Chapter 1

RAMSEY EDUCATION SOLUTIONS ™
SPONSORED BY
DAVE RAMSEY
SPONSORED BY: LICENSED FOR 2014 –2015 SCHOOL YEAR ONLY

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Acknowledgements
The Ramsey Education Solutions team would like to give special thanks to the
following people for their contributions to this product. Their input was essential
for creating a financial literacy curriculum that empowers high school students
to make sound financial decisions for life.
Educators
Len McKnatt Kathy Jarman Linda Brown
AC C OU N T I NG/ EC ONOM IC S T E ACH ER T E ACH ER CT E T E ACH ER
Battle Ground Academy Helias Catholic High School Sanderson High School
Franklin, Tennessee Jefferson City, Missouri Raleigh, North Carolina
Leah Zimmer LeAnn Dinsdale Terri Winkle

F I NA NCI A L L I T ER AC Y T E ACH ER CT E T E ACH ER /ACT E V P T E ACH ER
Bremerton High School Brackenridge High School Western Heights High School
Bremerton, Washington San Antonio, Texas Oklahoma City, Oklahoma
Brittany Sampson Lynn Isaacks

T E ACH ER S O CI A L ST U DI E S T E ACH ER
Lakeland High School Academy of Creative Education
Lakeland, Florida San Antonio, Texas
Ramona Harper Eric Lambert

BUSI N E S S T E ACH ER T E ACH ER
Lake Highlands High School North Bullitt High School
Richardson, Texas Shepherdsville, Kentucky
Credits
Executive Vice President Project Management Video/Audio Production
Jack Galloway Josh Campbell Jon Melton
Kassidy Slamer Diana Key
Chief Marketing Officer Lisa Mays Megan Hill
Jennifer Sievertsen Josh Fulton
Content Editing/Proofing Dave Oglesby
Vice President of Allen Harris Dave DiCicco
Education Solutions Darcie Clemen Megan Ledford
Jim King Stephanie Thomas Sara Zellner
Brandon Brison Chris Wright
Curriculum Design Jennifer Gingerich Ian Collins
Michelle Scott Danielle Britt Colin Fatke
Jennifer Norton Bobby Robertson
Product Management Molly Pinkley David Wilkinson
Brett Kozimor Josh Hancock
Creative Design Chris Blaylock
Sales/Marketing/PR Brian Williams
Herb Jenkins Marcus Meazzo Interactive/Web Development/UI
Beth Tallent Jason Miller Ash Harris
Jacqueline Garneau Steve Rupp Jon Wolski
Jamie Moorer Andrew Kallemeyn
Christy Richardson
Christy Wright
3

4 Foundations in Personal Finance High School Edition

Meet the Experts
Dave Ramsey
Dave Ramsey is America’s trusted voice on money and business. He’s
authored four New York Times best-selling books: Financial Peace,
More Than Enough, The Total Money Makeover and EntreLeadership.
The Dave Ramsey Show is heard by more than 6 million listeners
each week on more than 500 radio stations. By age twenty-six he had
established a four-million-dollar real estate portfolio, only to lose it by
age thirty. Using the wisdom he gained, Ramsey rebuilt his financial
life and now teaches others how to be responsible with their money, so
they can acquire enough wealth to take care of loved ones, retire with
dignity, and give generously to others.
Rachel Cruze
Rachel Cruze is a seasoned communicator and presenter, who has
been speaking to groups as large as 10,000 for more than a decade.
The daughter of Dave Ramsey, today she uses the knowledge and
experiences from growing up in the Ramsey household to educate
America’s students and young adults on the proper ways to handle
money and stay out of debt.
Chris Hogan
A popular and dynamic speaker on the topics of financial education
and leadership, Chris Hogan also works with businesses and high-
profile clients across the country, helping them develop strategies to
increase revenues, protect wealth and secure their financial futures.
Chris is also the host of the popular EntreLeadership podcast, one
of the leading podcasts on business and leadership.
Introduction 5

A Letter from Dave
Dear Student,
Welcome to Foundations in Personal Finance! The information you are about to learn will change your
financial future—if you apply what we teach.
I talk to people every day who tell me, “I wish I had learned this stuff in high school! I could have
avoided so many problems!” I know how they feel. I built a multi-million-dollar business in my
twenties, only to have it wiped out because I didn’t know how to manage my money—and I even had a
college finance degree!
You don’t want to learn about money the hard way like I did. Thanks in part to our friends at Fifth
Third Bank you will not have to. If you take what you learn from this class and apply it to your life,
you’ll never have to experience the pain and stress money problems can bring.
Enjoy the class! Use what you learn! Change your life!
Sincerely,
A Letter from Our Sponsor

