When it comes to financial planning, economics plays a major factor in people’s personal finances in many ways, it is an essential part of the world we live in today. When you buy gas, or shop for groceries, plan a vacation, economics is at the core of those choices. So why does economics play such a vital role, what is the driving force behind this? In its simplest form, it’s based on choice. We will look at a few factors that impacts financial planning and the economy, including the use of credit, and how the government affects the economy. Consumers make choices every day that affect the economy we live in, and in return these choices impact one’s personal finances. Take for instance, buying clothing at retail establishment that is trending, …show more content…
They have the option to use cash, check, or credit. Cash and checks are simple and straight forward, you have money earned and you spend the amount you want to spend. Credit on the other hand involves a bit more complexity, because it is borrowed or promissory money one is using. Credit plays an important role in personal finance and the economy. According to an article by the Federal Reserve Bulletin, By offering consumers both a means to pay for goods and services and a source of credit to finance such purchases, credit cards have become the most widely used credit instrument in the United States. As a payment device, credit cards are a ready substitute for checks, cash, and debit cards for most types of purchases (Federal Reserve, 2013). Credit plays a significant role when it comes to consumer spending, but can have a significant impact if misused. It doesn’t take much for consumers to get in over their head with the overuse of credit, credit debt can quickly mount if left unchecked. According to Stinson (2016), “The road to a credit card debt pileup is often paved with spending that seemed like a good idea at the time. But too many well-intended moves can lead you into a financial ditch and ruin your credit” (Stinson, …show more content…
We see this every time we make a purchase, taxes are a part of everyday spending. Taxes come in many forms, from income tax, to sales tax, to property taxes. As citizens of the United States, it is a requirement for us to pay our due share, and this comes in the form of taxes. The impact from taxes grossly affects the both personal finances and the economy on a grand scale. So why does the government require us as citizens to pay taxes? Well according to the article why do you have to pay taxes? Tax money helps to ensure the roads you travel on are safe and well-maintained. Taxes fund public libraries and parks. Taxes are also used to fund many types of government programs that help the poor and less fortunate, as well as many schools (Wonderopolis, 2016). The government use of taxes plays a crucial role in today’s economy as well as personal finances, it has and will continue to leave its mark on the world we live in. The choice we make, have influences throughout personal finance and today’s economy, we as consumers have the freedom to choose what we buy and purchase, and how we choose to pay for these choices, and the government is always there to collect their two cents. It is a tops- turve world we live in and the choice we make will continue to impact our personal finances and either stimulate or strain our
Miller, R. K., & Washington, K. (2014). PART I: THE AMERICAN CONSUMER: 7. CONSUMER DEBT. Consumer Behavior, 53-56.
Introduction: In the year 1862 during the civil war congress implemented the first income tax in America. It was 3% per year. However, it was not until 1913 when the 16th Amendment to the Constitution was passed, which granted the government the ability to impose a tax on individuals’ income. Since then it has been an issue to determine how much people should be taxed. Tax rates in America change drastically; for example, in 1963 a person in the highest tax bracket would give 90.8% of their income to the government. In contrast, that same person would only pay 28.0% in 1988. The tax rate for income tax is an issue because for every dime that someone pays in taxes is one dime that they are not able to spend themselves. Additionally, people
off their holiday expenses. Unfortunately, there are more ways to use a credit card than ever before, making it very hard
...teiner par. 2). This obviously means people are spending more than they have. This problem would be nonexistent if there were no credit cards at all.
Taxation has always been a major controversy. Just like any major corporation, the government is constantly looking to raise revenue. The easiest and fairest way to do this is by taxing the people. However, how the people will be taxed is always an issue.
The use of taxes is one of the government's favorite ways to make its presence known in the economy. While this method seems blatantly obvious, many of the ways the government uses the money collected by taxation is not. Some of the money it takes is used to fund other programs designed to "protect" consumers and to "create" jobs. Be...
Statistics suggest about 32% of consumers are going to over estimate the rating on their credit, while only around 4% are going to under estimate the rating on their credit. Ones who will overestimate the quality of their credit are most likely less informative about finances overall, and will be more likely to have learned about their financial knowledge, unfortuanately, the hard way. Also the consumers who are going to overestimate the ratings of their credit will be less likely to properly budget, effectevely save their money, or learn to invest it often. With another example, in 1999 it was found that about 40 percent of mortgage borrowers didn't understand what the interest rates that were associated with their loans were.
