Smart Money

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High School №1 named after V.I. Lenin

Smart Money

Student

Anara Rakhmatullina

Teacher

V.A. Ermolaeva.

Ulyanovsk, 2010

Introduction

«Money is like a sixth sense without which you cannot make a complete use of other five. »

W. S. Maugham.

In my project I would like to raise the problems of staying financially fit. The reason why I have chosen this subject for developing is quite evident - the world experiences the global financial crisis. And you see the main topic we discussed in Unit 3 of our English student book was the World of Money; this theme is on the front burner against the background of current events. In my work I've developed several main points.

First I've tried to give a general idea of financial crisis.Размещено на http://www.allbest.ru/

Second Размещено на http://www.allbest.ru/

I've tried to find out if family's budget had changed because of financial crisis.

Third Размещено на http://www.allbest.ru/

I've presented the plan of coping well with change and loss

Fourth Размещено на http://www.allbest.ru/

I've made top ten money myths people face trying to become financially fit

Fifth I've created the glossary of economical termsРазмещено на http://www.allbest.ru/

(Appendix 1)

1 EUR = 0.9463 USD, 1 USD = 105.39 JPY, 1 CHF = 0.06466 EUR,

1 GBP = 1.506 USD, 1 CAD = 0.7145 EUR, 1 JPY = 0.01 EUR,

1 CAD = 0.6758 USD

We've all seen this equation, posted at banks, airports, on the Internet. This currency equation is a deeply meaningful barometer of value. It defines costs, and tells you that if you spent a dollar on a cup of coffee in the United States, you're going to have to spend one hundred and five yen for a cup of coffee in Japan. But price is a far thing from worth. And worth may be a far thing from value. To understand what money means we have to understand worth and value: those things money is supposed to represent.

My Imagination sees a man crawling onto an oasis from the desert sunburned, exhausted, his clothes torn pieces. Would he pay more for a glass of water than someone not suffering from thirst? Of course he would. Hence, the value. Hence, what it's worth. But what would he pay with? If it's money, then money means survival. It means the ability to live. Once the man's thirst is quenched, the worth of water to him would decline. It would get poured into a nominal value system. That's when things get complicated. The value of money has to be assessed. For in and of itself, money is nothing more than paper and coins. Without value, a jingle jangle, origami is about all money would be good for.

Money is a conception. From it, a whole value system has been created. And that's not just economics. That value system often defines our social status, our professional lives, our leisure abilities, our relationships, and most of all our purchasing power. In other words, it defines us in a way.

Financial Crisis

The financial crisis of 2007-present is a financial crisis began by a liquidity shortfall in the United States banking system. It is considered by many economists to be the worst financial crisis since the Great Depression of the 1930s. It contributed to the failure of key businesses, declines in consumer wealth estimated in the trillions of U.S. dollars, substantial financial commitments incurred by governments, and a significant decline in economic activity. Many causes have been proposed, with varying weight assigned by experts. Both market-based and regulatory solutions have been implemented or are under consideration, while significant risks remain for the world economy over the 2010-2011 periods. Although this economic period has at times been referred to as "the Great Recession," this same phrase has been used to refer to every recession of the several preceding decades.

The global financial crisis really started to show its effects in the middle of 2007 and into 2008. Around the world stock markets have fallen, large financial institutions have collapsed or been bought out, and governments in even the wealthiest nations have had to come up with rescue packages to bail out* their financial systems.

On the one hand many people are concerned that those responsible for the financial problems are the ones being bailed out, while on the other hand, a global financial crisis (meltdown) will affect the livelihoods* of almost everyone in an increasingly inter-connected world. The problem could have been avoided, if ideologues supporting the current economics models weren't so vocal, influential and inconsiderate of others' viewpoints and concerns.

Market instability

The recent market instability was caused by many factors, chief among them a dramatic change in the ability to create new lines of credit, which dried up the flow of money and slowed new economic growth and the buying and selling of assets*. This hurt individuals, businesses, and financial institutions hard, and many financial institutions were left holding mortgage* backed assets that had dropped suddenly in value and weren't bringing in the amount of money needed to pay for the loans. This dried up their reserve cash and restricted their credit and ability to make new loans.

