3. Financial management

Subject title Financial management

Purpose of the activity To provide participants with information on personal finance management and its distribution into segments, savings, as well as to prepare for salary discussion situations in the first jobs.

Duration 2 hours.

Location and tools The presentation requires a projector, writing board, paper and writing tools for participants, tables, chairs, sticky notes, adhesive tape for gluing posters in space.

Number of participants Unlimited, but the most effective number – 16–20 participants.

Acquaintance/ team building methods

The method: „How does this thing describe me?“

Each participant is asked to choose one of the items he/she has with him/her during the session and to explain why he/she chose that particular item, why it is important for him/her and what it says about the participant himself/herself. When everyone introduces themselves, participants are invited to divide into groups somehow (according to the significance, value, price, purpose, etc. of the items). At the end, all the groups briefly explain according to what criteria they gathered in precisely such groups.

This method leads us to the topic of money and in-kind exchanges.

Practical tasks

Task no. 1

Participants are asked to divide the sheet of paper into two parts. On one side you need to list all your activities and hobbies – both those which generate funds and those which do not. Participants have 10 minutes to complete the task. Then on the other side of the page participants are asked to write down ideas on how each of these activities could become a financial source. Next to these activities that already generate income, participants are invited to write down ideas on what should be done so that the aforementioned activities would start generating even more income. Participants have 15 minutes to complete this part of the task.

Task no. 2

According to the part „Distribution of funds into segments“, participants are asked to describe their last month‘s expenses for each of the above columns. Participants have 10–15 minutes to complete the task. At the end, participants are allowed to share their insights.

End of session reflection methods

The Gift Method

At the end of the session, participants are asked to choose again one of the items they have, but this time to choose one item that they would like to give to someone in the group. Ask them to name why they chose this particular item and what they want to pass on or wish for another person when giving this particular gift.

THEORETICAL INFORMATION

THE STORY OF THE ORIGINS OF MONEY

At the start of the session, participants should learn the history of the money. Various archaeological researches have been carried out for many years in an attempt to answer the question of what the real origin history of the money, and later of the banking system, is, which has stimulated a huge global economic mechanism. Various archaeological data show that already in paleolithic times people carried out in-kind exchanges by exchanging various necessities: food, hunted catches, weapons, household tools, and etc. Over time, as people flocked to communities and improved their living conditions, the first marketplaces appeared, in which larger-scale in-kind exchanges took place. Over time, this way to exchange has become inefficient and inconvenient. Assessing the value of various items, the first coins came into existence as an intermediate exchange link. But eventually, even they became too heavy for us to carry. This is how the first paper money and the beginnings of the banking system originated.

HOW DOES AN ACTIVITY BECOME A FINANCIAL SOURCE?

As we can see from the history of money, they were never a goal and a value in themselves, but only an intermediate link to facilitate exchange. Every person, family or community gathered around a certain agricultural or other activity and, having an abundance of products that they were developing, shared it with others, thus being able to purchase other necessary things in return. But over time, successive historical events have led to speculation of the monetary system that was supposed to help, and material well-being has become an issue of constant stress and fear for most people. Nevertheless, from a historical perspective, we can see and understand that any human activity has a tendency to become a financial source. The essence of any profession we know in the world is to provide products or services targeted at other people. We all live in this world so we could show each other our fortes, talents and strengths that we can use to create one or another value and exchange it for money. So any favourite activity, pleasure, hobby has the potential to become a financial source – no matter what it is: sports, hobby, creativity of any kind, the ability to communicate, the talent to organize events for friends, and etc.

WHAT IS THE DIFFERENCE BETWEEN ACTIVE AND PASSIVE INCOME?

Active income is income that is received by directly exchanging the created products or services for money. In this case, the person directly sells his time, ideas, talents, services, and etc.

Passive income is the added value created by available financial resources, real estate or a creative product (such as a written book that is constantly being reproduced and sold) when the owner does not need to invest additional human resources in the process.