Dear Student,
It is a privilege for Fifth Third Bank to sponsor Foundations in Personal Finance in your school. We
are big fans of Dave Ramsey and what he teaches young people about money. We made this investment
in you so that you’d gain the knowledge that will pay you healthy dividends in the future.
We care about your financial literacy—how much you know about how money works and how to use it
properly—because, as a bank, we have a front-row seat to what can happen when you don’t understand
it. We want to be your partner on your journey to financial independence.
All of us at Fifth Third Bank wish you the very best as you move ahead toward graduation and into your
adult life. Thanks for the opportunity to be a part of your education.
Good luck!
Kevin Kabat
V IC E C H A I R M A N & C H I E F E X E C U T I V E OF F IC E R
F I F T H T H I R D B A NC OR P

Contents
UNIT 1: SAVING AND BUDGETING
Chapter 1: Introduction to Personal Finance 8
Chapter 2: Saving 28
Chapter 3: Budgeting 48
UNIT 2: CREDIT AND DEBT
Chapter 4: Debt 72
Chapter 5: Life After High School 100
Chapter 6: Consumer Awareness 126
UNIT 3: FINANCIAL PL ANNING AND INSUR ANCE
Chapter 7: Bargain Shopping 142
Chapter 8: Investing and Retirement 160
Chapter 9: Insurance 184
UNIT 4: INCOME, TA XES AND GIVING
Chapter 10: Money and Relationships 208
Chapter 11: Careers and Taxes 222
Chapter 12: Giving 250
GLOSSARY
2 70
Introduction 7

1
What do other high
school students know
about spending?
We asked other high school students
CHAPTER
if they or someone they know has
ever bought something they could
not afford.
“I haven’t, but my younger sister

always seems to need the latest
and greatest technology, and she
spends her college money on it!”
Sophomore, Louisiana
“No. But I have a family member

who once bought a house that they
ended up not being able to afford.”
Junior, New Jersey
“My dad bought a car that he could

not afford, and he ended up getting
it repossessed.”
Junior, Wyoming
“Yes. My parents buy things they

can’t afford all the time. That’s
why we’re in debt. That’s why I
need this course.”
Senior, Utah

UNIT 1: CHAPTER 1
Introduction
to Personal
Finance
W ELCOME TO A CL ASS that is going to give
81% you a head start on your future! Learning
how to manage your money is one of the most
of parents feel it is
their responsibility
important skills you can have. Why? Because
your financial decisions will have long-term
to teach their kids
about money and
savings.*
consequences, either good or bad. We’ll give
you the tools and knowledge that will help you
85% win with money right from the start. When it
comes to your financial future, we want you to
of American parents
surveyed thought
that a course in
aim high and dream big. There’s a lot to learn,
so let’s get started!
personal finance
should be a high
school graduation
requirement.*
*National Foundation for Credit Counseling, Inc.

INTRODUCTION
Before You Begin

 Learning Outcomes Key Terms
Once you’ve completed this chapter’s videos, you will be asked Get to know the language of money.
to return to this list and place a checkmark next to the items »» Consumer: A person or organization
you’ve mastered. that uses a product or service
»» Credit: The granting of a loan and the

Section 1: What Is Personal Finance? creation of debt; any form of deferred
payment
Describe what personal finance is.
»» Debt: An obligation of repayment owed
Outline the components of effective financial planning. by one party (the debtor/borrower) to
Identify focuses of study throughout this course. a second party (the creditor/lender); in
most cases this includes repayment of
the original loan amount plus interest
Section 2: Money, the American Way »» Economy: A system by which goods and
services are produced and distributed
Understand the evolution of America’s dependence
on credit. »» Financial literacy: The knowledge and
skillset necessary to be an informed
Observe and analyze the “normal” American family consumer and manage finances
as it relates to personal finance. effectively
»» Interest: A fee paid by a borrower to the

Section 3: You and Money lender for the use of borrowed money;
typically interest is calculated as a
Develop communication strategies for managing money percentage of the principal (original
and discussing financial issues. loan amount)
Evaluate your own money personality; identify your »» Loan: A debt evidenced by a “note,”
money strengths and weaknesses. which specifies the principal amount,
interest rate and date of repayment
»» Personal finance: All of the decisions

and activities of an individual or family
regarding their money, including
spending, saving, budgeting, etc.