There were other factors as well, including the cheap credit which made it too easy for people to buy houses or make other investments based on pure speculation. Cheap credit created more money in the system and people wanted to spend that money. Unfortunately, people wanted to buy the same thing, which increased demand and caused inflation. Private equity* firms leveraged* billions of dollars of debt to purchase companies and created hundreds of billions of dollars in wealth by simply shuffling paper, but not creating anything of value. In more recent months speculation on oil prices and higher unemployment further increased inflation.

How did it get so bad?

The American economy is built on credit. Credit is a great tool when used wisely. For instance, credit can be used to start or expand a business, which can create jobs. It can also be used to purchase large ticket items such as houses or cars. Again, more jobs are created and people's needs are satisfied. But in the last decade, credit went unchecked in the USA , and it got out of control.

Mortgage brokers, acting only as middle men, determined* who got loans, then passed on the responsibility for those loans on to others in the form of mortgage backed assets (after taking a fee for themselves originating the loan). Exotic and risky mortgages became commonplace and the brokers who approved these loans absolved themselves of responsibility by packaging these bad mortgages with other mortgages and reselling them as “investments.”

Thousands of people took out loans larger than they could afford in the hopes that they could either flip the house for profit or refinance later at a lower rate and with more equity in their home - which they would then leverage to purchase another “investment” house.

A lot of people got rich quickly and people wanted more. Before long, all you needed to buy a house was a pulse and your word that you could afford the mortgage. Brokers had no reason not to sell you a home. They made a cut on the sale, then packaged the mortgage with a group of other mortgages and erased all personal responsibility of the loan. But many of these mortgage backed assets were ticking time bombs. And they just went off.

The housing market declined

The housing slump set off a chain reaction in the American economy. Individuals and investors could no longer flip their homes for a quick profit, adjustable rates mortgages adjusted upward and mortgages no longer became affordable for many homeowners, and thousands of mortgages defaulted, leaving investors and financial institutions holding the bag.

This caused massive losses in mortgage backed securities and many banks and investment firms began bleeding money. This also caused a glut* of homes on the market which depressed housing prices and slowed the growth of new home building, putting thousands of home builders and laborers* out of business. Depressed housing prices caused further complications as it made many homes worth much less than the mortgage value and some owners chose to simply walk away instead of pay their mortgage.

The credit well dried up

These massive losses caused many banks to tighten their lending requirements, but it was already too late for many of them… the damage had already been done. Several banks and financial institutions merged with other institutions or were simply bought out. Others were lucky enough to receive a government bailout and are still functioning. The worst of the lot or the unlucky ones crashed.

The Economic Bailout is designed to increase the flow of credit

Many financial institutions that are saddled with risky mortgage backed securities can no longer afford to extend new credit. Unfortunately, making loans is how banks stay in business. If their current loans are not bringing in a positive cash flow and they cannot loan new money to individuals and businesses, that financial institution is not long for this world - as we have recently seen with the fall of Washington Mutual and other financial institutions.

The idea behind the economic bailout is to buy these risky mortgage backed securities from financial institutions, giving these banks the opportunity to lend more money to individuals and businesses, hopefully spurring on the economy.

financial crisis money budget

What? Credit got us into this mess! Why give more?!?

Ironic isn't it? Yes, it is true that credit got us into this mess, but it is also true that the American economy is incredibly unstable right now, and being that it is built on credit, it needs an influx of cash* or it could come crashing down. This is something no one wants to see as it would ripple through our economy and into the world markets in a matter of hours, potentially causing a worldwide meltdown.