In the United States, accumulation of material goods as well as wealth is very valued and individuals are highly aware of exactly how much money they earn. The system is transparent and democratic. However, there is an extreme difference between how much money someone earns in wages and other gains and how much they actually go home with. The difference between gross and net income originates in the system of taxation based on income earned. Since the income tax has existed, the income tax code has become increasingly more complex and difficult to understand. Businesses and individuals have suffered at the difficulties and costs of complying with the income tax. There are many other ways a government can collect taxes, the income based tax system does not stand alone as the only option for collecting tax revenue necessary to fund the federal government. Instead of taxing the money that a business or individual earns the government could tax money that they spend.
Most people want to blame the banks and card companies, but in the end the person put themselves in that predicament. The majority of adults are not taught how to manage their money properly and may eventually end up living off of credit as a way to pay for necessities. Therefore, simple planning and budgeting can prevent over spending and knowing what the money is being spent on. In the article Credit card woes may be your own fault, La Times writer Liz W Pullman states, “credit card debt, by definition, is a bad idea. It’s corrosive to your financial health and much too expensive for what you get- essentially the luxury of temporarily living above your means.” In other words, Liz is stating, debt is comprised of trying to live a lifestyle a person is not able to afford. When someone is spending money they are not looking at the possible implications, but instead a person is looking at what is going on that moment. Spending money is seen as fun and having access to cash is simple. For example, payday loans are everywhere and charging up a credit card during a shopping trip is not only fun, but also a normal occurrence for most people. Therefore, people need to know their limitations of how much they can or cannot spend in order to have a clear idea of what they are able to pay back. When credit debt is accumulated through spending habits no one can
You have a choice of paying by cash, debit card, online account or credit card. If you do not have money in your bank or online accounts, then either you go without, or you use your credit card. But, what about the people who have money in their bank account and still use their credit card.
Taxation has evolved throughout history as a method of funding government functions. The US government began taxing its people by imposing tariffs on certain items such as liquor, tobacco, sugar, and legal documents. Currently, there are taxes on almost every function. The IRS regulates income tax laws, central appraisal districts control property tax values, and there is a state sales tax on most purchases across the country. Taxes are difficult, if not impossible, to avoid.
If we don 't have credit cards, we can’t build our credit history. If we don 't have a credit history, we aren 't allowed to buy cars or houses with low monthly payments. Having credit cards is a cycle in life because without one thing, we can 't have the other. When people have credit cards they have to use them. It doesn 't help that banks offer many credit cards to people, ending in high debt. Banks also encourage low monthly payments. If people pay low monthly payments, they will never end up paying their credit card debt off. They will probably end up paying for the objects they bought, two or three times. People aren 't forced to pay high monthly payments in order for it to take longer to pay the card off. If it takes longer for a person to pay a credit card debt, the credit card companies will be making a lot of money. I can definitely say I have experienced this because I am always offered to get a credit card. There are many stores that carry their own credit cards, and offer them for their customers. Offers are tempting and they can add to a future of credit card debt.
Individuals are always confronted with decisions. America is changing into being more materialistic and it is becoming a problem in schools. It may be a matter of constrained time. The economy is critical on the grounds that it widens our comprehension, which thusly enhances the expectations for everyday comforts. Matters of trade and profit are paramount to ordinary life on the grounds that it gives social order an adjusted and composed framework for cash administration and business cycles. What ties the individuals and their lives together is the manner by which they choose to settle on the decisions against the risk of lack. The economy is about why individuals settle on the decisions they do and what the suggestions or impacts of those decisions are, and it assumes a significant part in everyone's lives. As America advances in technology, our materialism appears to grow and technology has become a tool for distracting individuals.
The introduction of the credit card first came around while the economy was booming in the early 1950’s. American consumers were in buy mode and the credit card was a genius idea to let people buy now and pay later. At first look this idea seemed great but what looks and sounds great does not always mean that it is going to be great overall. Over the years credit agencies have released thousands of credit cards with several questionable polices and high interest rates. “Any given American family in the present day possesses an average of eight credit cards with about 15,000 dollars of debt”(Canner 8). Many consumers have become addicted to wasteful cyclic consumption and living beyond their income due to the ownership of credit cards. The invention and continued implementation of credit cards into the American economic and social systems appears to be the cause of the struggling economy, the weakened U.S. dollar, the sky rocketing prices of gas and grocery store goods, the all-time highs of American debt, and social deprivation in some regions.
Personal financial planning is important because it helps you prepare financially for the future. My first short-term financial goal is to have an 8-month emergency savings account. This class helped me understand the important steps needed to achieve my financial goals. “Successful financial planning requires specific goals combined with spending, saving, investing, and borrowing strategies based on your personal situation and various social and economic factors, especially inflation and interest rates” (Kapoor, Dlabay & Hughes, 2012). First I evaluated my spending habits. This allowed me to see where I was