Measure Your Progress
Before watching the video, read each statement below and mark whether you agree or disagree in the “Before”
column. Then, after watching the video, do it again using the “After” column to see if you changed your mind
on any statement.
BEFORE AFTER
Agree Disagree Agree Disagree
1. I already have a strong working knowledge of

personal finance.
2. I think I have a lot to learn when it comes to

managing money.
3. Because I am a teenager, what I do now with my

money will have little effect on my financial future.
4. My parents have taught me a lot about how to

manage money.
5. Most Americans are very wealthy and will have

financial security when they retire.
JOURNAL QUESTION: INTRODUCTION
Can you think of a financial goal you have at this moment? Is this a long-term or a short-term goal?
Describe how you plan to achieve this financial goal.

SECTION 1
1
+
This is one of the most
important classes you will
ever take. We’re excited
you are joining us. Now
let’s begin!
“ CHAPTER
Section 1:
“Wealth is more
often the result of
a lifestyle of hard
work, perseverance,
planning and, most What Is Personal Finance?
of all, self-discipline.”
MOST HIGH SCHOOL students don’t Have a money plan. Set money
The Millionaire Next Door
spend their time worrying about goals. Learning to manage money
mortgages and investments, but they at this stage can eliminate financial
are at an age when smaller financial mistakes and promote huge financial
responsibilities start creeping into benefits for the future.
$ their lives. Many of you are earning
allowances or have already begun What is personal finance? Personal
55% of teens surveyed
working a part-time job. So what do finance refers to all the financial
say that they want to
learn more about how
you do with your money? If you’re decisions an individual or family
to manage their money— just putting it in your pocket and must make in order to earn, budget,
particularly learning spending without a plan, living save and spend money over time.
about: investing (88%), payday to payday could become your These decisions are generally based
saving (87%), budgeting normal. You need to make decisions on a variety of financial risks and
(82%), checking accounts about what to do with your money. planning for the future.
(80%), and financing for big
purchases like a car or a
home (79%).
National Foundation for Credit
Counseling, Inc.

VIDEO 1.1
Key Components of Financial Planning $
Directions: As you see words pop up on the left side of the Two in five U.S. adults gave
themselves a C, D or F on
video screen, write them into the workbook blanks. their knowledge of personal
finance.
Assess your situation (your income, National Foundation for Credit
Counseling, Inc.
1
assets and liabilities).
Set money ! Make sure you have a mix of both

2
short-term and long-term goals. “
“Wealth building isn’t
You must write out a detailed for accomplishing rocket science, which
3
your goals. This begins with your budget. is a good thing for me
(and probably you).
your plan! This involves discipline and Winning at money
4 is 80% behavior and
perseverance. 20% head knowledge.
What to do isn’t the
Know your money . problem; doing it is.
5
Most of us know what
Regularly and reassess your financial plan. to do, but we just
6
don’t do it. If I can
Replace money with money truths. control the guy in the
7 mirror, I can be rich.
Find a mirror!”
JOURNAL QUESTION: VIDEO 1.1 DAV E R A MSEY
In what ways could you do better when it comes to managing

your money?
+
If you put into practice what
we teach, you truly can win
with money!

