Lesson #2: Evaluate Spending

How to Manage Money

Length: 30 mins

❏ Assess personal spending behavior
❏ Understand the concept of opportunity cost
❏ Evaluate spending choices when it comes to personal wants versus needs

❏ Reading: Key Ideas and Details
❏ Speaking and Listening: Comprehension and Collaboration
❏ Speaking and Listening: Presentation of Knowledge and Ideas
❏ Language: Vocabulary Acquisition and Use

  1. What would you do if you had a million dollars? Make a list of the things you would buy if you had a million dollars. 
  1. Now organize your list by separating your purchases into wants and needs.
  1. Distinguishing between wants and needs means evaluating all available options before making a purchase. “You have $200 and you can either buy a video game console or a phone.” Which do you buy and why? Why can’t you buy them both? 
  1. Whenever we make a spending decision, choosing one option affects whether or not we can make the other choice. This is called opportunity cost. If you bought the cell phone, the video game console would be the opportunity cost and vice versa. 
  1. Now consider the choice between spending $200 on a new phone and making a car payment. If you opt to buy the phone, how will you pay for the car? How do we decide what to purchase?
  1. Imagine yourself in Tom’s shoes:

Scenario: Tom has been saving for a new laptop for the past six months. He’s done his research and found a model that experts say will more than meet his needs. New, it costs $3,000. He also found a refurbished version with all the same features for $1,500. The refurbished laptop comes with a warranty. Tom’s third option is a brand-new laptop that costs $1,800 and has all of the features he needs but not all of the ones he wants.

What are the wants?

What are the needs?

What decision would you make and why?

Think back to when you decided how to spend a million bucks. Did your perception change? Would you spend the money in the same way? Why or why not?

What’s Next?

New concepts covered and activities completed:
TODAY: Lesson #2: Evaluate Spending

❏“How can I make sure I’m not spending more than I need to?”
❏Needs vs wants
❏Opportunity Cost
❏Fixed expenses
❏Variable expenses


NEXT WEEK: Lesson #3: Maximize Savings