Assets – possessed and stored valuables that generate finances on their own (for example, leased real estate).

Liabilities are available valuables that are constantly depreciating and require additional investment in maintenance (such as a car, clothing, machinery, etc.).

DISTRIBUTION OF FUNDS INTO SEGMENTS

In the first part, we talked about generating funds, and now we invite you to look at the issue of financial costs. The purpose of this session is not to delve into complex financial management tools, but participants are invited to consciously assess what area of life they are devoting most of their financial resources to at the moment and whether the available distribution of funds is sufficiently balanced. Later, when performing one of the suggested tasks, participants will be given the possibility to explore this issue more closely in the context of their personal lives.

1. Housing, food, health – funds that are spent on essentials and unavoidable things and services. 2. Social relationships and emotions – funds which are spent when socializing with friends, acquaintances, colleagues or when investing in hobbies and leisure in order to enrich life with vivid emotions.

3. Rest – funds that are used to regain strength and other internal resources while resting, whether it be a day trip to the countryside residence or a weeklong holiday abroad. In some cases, there may be difficulties in trying to separate leisure from expenses on social relationships and emotions, but sometimes people’s expenses on leisure can vary dramatically because some people get their energy by being active and communicating, while others, on the contrary, need to fully shrink into themselves and to relax.

4. Activity – funds that are spent as an investment

in existing activities. This section is important for those who are developing an individual activity or business and inevitably have to invest in inventory, advertising, and other things that in the long run create added financial benefits.

5. Learning – funds for raising qualifications in areas of interest. 6. Savings – when you save money that does not have a planned purpose. There can often be difficulties in trying to figure out which column is more appropriate for a particular expense. For example, a trip to a festival where dance lessons will take place can be treated as a leisure trip, or in other words, as an expense when a person recharges his/her emotional battery. On the other hand, if the skills acquired during dance lessons are motivated by visions to become a dance teacher in the future, the expenses can already be unambiguously attributed to learning or even investing activities. Thus, the purpose of this distribution is primarily to encourage the participants to consciously reflect on the cost of living of each young person.

HOW TO TALK ABOUT YOUR REMUNERATION?

The last issue that is important to discuss during the session is the conversation about financial remuneration. Work experience with young people shows that the majority of young people are shy and even afraid to ask about financial remuneration during their first job interviews, and this is often used by unscrupulous employers. In fact, a significant number of people feel uncomfortable when it comes to dealing with financial issues at work. Therefore it is important to know a few of the aspects which are indicated below: • Talking about money is perfectly normal and what is more – it is necessary. If the employer does not raise the issue of the amount of remuneration himself/ herself, it is his/her fault, and it is worth inviting him/ her to discuss this topic. • If you have doubts about the pay rates for any job, profession or service, it is worth exploring market prices. It would also be useful to find acquaintances who have similar or analogous job and find out about their experience. Once you gather the information you need, it is much easier to talk about it to your prospective employer. Most people are afraid to turn to their acquaintances for help because the remuneration issue is taboo for most of society.

• In some cases, employers set specific fixed rates, which they present immediately, and then it becomes much easier to talk about remuneration. However, if you are asked during a job interview what salary you expect from the workplace, name a certain range rather than a specific number so that the employer can have a choice. Do not say the following phrase: “I would like to receive a salary of EUR 1000”, but rather describe your expectations as follows: “I think I should get EUR 800–1200 salary.”

• Already during the first meeting find out exactly what would be your gross salary and net salary, as this issue often leads to misunderstandings. • Find out what employee motivation programs the employer has and how to take part in them. Moreover, during the first or second meeting, clearly agree on the length of the probation period (if any) and on how the duties and remuneration will change after it ends.

• Constantly raise your qualification, level of excellence and, accordingly, the price. It is a common practice in many companies to raise the employee’s salary once a year by at least 10 percent. However, if you feel that the remuneration is starting to mismatch the efforts that you put to work or if you are being given more tasks for the same remuneration, feel free to talk to your manager about it.