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Personal Fin. Test 1

ch. 1, 2, 4, ?

the process of managing your money to achieve personal economic satsifaction personal financial planning
a formalized report that summarizes your current financial situation, analyzes your financial needs, and recommend future financial activities financial plan
the stages in the family situation and financial needs of an adult adult life cycle
ideas and principles that a person considers correct, desirable, and important values
the study of how wealth is created and distributed economics
a rise in the general level of prices inflation
a set of federal laws allowing you to either restructure your debts or remove certain debts bankruptcy
what a person gives up by making a choice opportunity cost
increase in an amount of money as a result of interest earned time value of money
the amount to which current savings will increase based on a certain interst rate and a certain time period future value
the current value for a future amount based on a certain interest rate and a certain time period present value
day to day financial activities necessary to manage current personal economic resources while working toward long term financial security money management
a private storage area at a financial institution with maximum security for valuables safe deposit box
a financial statement that reports what an individual or a family owns and owes balance sheet
cash and other property with a monetary value assets
cash and items of value that can easily be converted to cash liquid assets
amounts owed to others liabilities
debts that must be paid within a short time, usually less than a year current liabilities
debts that are not required to be paid in full until more than a year from now long term liabilities
the difference between total assets and total liabilities net worth
the inability to pay debts when they are due because liabilities far exceed the value of assets insolvency
the actual inflow and outflow of cash during a given time period cash flow
a financial statement that summarizes cash receipts and payments for a given period cash flow statement
inflows of cash to an individual or a household income
earnings after deductions for taxes and other items take home pay
money left over after paying for housing, food and other necessities discretionary income
a specific plan for spending income budget
the difference between the amount budgeted and the actual amoutn received or spent budget variance
the amount by which actual spending exceeds palnned spending deficit
the amount by which actual spending is less than planned spending surplus
what are some factors that influence financial decisions? age, income, household size
what is the Fed concerned with? maintaining an adequate money supply
the receipt of income and other financial resources obtaining
actions to determine future financial decisions planning
set aside funds for expected and unexpected expenses saving
appropriate use of short and long term credit plans borrowing
analysis of purchasing decisions for wise money use spending
insurance and other methods to reduce financial uncertainty managing risk
accumulation of funds for long-term financial security investing
efforts to provide for post-career years and transfer of assets retirement and estate planning
how long does an intermediate goal last? 2 - 5 years
what are the 5 goal setting guidelines? specific, measurable, action-oriented, realistic and time-based
what are some examples of personal opportunity costs? time that could be for work or studying and in regards to health: poor eating habits, lack of sleep or avoiding exercise
a legal agreement that provides for the management and control of assets by one party for the benefit of another trust
an all in one account that includes savings, checking, borrowing, investing and other financial services for a single fee asset management account
a computer terminal used to conduct banking transactions ATM
a plastic access card used in computerized banking transactions debit card
a financial institution that offers a full range of financial services to individuals, businesses, and government agencies commercial bank
a financial institution that traditionally specialized in savings accounts and mortgage loans savings and loan association
a financial institution that is owned by depositors and specializes in savings accounts and mortgage loans mutual savings bank
a user-owned, nonprofit, cooperative financial institution that is organized for benefit of its members credit union
a savings-investment plan offered by investment companies, with earnings based on investments in various short-term financial instruments money market fund
a savings plan requiring that a certain amount be left on deposit for a stated time period to earn a specified interest rate certificate of deposit
a savings account offered by banks, savings and loan associations, and credit unions that requires a minimum balance and has earnings based on market interest rates money market account
the pecentage of increase in the value of savings as a result of interest earned rate of return
a process that calculates interest based on previously earned interest compounding
the percentage rate expressing the total amount of interest that would be received on a $100 deposit based on the annual rate and frequency of compounding for a 365 day period annual percentage yield
an automatic loan made to checking account cutomers to cover the amount of checks written in excess of the available balance in the checking account overdraft protection
provides safe storage of funds for future use savings
offer an ability to transfer money to others for daily businessa ctivities payment services
used by most people at some time during their lives. credit alternatives range from short term accounts to long term borrowing borrowing
taxable interest reduces amount of earnings taxes
ease with which savings can be withdrawn liquidity
availability of deposit insurance; risk safety
minimum balance limitations; fee for additional transactions restrictions, fees
serve as intermediaries between suppliers and users of funds deposit institutions
offer various financial services such as financial security, financing, mutual funds nondeposit institutions
what variables affect financial decisions? 1. age 2. marital status 3. number and age of household members 4. employment situation
what are the benefits of sound financial planning? (4) 1. increased effectiveness in obtaining, using and protecting your financial resources 2. increased control of your financial affairs 3. improved personal relationships 4. a sense of freedom from financial worries
short term, intermediate, and long term goals short = less than a year intermediate = 2 - 5 years long term = 5+ years
name an example of a financial opportunity costs taking money out of savings to buy something... you are losing the interest from that money, but the current purchase may have more value to you or be of a higher priority
what is the rule of 72? divide 72 by the annual interest rate, and you will get how many years it will take for your investment to double
what are the 3 components of money management? 1. storing and maintaining personal financial records and documents 2. creating personal financial statements 3. creating and implementing a plan for spending and saving
what items are included on a personal balance sheet? assets, liabilities and net worth
what are the steps in preparing a budget? (7) 1. set financial goals 2. estimate income 3. budget an emergency fund and savings 4. budget fixed expenses 5. budget variable expenses 6. record spending amounts 7. review spending and saving patterns
how much cash should a person have in an emergency fund? 6 months worth of expenses
what are the characteristics of a successful budget? 1. well planned 2. realistic 3. felxible 4. clearly communicated
what is the debt ratio formula? liabilities/net worth
what is the debt-payments ratio formula? monthly credit payments/take home pay
what are the 4 major types of taxes? 1. purhcases 2. property 3. wealth 4. earnings
the rate used to calculate tax on the last (and next) dollar of taxable income marginal tax rate
total tax due divided by taxable income average tax rate
how long should you keep any paperwork regarding federal income tax returns? 3 years
what are the different types of financial institutions? - deposit - non-deposit - online banking - other (pawn shops, check-cashing, etc.)
what are the 4 major savings plans? 1. regular savings accounts 2. money market accounts 3. Certificates of deposit 4. US Savings bonds
the use of credit for personal needs (except a home mortgage) consumer credit
what are some advantages of credit? 1. emergency 2. instant gratification 3. float time 4. credit indicates stability
what are some disadvantages of credit? 1.comes from future income 2. temptation to overspend 3. no security 4. does not increase purchasing power
what are the 5 c's of credit? 1. character 2. capacity 3. capital 4. collateral 5. conditions
what is the use of a fico score? it evaluates how risky a borrower is
what are some warning signs of debt problems? 1. don't know your level of debt 2. denied credit 3. no savings 4. at or above credit limit 5. late payments
what do you do if your identity is stolen? 1. contact the credit bureaus 2. contact the creditors 3. file a police report
what steps can you take to protect your identity? 1. keep a record of your credit card number 2. always make sure your card is returned to you after a purchase 3. notify the credit card company immediately if your card is lost or stolen
Created by: taysam05