SECTION 2
Section 2: Money, the American Way

VIDEO 2.1
A History of Credit and Consumerism

It is impossible to discuss the history of personal finance in America without
highlighting the evolution of the credit industry. Think, for a moment, about
the most recent commercial you’ve seen advertising a big ticket item like a
new car or new furniture. Do those ads target people who have “budgeted,
PRIOR TO 1917 1929 1939
1 2 3
Credit Prior to 1917 Credit Takes Root Leveraging Credit to Escape
the Great Depression
»» Before 1917, buying things on credit was »» After 1920, consumer demand for big-
not common. Why? Because it had never ticket manufactured products was on »» In an attempt to help Americans regain
been legal for lenders to charge inter- the rise. their financial footing, New Deal policy-
est rates high enough to turn a profit. makers came up with mortgage (home
»» Credit laws were relaxed in an attempt to
»» Lending money to others was not a create a mainstream, profitable alterna- loans) and consumer lending policies
money-making business. Only wealthy tive to loan sharks for the working class. that convinced commercial banks that
people could get personal loans. Without consumer credit could be profitable
»» Installment credit (type of credit that despite bankers’ long-held reluctance
the possibility of profit, lending money
has a fixed number of payments, also to lend to the working class.
to the middle and lower class was not
known as revolving credit) and legalized
worth the risk.
personal loans became big business.
+
»» Small-time loan sharks (people who
»» This era made consumer credit legal
offered loans at extremely high interest
and more socially accepted.
rates, which was an illegal activity at the
time) existed for people in desperate
The New Deal was the legislative and
financial positions, but they were shady
administrative program of President
operations on the fringes of society.
»» The highly evolved, highly accepted
“ F. D. Roosevelt designed to promote
economic recovery and social reform
consumer credit as we know it today “In 1917, one popular historian during the 1930s.
did not exist.
described debt as ‘semi-
slavery’ . . . (which) existed
before the dawn of history, and
it exists today.”
Debtor Nation: The History
of America in Red Ink

Source: Debtor Nation: The History of America in Red Ink
saved, and are ready to go make that large purchase”? Or are they more likely
to suggest that you “Buy NOW, pay LATER”? Which phrase is more familiar?
Sadly, borrowing money is so ingrained in our culture that we can’t imagine
life without it. So how did we get here? Let’s take a look.
1945 1970 TO THE PRESENT
4 5 6
WWII Fuels an Post World War II The Decline Into Debt:
Economic Recovery Consumerism 1970–Present
»» After the Great Depression, WWII »» Ah, the birth of the suburbs! The post- »» After 1970, consumer debt skyrocketed
proved to be the most important eco- war middle class bought the American not because people were borrowing
nomic event of the 20th century. The war Dream with consumer credit. Ameri- more, but because they continued
ended the Great Depression by reviving cans “learned” to borrow in the midst to borrow as their parents had done
American industry through government of prosperity. since WWII. The difference was they
spending and consumption. In short, didn’t have the postwar period’s well-
»» They borrowed because they believed
the economy improved because the paying jobs.
their incomes would continue to grow
war created a ton of new jobs. These
into the future . . . and they were right. »» Banks were willing to lend even more
jobs provided considerable increase
Incomes rose steadily from 1945 to 1970. because they were now making huge
in personal income and led Americans
profits off consumer debt. The credit
to predict permanent improvements to »» Financial institutions lent more money,
industry had become smarter than
their standard of living. and borrowers paid it back. Borrowing
borrowers.
became a post-war normalcy.
»» As consumers borrowed to deal with
“
unexpected job losses and medical ex-
penses, as well as to live “the good life,”
“ banks were willing to continue lending.
“Americans left government- »» Due to the clever structuring of finan-
mortgaged homes in “If you will happen to your cial institutions, the credit world now
installment-financed cars to money, then you will have resembles the pre-1920s loan sharks
shop on revolving credit at some. If you just let all your more than the 1950s banks.
shopping centers.” money happen to you, you’ll »» In short, an old credit system premised
Debtor Nation never win.” on rising wages and stable employment
(low-risk borrower) was reformed to ac-
DAV E R A MSEY
commodate uncertain employment and
income instability (high-risk borrower).

SECTION 2
Today’s American Reality

“ Unfortunately, many American even a dining room table! Americans
families only have the appearance of often spend more money than they
“When we participate being financially secure. If you drive make. Most Americans don’t have an
in what the crowd through a middle-class neighborhood, emergency fund. Saving, budgeting,
identifies as normal, you might look at the manicured lawns, retirement planning and staying out
even if it is stupid, we nice houses and new vehicles in the of debt are all basic money principles,
gain acceptance into driveways and think, Wow, they’re not complex economics.
the club. Sometimes doing all right. I want to live like that
we don’t even realize when I’m an adult. So why aren’t Americans better at
what we are doing managing money? They were never
is stupid because The sad reality is that most of the taught the right way. As you go
we have been taught people in those houses are struggling through this course, we will focus on
that it’s just ‘the way with debt in the form of mortgages, car teaching you what to do with money
you do it,’ and so we loans, student loans and credit cards. and then show you how to do it. Money
never ask why.” Based on statistics, Americans are math is easy. It’s controlling your
DAV E R A MSEY horrible at saving money and planning money behavior that’s the challenge.
for retirement. They are so conditioned A s you eva luate the “norma l”
to think debt is normal, they can’t American family, consider your own
envision paying cash for a car or financial future.
The fact is, this doesn’t have to be your future reality.