As I previously mentioned credit in and of itself is not a bad thing. Credit promotes growth and jobs. Poor use of credit, however, can be catastrophic, which is what we are on the verge of seeing now. So long as the bailout comes with changes to lending regulations and more oversight of the industry, along with other safeguards to protect taxpayer dollars and prevent thieves from not only getting of the hook, but profiting again, there is potential to stabilize the market, which is what everyone wants. Whether or not it works is to be seen, but as it has already been voted on and passed, we should all hope it does.

Quiz «Family's Budget and Financial Crisis»

Preparing my work I lead a quiz «Family's Budget and Financial Crisis». Here there are the questions and statistics.

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Coping well with change and loss

All who have been in the direct path of a natural disaster have felt its effects both in their souls and in their livelihood. Other disasters can also strike without warning and be just as devastating. Divorce, a sudden casualty or death in the family, collapse of a business, an official finding of liability, can sweep away investments, dry up savings, and even drain your cash on hand. Despite our best planning, the fruits of anyone's life's work can disappear in the wake of a financial tsunami--whether caused by nature, the general economy, an accident, attack from out of the blue, or by personal circumstances.

By being proactive instead of reactive, you can prepare for possible financial trauma. If some unforeseen event may happen, you will experience it more like a close call or a bump in the road than an all pulling down wave.

There're some the most widespread money disasters:

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Even if faced with situations such as these, which are all too commonly a part of life, there are steps you can take to protect yourself and your loved ones. But it is important to take action before disaster strikes--incorporating simple behaviors and habits as part of your daily activities to be ready for money disasters in general. Here are some of them:

- Be aware of trends in the general economy, policy shifts at work, threats, unsafe conditions in your home, or other situations in your personal environment that need your attention and action.

- Insure reasonably against losses and check your insurance policies annually to see whether changed circumstances might call for a change in your level of coverage*.

- Get and stay organized. Keep your records and important papers in secure places and make sure that someone else knows where they are in the event of an emergency.

- Be disciplined. Just as those who live in flood zones routinely check weather reports and lay in sand bags when the skies turn gray, we can forestall disasters or, at least, take steps to lessen the damage before they strike. The floodwaters may rise, but we can be protected from heavy damage.

Recovering_from_financial_setbacks

But in particular my job I consider the problem of staying financially fit during the economical crisis` time and one of the most difficult that time not to lose your job. When we lose a job, we lose not only an income stream, but we can also temporarily lose our sense of self-esteem. We can endure feelings of failure at being unable to provide for our family or not being “good enough.” It does not matter whether we lose our job to outsourcing, downsizing, or some other corporate policy that also affects our coworkers. We take the loss of our own job personally--that's just the way it is. The nagging question, “What could I have done better?” can plague us until enough time passes, and we are able to see the situation through clear eyes and with strong resolve.

Here some points which help you to recommend yourself as an irreplaceable worker:

- Keep your skills current to stay competitive. Take advantage of or ask for mentoring relationships, professional development, or on the- job training opportunities. Consider taking night courses at your local community college or university.

- Remind yourself how valuable you are. Provide your boss with periodic updates, in writing, on projects you have successfully initiated or completed and ways that you have saved the company money. Keep your updates handy, in case you decide to jump ship and start your own new company.

- Establish solid habits of attendance, teamwork, initiative--and remember to stay positive. These are the hallmarks that will get you noticed, that a future employer will seek, or that will give you the confidence to “go it on your own someday.”

Even if you are content and secure in your job, understand the job market; know which industries are hiring and what the upcoming “hot” jobs are. Be flexible and ready to move on if and when the time ever comes.

Recovering from adversity

Life is not always “fair.” We can live prudently, devise a savings= plan, and diligently build assets. We might be well on our way to reaching cherished goals and even have planned strategies to avoid serious mishap. Despite our best efforts, trouble can happen anyway, and on occasion, it will hold us firmly in its painful grip. Our difficulties can be gradual--a job loss or long-term health problem-- and result in a slow erosion of assets. Or we can be hit by a sudden financial calamity. Our retirement savings can disappear in the blink of an eye through the actions of an unscrupulous money manager or the changed pension policies hammered out in a corporate boardroom and ratified by a federal bankruptcy court to “save the company.”

