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_172_100 | Employers often have 401(k) plans where they will match your contribution up to 4% of your gross salary. These plans have taken the place of the traditional guaranteed pensions and have shifted the burden of managing each worker’s retirement fund from the employer to the worker. However, if you put your retirement cont... | 0 | 1,043 | 172 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_176_100 | Until you are within a couple of years of retirement, you should invest your retirement funds and other extra income for growth, which means investing in stocks. Although stock prices have more volatility than bonds, they return double what bonds do over time. You will need to be able to stomach that volatility in orde... | 0 | 713 | 176 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_180_100 | Debt used for investing in something, such as a house, your education, or your car is good debt. Credit cards are bad debt—debt for consumption purposes. If you buy something with a credit card, pay it off at the end of month. Credit cards charge anywhere from 9% to 25% per month, depending on your credit score. If yo... | 0 | 676 | 180 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_184_100 | Do not overpay on fees or commissions for investing in stocks and do not overpay on your taxes. I talk about each of these issues in the chapters on investing and on taxes. Financial advisers usually charge 1% of your assets annually to tell you what stocks to buy. None of the actively managed portfolios or mutual fund... | 0 | 666 | 184 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_188_100 | The ideal goal is to build up a fund worth six months’ expenses. This is a very difficult goal to accomplish, so when you are young try to save at least one month’s rent for starters. Why do all the experts pick six months as the ideal amount in this emergency fund.? This is because it takes about six months to find a ... | 0 | 540 | 188 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_189_100 | You may have an accident and be unable to work. Many employers pay for a minimum amount of disability insurance that will pay you 60% of your salary if you are disabled long term. If you own a home and have a family, you should consider buying some long-term disability insurance as a supplement to your employer’s. It i... | 0 | 566 | 189 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_193_100 | As I said above, keep your investments simple. Do not chase fads, such as cryptocurrency or 3D printing companies. Invest in an Index Fund that has the S&P 500 stocks in it, and you will pay low fees and earn on average 10% per year. Also, a mutual fund with the S&P 500 stocks in it will have Google, Apple, Facebook, a... | 0 | 429 | 193 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_197_100 | I strongly advise you to go to Vanguard and invest in one of their index funds. Vanguard is owned by the customers who invest in its mutual funds, so it is essentially a non-profit. There are no stockholders, so they can keep their fees low. Jack Bogle, the founder of Vanguard, invented Index Funds (passively managed f... | 0 | 502 | 197 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_198_100 | Finally, do not buy individual stocks from a stockbroker, and do not buy mutual funds that charge you a commission to get into them. You cannot pick the consistent winner stocks and the brokers who charge you a commission to get into a fund often sell you the investment that gains them the highest commission, not the i... | 0 | 351 | 198 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_202_100 | Personal and household savings are important, both for you and for the economy. For you, savings creates a buffer for unexpected expenses and can also be used to finance a down payment on a house or to help pay for college. You can deposit your savings in a financial institution or buy a mutual fund that invests in the... | 0 | 544 | 202 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_206_100 | For the economy as a whole, these savings create economic growth. Firms borrow money (your deposits) from financial institutions or sell shares to your mutual funds and then use that money to expand their businesses. Before we go further, though, we should break down some of these terms. First of all, it’s important to... | 0 | 423 | 206 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_223_100 | From another perspective, savings can be viewed as the portion of personal income that is used either to provide funds to capital markets or to invest in real assets such as residences. | 0 | 185 | 223 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_224_100 | What happened to the U.S. savings rate in the recent Pandemic Recession is quite unusual, to say the least. As you look at the graph below, you will see that from 2000 to 2020, the Personal Savings Rate averaged about 5% to 7% of Disposable Income. However, as the Pandemic Recession began (in February 2020) the Persona... | 0 | 347 | 224 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_237_100 | The total amount of consumer credit outstanding at the end of the first quarter of 2020 was $14.3 trillion. Of this amount, here are the types and amounts of the outstanding loans as of the end of Q1, 2020 (note that the Pandemic Recession began in February 2020, but the President’s order to shut down restaurants, hote... | 0 | 355 | 237 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_242_100 | As a practical matter, we need to divide interest rates into short-term interest rates—those where the principle must be repaid in one year or less—and long-term interest rates—those where the principle must be repaid over a period in excess of one year. Some short-term interest rates include credit cards, treasury bon... | 0 | 539 | 242 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_243_100 | Interest rates, both short- and long-term, are ultimately determined like any good or service; that is, by the laws of demand and supply. The equilibrium interest rate and equilibrium quantity of loans borrowed is determined by the intersection of demand for loans and supply of loans. The graph below calls the good we ... | 0 | 455 | 243 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_247_100 | We can see who creates the demand for loans and the supply of loans by using a simple model known as the circular flow of the economy. Households supply labor to firms and receive wages in return. Firms produce goods and services by using labor along with the plants and equipment they own (physical capital), as well as... | 0 | 533 | 247 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_260_100 | Households supply Loanable Funds to banks through deposits. How much Loanable Funds households supply is determined by the price they will be paid for their savings (the interest rate) and other factors, such as how much income they make. Firms, households and the government demand Loanable Funds. The price of Loanable... | 0 | 604 | 260 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_265_100 | In general, financial intermediaries are in business to make a profit. While this is not true of credit unions, they still have to pay interest to their depositors, cover their workers’ wages, and fund overhead; they just do not have to make money above their expenses to pay to stockholders. In any case, financial inte... | 0 | 457 | 265 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_283_100 | For financial intermediaries, their total revenue is the interest they earn on the loans they make plus some investment returns (usually Treasury Bonds). Their costs are the interest they pay their depositors, interest on Commercial Paper, physical capital expenses, and employee wages. Thus, a financial intermediary de... | 0 | 341 | 283 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_290_100 | To cover all its expenses, the financial intermediary must decide what breakeven interest rate it must charge on its loans. In order to understand this, we can think of interest rates as having three components: | 0 | 211 | 290 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_297_100 | The current amount of outstanding student loans is approximately $1.7 trillion; meanwhile, the total outstanding credit card debt stands at $922 billion. As you can see below, student debt has risen continuously over the past decade and a half, continuing a trend over the previous four decades. | 0 | 295 | 297 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
s_302_100 | Borrowing money for a college education is an investment. In 2020, the average annual salary of a high school graduate in the United States was $37,000 while the average annual salary of a college graduate was $61,000. Those with a college degree will earn at least 60% more money for over their lifetime. In addition, a... | 0 | 745 | 302 | Economics for Life: Real World Financial Literacy | 1 | Donald Wargo | https://open.umn.edu/opentextbooks/textbooks/economics-for-life-real-world-financial-literacy |
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