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FPF Ch 2&3
Foundations in Personal Finance Chapter 3 Terms
| Term | Definition |
|---|---|
| Budget | A cash flow plan. Every dollar you make is assigned to a specific category / expense at the beginning of each month or pay period. |
| Cash Flow Statement | A summary that shows total income and spending for a given time period |
| Carbon Check | Checks that have a second copy behind them made of special paper which makes a copy of each check as you write them. |
| Envelope System | A series of envelopes, divided into pre-determined categories; works great for managing spending on things that don't normally have a fixed monthly expense, like eating out, entertainment and buying clothes |
| Impulse Purchase | To buy an item without thinking about it. |
| Overdraft | Occurs when money is withdrawn from a bank account and the available balance goes below zero; a sign of crisis living and lazy money habits |
| Reconcile | To match your bank statement with your checkbook, preferably within 72 hours of receiving the statement. |
| Zero- based budget | Cash flow plan that assigns an expense to every dollar of one's income: (total income) - (total expenses) = zero; best method of budgeting |
| ATM | Automated Teller Machine card which allows you to make transactions in Automated Teller Machines. |
| Currency | Another name for Money |
| Debit Card | A type of card (often backed up by a major credit card company) that is issued by a bank and used to make purchases. Unlike a credit card, the money comes directly out of the user's checking account. (Also called a "Check Card".) |
| Discipline | Self-control used in directing behavior. The key to wealth building is being consistent (self-disciplined) over time. |
| Persistent | Refusing to give up. |
| Hoarding | Collecting unneeded items or much more than necessary and then guarding them. |
| Checking and Savings | Two accounts that should be kept separate in order to prevent "dipping" into your savings" and to alert you that you've reached your spending limit |
| Fixed Expenses | Costs (expenses) that do not change from month to month |
| Variable Expenses | Expenses that can change each month like money spent on eating out or entertainment. |
| withdraw | to take money out of your bank account |
| Income | Money earned from working and investments. |
| Compound Interest | Interest paid on interest previously earned; credited daily, monthly, quarterly or semiannually. |
| Emergency Fund | Five hundred dollars in readily available cash to be used only in the event of an emergency; the goal of the First Foundation. |
| Interest Rate | Percentage paid to a le4nder for the use of borrowed money (in debt); percentage earned on invested principal (in investing). |
| Five Foundations | The five steps recommended by Dave Ramsey to achieve to financial success. |
| Sinking Fund | Saving money over time for a large purchase; divide the total amount of money needed by the number of months (when the money is needed) |
| Foundations 1 | Save a $500 emergency fund. |
| Foundations 2 | Get out of debt. |
| Foundations 3 | Pay Cash For car |
| Foundations 4 | Pay Cash for college |
| Foundation 5 | Build Wealth and Give |
| Three things to save for: | Emergency fund, Purchases, and Wealth Building. |
| Emergency | Unexpected life events that will happen and cost money to fix. |
| Inflation | Inflation is a persistent rise in the price of goods and services over a period of time or the persistent decline in purchasing power of money. |
| Interest Building Account | an account that earns interest on the balance available in the account; An account that pays you interest. |
| Principal | The original amount borrowed |
Created by:
fcswatsons
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