Dealing with Tough Times

Remember when you were little and you learned to ride a bike? You didn't think that you could do it, and sure enough, that first time going solo, you wiped out--big time. If you are now faced with adversity as an adult, envision your childhood self falling off that bike. To that child, falling may have been devastating. You might have felt like a failure, especially when you saw the other kids zipping around on their bikes.

You might have believed you would never get past that moment, sitting on the curb with a bloody knee, crying. But you did and went on to ride with the best. Granted, as an adult, your adversity is significantly more severe, but it is still really just about getting past that disappointment and temporary feeling of failure. Getting a grip on both the financial setback and the emotional fallout is crucial; it is also a time to practice resourcefulness and resilience--even if we don't feel like it. We must get up off the curb and wipe our eyes. To succeed during tough times requires patience, focused attention on the issue, and a willingness to make gradual progress. And, just as your moment is a mix of financial and emotional issues, it will take a mix of financial and emotional strategies to see you through. These strategies can be sorted into four categories: taking control of the situation, turning the adversity around, back-pocket strategies, and maintaining a healthy frame of mind.

1. Taking control of the situation.

- Stay calm.

- Acknowledge your feelings.

- Objectively asses your situation.

2. Turning the Adversity Around.

- Maintain contact with your creditors.

- Separate money and emotions.

- Be creative about raising funds.

- Look at home equity.

- Learn how others recovered.

3. Back-Pocket Strategies.

- Bankruptcy.

- Do not tap your retirement funds.

4. Maintaining a Healthy Frame of Mind.

- Reach out.

- Live well.

- Get plenty of rest.

- Don't dwell in adversity.

- Avoid the blame game.

- Pace yourself.

You now understand the four traits you need to achieve financial competence: have a positive attitude; be engaged and active in your financial affairs; reach out to others for advice, education, financial resources, and financial help; and learn to cope well with loss when you must.

As you put them into practice, you will find that they get easier and easier. And what's the reward for your hard work? The ability to realize your dreams.

The Top Ten Money Myths

1. Having money means fewer worries and ease of living.

It is tempting to believe that people who have money are wise, self-disciplined, self-confident and untroubled. Yet having money does not by itself lead to feelings of security, and at times not even to feelings of financial security. How you feel about life and how comfortable you are about money management is not determined by the size of your bank account, but by your values and priorities. Taking responsibility for your financial well-being means setting life priorities and making choices each day in the service of those priorities.

2. Financial matters are too complicated to understand and master.

Financial competence is like most life challenges: The fundamentals are mastered one at a time. We begin by learning the financial basics and the practical steps we must take to resolve the financial concerns in life. To succeed, we must patiently explore our own needs and values and be willing to seek appropriate guidance from skilled partners, family members, friends, or professionals when advice is needed. We need to know our discomfort levels and when it is time to back off completely from making a financial decision. This can make the difference between being vulnerable to slick advertising and feeling in control of our spending impulses.

3. Financial planning and investing should be left to an expert.

We all need to take responsibility for our patterns of spending, difficulties with budgeting, and willingness to plan, save, and invest for future life events. We need the courage to communicate with partners and other family members. Then we are in a position to choose financial experts wisely and deal most constructively with them.

4. Genuine love and true commitment will conquer all, including money problems.

Too often anxiety over money matters gets rationalized when we are in love, but this is romantic rather than realistic. We are really setting the stage for painful disillusionment that is as predictable as it is unnecessary. What genuine love and true commitment can do is help us establish a dialogue with our partners.

This must include the honest expression of our feelings about money together with the time and mutual respect needed to resolve our money issues with one another.

5. Better quality costs more.

Quality and cost are not always linked, but the image of quality portrayed by elaborate packaging and advertising is linked to cost. What organizations pay for prestige, brand, and advertising are as important as materials, labor, and other basic costs. They all are factors that impact the prices we pay for goods and services.

