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Personal Finance

Budgeting and Investing Test

QuestionAnswer
What is a budget? An estimation of revenue and expenses over a specified future period of time and is usually compiled and re-evaluated on a periodic basis.
What is an emergency fund? Money put away that people can use in times of financial distress.
What are expenses? The cost one is required to spend on obtaining something.
What are assets? A resource with economic value that an individual, corporation, or country owns or controls with the expectations that it will provide a future benefit.
What are liabilities? Something that a person or company owes, usually a sum of money.
Describe the 50/30/20 budget. A budgeting template that is intended to help individuals manage their money and save for emergencies and retirement.
Describe the Pay Yourself First (PYF) budgeting method. This budgeting method is called The Investor Mentality, where you have money automatically routed or drafted from your paycheck to a savings or investment account.
Describe the Cash Envelope budgeting system. This is a cash-based system, designed for people who primarily spend cash, and is intended to control spending habits.
What is a savings account? NOT ON THE GIMKIT An interest-bearing account at a bank or credit union.
Describe a last will & testament. A legal document that communicates a person's final wishes pertaining to their assets.
What is a will? A legal document that spells out how you want your affairs handled and assets distributed after you die.
What is estate planning? The preparation of tasks that serve to manage an individual's financial situation in the event of their incapacitation or death.
What is a trust? NOT ON THE GIMKIT A fiduciary arrangement whereby the grantor (AKA trustor) gives a trustee the right to hold and manage assets for the benefit of a specific purpose or person.
What is the difference between a last will & testament, a trust, and estate planning? See definitions
What is a fiduciary? A person that manages money or property for someone else.
Who is a Power of Attorney? A person with legal authorization that's a designated person with the power to act for someone else.
What is the difference between a fiduciary and Power of Attorney? See definitions
Investing The act of allocating resources, usually capital (i.e. money) with the expectation of generating profit.
Risk Tolerance The assessment of risks in investing based on your own, economic, socio-economic, and demographic factors
Financial Risk The possibility of losing money on an investment or business venture
Diversification A risk management strategy that mixes a wide variety of investments within a portfolio.
The Rule of 72 A formula that is popularly used to estimate the number of years required to double the invested money at a given annual rate of return.
Stocks A slice of ownership of one or more companies.
Shares A slice of ownership of a particular company.
Mutual Funds A type of investment that increases diversification in investments for small and individual investors.
Money Market Accounts An interest-bearing account at a bank or credit union that has higher interest rates than regular savings accounts. It's suited for short-term goals rather than long term financial planning.
Hedge Funds Fund that has a lower investment risk and maximizes its returns for investors.
Stockholder The owner or holder of stocks or shares of a company; equity share in a business.
Shareholder A person, company, or institution that owns at least one share of a company's stock or in a mutual fund.
What is the difference between stocks and shares? See definitions
Know when your investing portfolio is diversified (see the pictures on the last slide of the Budgeting and Investing notes)
The test is worth 300 points. Everything we need to know for the test is on these flashcards, but will be asked in different ways. Questions for the terms part of the test will be both short-answer and multiple choice questions. -->
Created by: zxnubi
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