Two Chapters. Three Questions.
Week 13 Interactive Lesson | Chapters 15 and 16 | FINC 3501 | University of West Georgia
Chapter 15 is about people you love asking for money. Chapter 16 is about a three-legged chipmunk and a $300 insurance quote. They look unrelated. They are the same lesson arriving from two directions.
Both chapters ask you to separate three questions that most people answer as one:
- Capacity. What can I actually afford?
- Values. What do I want to do?
- Risk exposure. What happens to me if this goes wrong?
Work through the cards in order. Several ask you to commit an answer before the explanation appears.
Start With Your Instinct
Someone you love asks you for money you have but cannot spare.
Which comes closest to how you would decide?
In one or two sentences, why?
No graded answer. Keep what you wrote; card 16 comes back to it.
Notice which of the three questions your answer started from. The first option starts with capacity. The second starts with the other person's need, which is not one of the three. The third starts with values. The fourth is a rule adopted in advance to avoid deciding at all.
None is wrong. But people who only ever use one of them get surprised by the other two.
Chapter 15: The Foundation Fund Crisis
It is early December. The same students you have followed all semester arrive carrying real problems, not case studies.
- Alex has lost four work-study hours a week, which is $160 a month he was counting on.
- Ella's scarf sales are down because people are saving for Christmas.
- Carter's father has a sentencing hearing in two weeks.
- Berkeley's mother's church needs about $3,000 for emergency roof repairs before winter.
- Noah and Madison arrive not holding hands, which is how you know.
Noah's mother needs dental surgery insurance will not cover. An infected tooth, not cosmetic, and dangerous if left. The dentist wants $800 upfront before scheduling.
Noah and Madison have been saving for a house since the farmhouse dinner three weeks ago, $800 a month as planned. Their Foundation Fund holds $530.
Question One: Capacity
Before anything else, the arithmetic. The dentist wants $800. The Foundation Fund holds $530.
Predict before you read on. Sophie does the subtraction out loud. What does she say they are short by?
Capacity questions have arithmetic answers. That is what makes them the easiest of the three, and the one people skip most often.
Why Noah and Madison Disagree
They are looking at the same $530 and reaching opposite conclusions, and neither of them is being unreasonable.
| Who | What they say | Which question they are answering |
|---|---|---|
| Madison | "I think we help Noah's mom. Our house can wait a month or two. Her health can't." | Values |
| Noah | "If we start raiding our Foundation Fund every time there's a family crisis, we'll never buy a house." | Risk exposure |
This is the whole chapter in two lines. Madison is answering what she wants to do. Noah is answering what happens to them if this becomes a pattern. They are not having the same argument, which is why it is not resolving.
Carter, who has been here, puts the cost of getting it wrong plainly: he kept saying no to his family's requests for legal fees, because he knew they would need more next month, and he "felt like garbage every time."
Keep the three apart. Capacity is arithmetic. Values are yours. Risk exposure is a forecast. Collapsing them into one feeling is how people end up with answers they cannot defend the next morning.
Question Two: Values
The book builds giving into its budget framework rather than leaving it to whatever is left over:
| The 70/30 budget, as the book presents it | |
|---|---|
| 70% | living expenses |
| 10% | emergency savings |
| 10% | long-term investing |
| 10% | giving |
The structural point is sound and worth taking: giving planned in advance behaves completely differently from giving decided in the moment. A planned category has a limit, which means you can say yes without panic and no without guilt. An unplanned one has neither.
Pick your own number, including zero. Then treat it as a category with a limit rather than a feeling, which is the part that actually transfers.
Helping or Enabling
The book's distinction is short: "Giving helps someone stand up. Enabling allows them to stay down comfortably. Giving comes with boundaries and expectations. Enabling comes with excuses and resentment."
Commit your answer. Alex has been tutoring a student, Maria, who cannot afford textbooks and may drop out. She needs $300. Alex has exactly $300 saved, which is his entire emergency fund.
What should Alex do, and what does your answer cost him?
