Back At it ... In depth Discussion questions and responses

ECO110: Taking Charge of Your Economic Future

Discussion Question Week 2

Personal Budgets

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A key concept in economics and finance is the time value of money. 

Most investment decisions, like buying a house, paying for your education, or starting a business, involve making a payment up front in order to earn a return later. (You pay money out at one or more points in time and later receive your benefits based on the investment’s agreement.)

Additionally, economic factors such as supply and demand can play an important role in your investment process. If there is a huge supply of houses available in a neighborhood you like, housing prices in that neighborhood may go down due to a lack of current demands. Therefore, you as the buyer have more power and may be able to make an offer that is lower than the initial asking price. Alternatively, in a neighborhood that is very much in demand and low in available housing, the housing prices may be higher, and you may need to offer to pay more to compete with other offers for a home there.

Decisions in investments can end in a variety of ways. Applying your problem solving skill and critical thinking strategies can help you successfully analyze opportunities to bring the best benefits for your efforts. Adjusting for the time value of money lets you calculate if the rewards are worth the wait so that you can arrive at an informed decision before you commit your money.

In this week’s discussion: 

Identify an investment decision that you or someone else has made. (This should be for goods or services for which one or more payments were made in order to receive increased benefits from those goods or services at a later time.)

Scenario: I brought my Dodge Durango for $40,000, payment are $635 monthly, balance owed with out interest is $20,000 … I have the money ($20,000) in the bank and I am looking to pay off the truck so I don’t pay any more interest (balance due with interest is $30,000)

· How do you think the concept of supply and demand impacted the investment decision?

· Now that you understand the time value of money, how would you use your problem solving skill (especially critical thinking strategies) to rethink the decision in the future?

Please be sure to respond to at least one classmate. (Part 2)

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Part 2:

Sean Sanders 

RE: Personal Budgets

My wife and I had been talking about tearing down our deck and replacing it with a paver patio for a couple of years. We had some contractors out for estimates, but put that project on the back burner. Fast forward to January 2020. We had found a copperhead snake in our basement. We knew it was time to remove the deck and seal up the house under it. We had more contractors come out for quotes. In just under 2 years, the cost for this project went up almost 1/3 of what we were originally quoted. However, we had to get the patio done. We signed our contract February 3rd 2020 with work to be started mid April. Well......covid happened. We did not have our project started until the 3rd week of July. In the meantime, we had paid more than 75% of the project up front. This was funds that were already disbursed that we could have used elsewhere. We had no idea a pandemic would happen and materials would be scarce. We had to pick out new stones, wait for shipments, and deal with weather. While installing the patio, the workers hit a water line to our basement. Basement was now flooded. The whole project from start to finish was a mess and very stressful.  However, once it was completed, we could not have imagined not doing it. We use it everyday and love it. I think in the future, if anymore projects of this magnitude arise, we will use the problem solving skills we learned from this project. We had to pick new materials, arrange for the basement to be fixed, and make sure the contractors did a great job. We were able to handle all the problems that popped up. If you were to ask me mid way through the project if I thought this was a good idea, I would have said no. But the outcome far outweighs the issues that were experienced and I believe it was money well spent.

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