Chapter 5Personal Finance

Vocabulary APR – Annual percentage rate, cost of

borrowing money on an annual basis. Buyer’s Remorse – regretting a purchase

soon after making it. Brand Recognition - is the extent to

which a brand is recognized for stated brand attributes or communications.

Financing – to buy an item with credit, and you pay it back over time.

Vocabulary Finite – having a beginning and an end;

money is finite, it has limits. Impulse Purchase – buying something

that you were not planning on buying. Opportunity Cost – the true cost of

something in terms of what you have to give up to get an item: the benefits you would have received by taking the other action.

Vocabulary Rule of 78 – pre-payment penalty in a

financing contract; the portion of a “90-days same-as-cash” agreement that states that the entire loan amount plus the interest accumulated over the first 90 days becomes due immediately.

Significant Purchase – an amount of money you spend, usually $300.00 or more, that causes some pain to part with.

Popular techniques used in ads. Bandwagon – Persuading people to do

something by telling them that others are doing it, too. “Don’t be left out”

Testimonial – Famous people say they use a product or persuade you to use a product.

Transfer/Fantasy – By using the names or pictures of famous people, but not their direct quotations, the ad is trying to convey that the product will help the consumer imitate the famous person in the ad.

Popular techniques used in ads. Repetition – The product name is

repeated at least four times. Emotion – Words are used in the ad to

evoke strong feelings about someone or something.

Nostalgia – Creates a sentimental tone while pointing back to “the good old days”

Popular techniques used in ads. Statistics – Facts and statistics are

shown. Humor – Makes people laugh so they

have a positive association with the product.

Sense Appeal – Sounds or pictures that are pleasing to the eye.

Ways companies compete for your business Personal selling Financing as a marketing tool TV, radio, internet and other media

advertising Product positioning

Brand recognition Color Packaging Shelf position

Opportunity cost Opportunity cost is the value of the next

best choice that one gives up when making a decision.

What do you have to give up in order to make a purchase?

Significant purchase Causes some pain For most people over $300.00 Bodies go through physiological

changes

5 steps to help you make a significant purchase1. Wait overnight before making a

purchase2. Carefully consider your buying motives3. No amount of stuff equals contentment

or fulfillment4. Never buy anything that you do not

fully understand5. Consider the opportunity cost

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