»» You don’t have to spend more than you
8
make just to look good in front of your friends. You can
learn basic money principles and put them into practice.
»» When you manage money well, you’ll experience deeper

.
9
»» It’s really simple! Personal finance is 80%

10
and 20% head knowledge.
»» Money is easy—it’s controlling your

11
behavior that’s the real challenge.
»» As you think about the “ ” American

12
family, remember that normal is broke. You don’t have to
be normal!

A Snapshot of the “Normal” American Family
Don’t be fooled by outside images of new cars and expensive homes. Most Americans
are struggling financially and drowning in debt.
DEBT PROFILE OF THE AVERAGE AMERICAN FAMILY *

Average Credit Card Debt (of households with credit card debt) $15,799
Average Mortgage Debt $149,667
Average Student Loan Debt $32,559
Average Car Loan Debt $13,125
This does not have to be your future reality. If you manage money well from the start and
make the decision not to use debt as a financial tool, you can avoid the stress of living paycheck
to paycheck.
* NOTE: Average credit card debt of all American households is $7,000, source: Nerd Wallet
*Federal Reserve, U.S. Census Bureau, Internal Revenue Service, manilla.com
Dave’s Story
With more than 20 years of experience counseling people on
how to manage their money, Dave knows what it takes to get
control of your cash.
More than 20 years estate worth more than $4 million. I
ago, my wife, Sharon, was good at real estate, but I was better
and I went broke. We at borrowing money. Even though I
lost everything due had become a millionaire, I had built
to my stupidity in a house of cards. The short version of
handling money, or the story is that debt caused us, over
not handling it, as the case may be. the course of two and a half years of
Hitting bottom and hitting it hard was fighting it, to lose everything. We were
the worst thing that ever happened sued, foreclosed on, and, finally, with
to me and the best thing that ever a brand-new baby and a toddler, we
happened to me. were bankrupt. Scared doesn’t begin
to cover it. Crushed comes close, but
We started with nothing, but by the we held on to each other and decided
time I was 26 years old, we held real we needed a change.

SECTION 2
Dave’s Story (Continued)

“ After losing everything, I went on a to manage the character I shaved
quest to find out how money really with every morning, I would win
“Today there are works, how I could get control of with money.
three kinds of people: it, and how I could have confidence
the haves, the have- in handling it. I read everything I The stuff we teach in this class
nots, and the have- could get my hands on. I interviewed represents everything I’ve learned
not-paid-for-what- older rich people, people who made about money since then, from
they-haves.” money and kept it. That quest led savings and debt, to insurance and
EA R L WILSON me to a really, really uncomfortable investing. And I’m excited that my
American columnist
place: my mirror. I came to realize daughter Rachel has joined me to
that my money problems, worries get this information to you before
and shortages largely began and you graduate high school. Trust me,
ended with the person in my mirror. knowing this stuff then would have
I also realized that if I could learn saved me a whole lot of trouble!
What’s Your Money Personality?

StageofLife.com conducted a writing contest to 2. ROLE MODELS: Teens are watching how their
evaluate students’ attitudes toward money and parents treat money. In several of the essays,
the role of money in their lives. The following was the teens made a point to criticize how their
the contest writing prompt: parents handle money and vowed not to “be
like them.”
“What is your relationship

3. PRAGMATIC: There was a minority voice that
with money? How do you spend did approach the topic with a more pragmatic
(or save) and why?” point of view and in some rarer cases, even
positivity. Students shared their personal
More than 3,335 students from all 50 U.S. states saving tips, budgeting experience and more.
contributed a 500-word essay response. From
the essay submissions, several themes emerged: 4. MONEY ISN’T EVERYTHING: A good percentage
of the essays address a more universal truth:
1. FRUSTRATION: Many teens expressed negative that money isn’t everything. Yes, it’s needed to
emotions about money: anger, frustration, survive, but it’s not a requirement in making
stress, distrust and even hatred. people happy.