The chapter's answer is neither yes nor no. It is: help her access resources that do not require your money. Go with her to financial aid, help her fill out emergency assistance applications, show her the textbook rental options.
Alex objects that this feels less generous. Madison's reply is the chapter's best line: "It's more generous. You're teaching her to solve her own problems instead of creating dependency on you. When you're gone next semester, she'll know how to find help instead of just knowing that Alex has money."
Notice what the three questions do here. Capacity says he has exactly $300 and no more. Risk exposure says giving it leaves him with nothing if his own car breaks. Values say he wants to help. The resolution does not override any of the three. It finds an action that satisfies all of them, which is what a good answer usually looks like.
Zoe adds the hard version: "Destroying your own financial security to help someone else isn't virtuous, it's foolish." Her grandmother helped everyone in the neighbourhood and always kept her own emergency fund intact.
How It Actually Resolved
Noah and Madison do not choose between the house and his mother. Madison searches and finds that the UAB dental school performs the same procedures under supervision, at 40 to 60 percent less than private practice.
The surgery happens. The house fund survives. And Madison adds the part that keeps it from being enabling: "This doesn't let them off the hook for learning to plan better." They take Noah's parents to a free financial counselling service at her family's church after Christmas.
The move worth stealing: when capacity and values collide, the first question is not "who wins." It is "is the price actually fixed?" Here it was not, and the collision disappeared. That will not always work. It works often enough to try first.
Chapter 16: The Monday After
Chapter 16 opens the Monday after Noah's giving dilemma, with Madison still reporting the win: "Three hundred twenty dollars instead of eight hundred." Same students, same room, one week later.
But the question changes. Chapter 15 asked what you do when someone you love needs money. Chapter 16 asks what you do about losses that have not happened yet.
That is question three, risk exposure, taken on its own for the first time this semester. And the book teaches it through a chipmunk.
Lucky's Lesson
Berkeley inherited a pet chipmunk named Lucky from his Uncle Pete. Lucky is blind in one eye and has three legs, after an incident with a raccoon before Uncle Pete rescued him.
Lucky stopped eating. The vet bill was $150. So Berkeley asked about pet insurance, which seemed responsible.
Commit your answer. The premium is $300 a year to protect an animal worth about $20. By what factor does the annual premium exceed the value of the thing insured?
Question Three: Risk Exposure
The chapter's fifth Money Move is a single question you can ask about any policy you are ever offered:
If yes, insure it. If you could absorb it, save the premium instead and carry the risk yourself. That is what self-insuring means: not going without protection, but deciding deliberately to be your own insurer for losses you can survive.
Two things follow, and both catch people out.
The answer depends on you, not on the item. The same bicycle is worth insuring for a courier who cannot earn without it and has nothing saved, and not worth insuring for someone who rides it on weekends and holds six months of expenses. Nothing about the bicycle changed. The question is never what the item is worth, it is what losing it would do to you.
Amy's line is the other half: "You need it before you need it." Lucky's eye and legs were excluded because they already existed. Insurance does not cover what has already happened, which means the time to buy it is while you do not need it, and the time you most want to buy it is the time you cannot.
Discussion 13 asks you to apply this test to a specific budget. This card gives you the test, not the answers.
Where the Money Actually Goes
Chapter 16 prices one decision precisely enough to see it. Same $500,000 of life insurance coverage, two products:
| Product | Monthly cost | What it does |
|---|---|---|
| Term life, 30 year | $50 | Pays a death benefit during the term, then ends |
| Whole life | $300 | Pays a death benefit and builds cash value, with high commissions |
Noah does the subtraction on his phone: that is $250 a month you could invest instead. Here is what the gap becomes over thirty years.
Bar height is the $108,000 paid in over thirty years, identical on both routes. The label above each bar is what you are left holding, which is a different quantity.
The book does not state a rate for this. It says the invested difference "becomes substantial wealth," which is true at every rate you can set above. That is why the rate is yours to choose here rather than given to you. Move it and watch how much of the conclusion depends on an assumption nobody stated.
Both products are real and whole life suits some situations. The chapter's claim is narrower and well supported: for a young person building wealth, term plus investing the difference beats whole life.