Be a money conscious consumer--refuse to be drawn into illusions of quality. This goes for nearly everything we consume: education, housing, clothing, recreation, transportation, food, and even good wines.

6. Credit and debit cards are convenient devices that make purchasing easy.

Yes, if only in the ironic sense of being too easy. With credit and debit card use, one side of the exchange transaction is missing-- the act of consciously paying money for goods or services Received. All during recorded history, the exchange of valued items formed a basis for human interaction, which in turn fostered communication among peoples despite language barriers. Although no one wants to return to primitive living, we benefit by consciously planning our everyday purchases and limiting impulse buying to a budgeted amount each month.

7. Money is a substitute for love or spending time with someone.

Few would agree that this is true, but our actions speak louder than words. Money is a symbol of success, power, and control. Too often it is substituted for other types of investments in relationships, such as time, energy, thoughtfulness, and empathy. While most of us would like to deny doing this, it is amazing how amply we invest our relationships with material gifts while giving little thought to this underlying irrational principle.

8. Financial security is determined by the amount of our accumulated capital.

Security is never determined by quantitative measurement alone, but rather by our ability to live fulfilling lives, our relationship to others, and attitudes about life in general. Real security is the sustained feeling and belief that one can handle unforeseen challenges as they arise, whether they concern our financial affairs or not. Money should be a tool for positive growth and possibility in our life. However, for many people, money or the lack of money causes anxiety and stress instead.

9. Money management should be handled by the partner most comfortable or skilled in financial affairs.

Both partners in a relationship should be actively engaged in, or at least knowledgeable about, all aspects of the couple's finances. Challenge any assumption you might have that money management is a chore to be avoided and reconsider whether two heads could be better than one at improving your joint financial wellbeing. Working with a loved one on the business affairs of your marriage or partnership can be fun and personally rewarding and not just in the area of finances.

10. A lot of money is the best gauge* of success in our society.

While this myth forms the basis for much of society's interactions, it is nevertheless a myth. Yes, the accumulation of money is one driving force. When we really look at the sad (and sometimes tragic) lives that have been governed by wealth, however, we can see its uselessness as a primary success indicator. Even opinion polls disagree with this widely held notion about the power of money. They show “life satisfaction,” “a happy marriage,” and “feeling in control” as more cherished signs of success than “a lot of money,” and these values win out by a very large margin!

Myths persist because we have a need to cover the truths they hide. If we want to stop believing in myths, we are required to put aside the fears that got us where we are in the first place. We need to think differently, take responsibility, and connect to our loved ones in common effort that can bring us riches--not only in terms of our finances, but in all of our relationships too. That means asking the difficult questions that heal us and offer hope for real change because the route to healthy money and interpersonal relationships is paved with answers from the past. The clues are always in our feelings. When our buttons are pushed, when the pouting begins, or the anger wells up, or that familiar pit-often- stomach sick feeling attacks us over some financial matter, something from the past is influencing us. You can count on it.

Conclusion

At the end of work I'd like to draw to the conclusion.

1. I've found out that in Russia despite of the USA families` budget hasn't been so bad influenced by financial crisis. (quiz «Family`s Budget and Financial Crisis»)

2. Creating the plan of coping well with change and loss I've understood that staying financially fit even at the time of crisis is quite probable and not so difficult.

3. Composing top 10 money myths I've faced with my own money stereotypes and in future I'll try to avoid them and the same I advice to you.

4. Creating glossary of economical terms I've learnt a lot of new words, have made great dictionary work. Now I can surely say that my business English is on new level

Inference

As consumers and citizens, we are all a part of what is going on in the world around us. Whether you own millions of shares of stock or no shares at all, the rise and fall of the stock market will affect your daily living. And even if you avoid or limit your driving due to rising gas prices, you are still affected; you might not be traveling that much, but the goods you consume-- everything from bananas to automobiles--are traveling to get from the producer to your local market or dealer, and the increase in shipping costs is reflected in higher prices. What all these examples illustrate is that the web of marketplaces, both here and abroad, touches all our lives.

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