Americans Are Being Outsmarted
Ultimately, what made our current trillion dollars each year on their $
indebtedness possible was that it credit cards, one can understand
Teen money attitudes
became profitable. Yes, a debt system why the credit card companies are shifted with the recent
that keeps Americans from achieving so profitable. There is nothing wrong recession.
wealth and makes us “slaves” to the with a business turning a profit; what’s
• Nine in 10 teens say they
lender exists because it became a wrong is that these companies are
were affected by the
profitable industry. Today, with outsmarting Americans. That should recession.
Americans charging more than a bother you!
• Nearly two-thirds of
teens (64%) are more
Why do we allow ourselves to be outsmarted when it grateful for what they
comes to our own money? have.
• The majority (58%) of
»» We like —lots of stuff! teens say they are less
13
likely to ask for things
»» We are told that debt is . It has become they want.
14
• The majority (56%) of
acceptable in our culture to use credit to buy things. teens have a greater
appreciation for their
»» We are taught that we can . parents’ hard work.
15
This is simply not true! • More than a third (39%)
of teens appreciate their
families more.
»» Our debt system keeps us from building • Nearly three-quarters
16
because we are constantly giving our money away to pay (73%) of teens say it is
important to have an
for things we bought years ago. emergency fund.
• More than half (51%) of
»» In America, we are bombarded with marketing ads that teens say it is important
to understand debt.
push us to buy things. “You can buy it today with no money CBS Money Watch
down and no interest for 90 days!” Sound familiar?
»» We want you to be of the financial

17
condition of our country—and we want you to
it!
18
We will talk more about consumerism and debt in later

chapters. Right now, our focus is to be aware of the
financial “condition” of America and begin to question it.

SECTIONS 2 & 3
JOURNAL QUESTION: VIDEO 2.1
“ What was Dave’s biggest lesson when it came to managing money and
building wealth?
“You will either
manage your money,
or the lack of it will
always manage you.”
DAV E R A MSEY
Section 3: You and Money

VIDEO 3.1
Learn the Language of Money

No one is born financially smart! are. You’ve got to learn enough to
Learning the language of personal understand your personal financial
finance is the first step in becoming statements a nd communicate
money smart. The language of effectively about your finances.
money is spoken in the vocabulary How smart you are with your money
of accounting: understanding what will determine your financial well-
credits, debits, assets and liabilities being in life.
»» Knowing the of money allows you to

19
tell your money what to do.
»» That means deciding where your money is going to go

you get your paycheck.
20
»» You’ll be able to communicate effectively with

, financial planners and insurance agents.
21
»» Focus on understanding the as you

22
move through this course.
»» You’ll become the on your money. Winning

23
with money is not complicated, but it does involve some
basic knowledge.

Learning the language is the key to the game.
Learning the language of money is a
little bit like learning the language
Benjamins. It’s about effectively
communicating w ith ba nkers,
“
of sports. You can’t really follow— financial planners and insurance “Ignorance is not lack
much less enjoy—a football game if agents—people who provide the money of intelligence; it is
you don’t know what the ref is talking services you need in order to grow lack of know-how.”
about when he uses words like “blitz,” wealth. It’s also about knowing how DAV E R A MSEY
“option” or “stunt.” But once those to budget and what to budget for.
terms are explained to you and you
grasp their meaning in the context of Understanding the language of
the game, you can easily get into it and money will allow you to manage
shout for your team. your own finances effectively. You
don’t want to be dependent on outside
It’s the same way with money. Being influences to control, shape or coerce
financially literate allows you to your financial behavior. Instead,
participate in the game. And if you you will determine which level of
really put what you learn into practice, financial well-being you will achieve.
you can even become a coach—and It’s simple. If you’re going to tell your
tell your money what to do! Of course, money what to do, you need to first
that doesn’t mean talking to your speak the language!
Become Money Smart

You don’t have to be a financial or accounting degrees. But you do need to
accounting genius to win with money. be what we call “money smart.” That
Financial success isn’t reserved just means you need to understand
just for the select few who actually some basic principles.
enjoy running spreadsheets or earn
»» First, you need to be comfortable with .

24
»» Second, you must start learning the

25
of money.
»» Third, and this is the hardest part, you need to learn how
to manage your with money.
26

SECTION 3
What Does Winning With Money Look Like?