The Four Most People Get Wrong
Chapter 16's other four Money Moves, with the numbers it gives:
| Coverage | The chapter's position |
|---|---|
| Health | Non-negotiable. One hospital stay can bankrupt you. Use employer coverage, or marketplace with subsidies |
| Disability | Your ability to earn is your most valuable asset. Pays 60 to 70 percent of income. Costs 1 to 3 percent of income, so $500 to $1,500 a year on a $50,000 salary. Check employer benefits first |
| Renters | $15 to $30 a month, or about $200 a year, to protect thousands in belongings. Most students need it and do not have it |
| Term life | Needed when others depend on your income |
Ella is the worked example. She values her belongings at $5,000 to $7,000 and has "maybe $500 on a good month" in savings.
Run the fifth Money Move on that and it answers itself. Which is the point: the test is easy once you actually have both numbers. Most people never write down the second one.
All Three At Once
Here is a situation neither chapter contains. It needs all three questions.
Your closest friend is starting a business and asks you to co-sign a $15,000 equipment loan. You would not pay anything now. If the business fails, you owe the balance. You have $3,000 saved, no insurance beyond health, and you believe in what they are building.
Answer each question separately, then decide.
Capacity, values, and risk exposure. One sentence each, then your decision in one more.
There is no graded answer, but there is a trap, and most people fall into it.
Capacity looks reassuring: it costs nothing today. That is what makes co-signing dangerous. The capacity question for a guarantee is not what it costs now, it is what you owe if it is called, which is $15,000 against $3,000 saved.
Risk exposure is the real analysis, and it is Chapter 16's test word for word. Would this loss devastate you financially? A $15,000 liability against $3,000 would. By the chapter's standard that is a catastrophic risk, and you are not transferring it to an insurer, you are accepting it in full.
Values are genuinely yours and nobody grades them. You may believe in your friend and want to back them. That belief is not evidence about the business, and the chapter's enabling question applies: does this help them stand up, or does it let them skip the step of proving the business to someone whose job is to assess it?
If the three point different ways, say so in your answer. Chapter 15's move applies too: before choosing between yes and no, ask whether the price is fixed. Co-signing a smaller amount, or for a shorter term, or helping them build the case for a lender, are all options the question did not offer you.
Before Discussion 13 and Discussion 14
Both graded items this cycle ask you to test something rather than summarize it.
Discussion 13 gives you a fixed insurance budget that does not cover everything, and asks you to rank, spend, and defend what you left uninsured. The method is on card 11. The ranking is yours, and two careful students will disagree.
Discussion 14 asks you to audit a recommendation made in Chapter 15, by the author of the book, about Berkeley's mother's church roof. You are asked to test it against alternatives and reach your own number, which may differ. Agreeing with the book without checking will not earn full credit. Disagreeing well will.
Neither of those is a trick, and neither is answered anywhere in this deck. What this deck gives you is the method: separate the three questions, write down both numbers before you judge a risk, and ask whether the price is fixed before you choose between two bad options.
Both discussions use supplied cases. Do not use your own or your family's financial information in either one.
What the Two Chapters Share
Chapter 15 is about money leaving on purpose. Chapter 16 is about money leaving by accident. In both, the people who do well are the ones who decided in advance.
Noah and Madison had a named account with a target before the crisis arrived, which is why they had something to protect and a reason to look for a third option. Berkeley found out what insurance costs after Lucky was already blind in one eye.
Last commit. Go back to card 2. Which of the three questions did your instinct start from, and which one would you add now?
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This cycle
- Discussion 13, The Risk Budget. Everything due Sunday November 22. Posting your original response by Friday November 20 is recommended so classmates can reply.
- Assignment 6, The Quote File. Due Sunday November 22.
- Discussion 14, The $3,000 Roof. Everything due Sunday November 29. Posting your original response by Wednesday November 25, before the break, is recommended.
The recommended first-post dates are recommendations, not separate graded deadlines. CourseDen is the authority on all dates and on the late-work policy. If anything here disagrees with CourseDen, CourseDen wins.