+ We can divide financial well-being into three levels.
Some people make more
* NOTE: These levels are not determined by income, but rather by how you manage your income.
than $100,000 per year
but are living at survival
1. Survival: At this level there are simply income, bills and
level because they spend
everything they make hope that there is enough money to get you to the end of the
(and then some). There
are others who make
month. Sounds like fun, right? You work for every dollar
$40,000 per year but live at you earn and spend everything you earn. This is the living
a secure level. How is this
possible? They live on less “paycheck to paycheck” level of financial well-being.
than they make!
2. Comfort: At this level, you have a basic understanding
of money management. There are still income and bills,
how-ever, you pay yourself first! You have a small
monthly surplus that you use to save and invest. You
are slowly building wealth and moving toward being
financially secure.
3. Secure: Instead of saving and investing a small surplus,

you arrange your finances in such a way that your wealth
now generates your income. That’s right! At this level,
your money actually works for you.
On which level would you like your financial future to rest?
How You View Money Matters

The way we view money is unique money a person has, unfortunately,
and largely dependent on our current does not always dictate his or her
financial state. Even though you are spending behavior. Some millionaires
still dependent on your parents, you hate spending while some people who
are already developing a “money are broke can’t seem to stop buying
personality.” Some people are really things. Money—or the lack of money—
good at saving while others are talented can affect the way we feel about
at finding bargains. The fact is we all ourselves and the way we interact
have strengths and weaknesses; we all with others. Your relationship with
have a money personality. How much money is complex and dynamic.

»» Winning with money isn’t just about understanding how
it works—it’s about putting your into it.
27
That’s the 80% behavior we’ve talked about.
»» Money is a . It’s up to you to manage it.

28
»» The best way to manage money is to learn how

to manage .
29
Budget
»» You need to know your natural when
30
Builder
it comes to money. For instance, are you more likely to One of the most important
spend or save? steps in winning with

money is to have a plan. We
are going to teach you how
»» Once you know your money , you to write a budget. Go to
foundationsU.com/1 for
31
develop a financial plan that works for you. your first budget lesson!
»» It’s in recognizing who you really are that allows you the
to grow and learn.
32
During this course, as you develop life spend and save. Reflect on your own
your knowledge and skills in areas like spending habits. Understanding the
budgeting and saving, consider your way you think about money will help
money personality. Think about how you manage your money and make good
your parents and other adults in your decisions for your financial future.
JOURNAL QUESTION: VIDEO 3.1
How do you want your financial future to look?

RECAP & REVIEW
Chapter Summary
Check for Understanding
Now it’s time to check your learning! Go back to the Before You Begin section for this chapter. Place a
checkmark next to the learning outcomes you’ve mastered and complete the “after” column of the Measure
Your Progress section.
Build On What You’ve Learned

Fill in the graphic organizer below.
1. 2. 3.
7.
Key Components 4.
of Financial Planning
6. 5.
Big Ideas
The following Big Ideas are intended to provide clear focus and purpose to the lessons. Read each statement
and think about how what you’ve learned will affect your current and future decisions. Then, in the space
provided, write an “I believe” statement for each of the Big Ideas.
»» Personal finance is 80% behavior and 20% head knowledge.
»» Many Americans are buried in debt.
»» Learn the language of money!

Take Action Challenge
The first key component of financial planning is to assess your current financial situation. This should
be pretty easy at your age. It’s important to have a clear picture of your income (money in) and expenses
(money out) before you move on to the next phases of financial planning. Complete the student financial
assessment form below.
LIST ALL INCOME SOURCES
Regular Income Source (job/allowance) Amount Pay Period (weekly, biweekly, etc.)
Irregular Income Source (babysitting, summer job, tutoring, etc.)
N/A
LIST ALL EXPENSES (auto insurance, car payment, cell phone bill, entertainment, clothing, etc.)
Expense Amount Pay Period (weekly, biweekly, etc.)
LIST ALL ASSETS (anything you own that has value: car, savings account, etc.)
Asset Value
N/A
N/A
N/A
N/A

RECAP & REVIEW
Money in Review
Matching
Match the following terms to the correct definition below.
a Consumer d Loan g Economy

b Financial Literacy e Debt h Personal Finance
c Credit f Interest
1. _____ A fee paid by a borrower to the lender for 5. _____ The granting of a loan and the creation
the use of borrowed money of a debt; any form of deferred payment
2. _____ An obligation of repayment owed by one 6. _____ A system by which goods and services
party (debtor/borrower) to a second are produced and distributed
party (creditor/lender)
7. _____ The knowledge and skillset necessary
3. _____ A person or organization that buys/uses to be an informed consumer and manage
goods or services finances effectively
4. _____ A debt evidenced by a “note,” which 8. _____ All of the decisions and activities of
specifies the principal amount, interest an individual or family regarding their
rate and date of repayment (example: money, including spending, saving,
house mortgage) budgeting, etc.
Illustration
Draw a picture representation of each of the following terms.
Money personality Consumerism

Multiple Choice Short Answer
Circle the correct answer. Respond in the space provided.
9. Learning the language of money is not that 13. Describe some of the mistakes Americans
important because you will be able to depend often make when it comes to money.
on financial planners to manage your money.
a True b False
10. Which of the following is NOT a reason

credit is marketed so heavily to consumers
in the United States? 14. Explain why understanding your money
a There is strong consumer demand for big personality is important when it comes to
ticket items. developing a money plan that’s right for you.
b The credit industry has become extremely
profitable.
c The use of credit is not socially accepted
in the United States.
d After World War I, credit laws in the
United States were relaxed in an attempt 15. Does the History of Credit and
to create a mainstream alternative to loan Consumerism segment make you view the
sharks for the working class. use of credit differently than you did before?
Explain your answer.
11. During the Great Depression, New Deal
policy makers came up with mortgage
(home loans) and consumer lending policies
that convinced commercial banks that:
a Consumer credit was not a profitable
industry.
16. Explain how marketing can affect your
b Consumer credit could be profitable. decisions when it comes to spending money.
c Consumers would not be willing to use
credit, since borrowing money for large
purchases had not previously been an
option for the middle class.
d They would not be able to compete with
loan sharks in the industry of consumer
lending. 17. Does managing your money well mean that
you can’t have fun with your money? Explain
your answer.
12. When it comes to managing money, success
is about _______ % head knowledge and
_______% behavior.
a 50, 50 c 60, 40
b 80, 20 d 20, 80


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RAMSEY EDUCATION SOLUTIONS ™

SPONSORED BY: LICENSED FOR 2014 –2015 SCHOOL YEAR ONLY

Copyright © 2014 by Lampo Licensing, LLC

NOTE TO THE READER

Printed and bound in the United States of America

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Leah Zimmer LeAnn Dinsdale Terri Winkle

Brittany Sampson Lynn Isaacks

Ramona Harper Eric Lambert

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A Letter from Our Sponsor

6 Foundations in Personal Finance High School Edition

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Chapter 1: Introduction to Personal Finance 8

UNIT 2: CREDIT AND DEBT

Chapter 5: Life After High School 100

Chapter 6: Consumer Awareness 126

UNIT 3: FINANCIAL PL ANNING AND INSUR ANCE

Chapter 7: Bargain Shopping 142

Chapter 8: Investing and Retirement 160

Chapter 9: Insurance 184

UNIT 4: INCOME, TA XES AND GIVING

Chapter 10: Money and Relationships 208

Chapter 11: Careers and Taxes 222

Chapter 12: Giving 250

_Foundations_HS_Textbook.indb 7 4/9/14 2:45 PM

“I haven’t, but my younger sister

“No. But I have a family member

“My dad bought a car that he could

“Yes. My parents buy things they

SPONSORED BY: LICENSED FOR 2014 –2015 SCHOOL YEAR ONLY

SPONSORED BY: LICENSED FOR 2014 –2015 SCHOOL YEAR ONLY

Before You Begin

»» Credit: The granting of a loan and the

»» Interest: A fee paid by a borrower to the

»» Personal finance: All of the decisions

10 Foundations in Personal Finance High School Edition

SPONSORED BY: LICENSED FOR 2014 –2015 SCHOOL YEAR ONLY

1. I already have a strong working knowledge of

2. I think I have a lot to learn when it comes to

3. Because I am a teenager, what I do now with my

4. My parents have taught me a lot about how to

5. Most Americans are very wealthy and will have

JOURNAL QUESTION: INTRODUCTION

Chapter 1: Introduction to Personal Finance 11

12 Foundations in Personal Finance High School Edition

SPONSORED BY: LICENSED FOR 2014 –2015 SCHOOL YEAR ONLY

Key Components of Financial Planning $

Set money ! Make sure you have a mix of both

In what ways could you do better when it comes to managing

Chapter 1: Introduction to Personal Finance 13

Section 2: Money, the American Way

A History of Credit and Consumerism

PRIOR TO 1917 1929 1939

14 Foundations in Personal Finance High School Edition