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Personal Finance
Foundations in Personal Finance Vocabulary
| Term | Definition |
|---|---|
| Consumer | A person or organization that uses a product of service |
| Credit | The granting of a loan and the creation of debt; any form of deferred payment |
| Debt | The obligation of repayment owed by one party (the debtor/borrower) to a second party (the creditor/lender); in most cases this includes repayment of the original loan amount plus interest |
| Economy | A system by which goods and services are produced and distributed |
| Financial literacy | The knowledge and skillset necessary to be an informed consumer and manage finances effectively |
| Interest | A fee paid by a borrower to the lender for the use of borrowed money; typically interest is calculated as a percentage of the principal (original loan amount) |
| Loan | A debt evidenced by a "note," which specifies the principal amount, interest rate and date of repayment |
| Personal finance | All of the decisions and activities of an individual or family regarding their money, including spending, saving, budgeting, etc. |
| 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 lender for the use of borrowed money (in debt); percentage earned on invested principal (in investing) |
| Five Foundations | The five steps to financial success |
| Sinking fund | Saving money over time for a large purchase |
| Inflation | The persistent increase in the cost of goods and services or the persistent decline in the purchasing power of money |
| Interest-Bearing Account | An account that generates interest income on the available balance in the account |
| Budget | A written cash flow plan |
| Cash Flow Statement | A summary that shows total income and spending for a given time period |
| Carbon Check | A copy of each check you write |
| Envelope System | Series of envelopes that are divided into categories (food, entertainment, gas, etc.) and are used to store cash for planned monthly expenses |
| Impulse Purchase | An item that is bought without previous planning or consideration of the long-term effects |
| Overdraft | Occurs when money is withdrawn from a bank account and the available balance goes below zero |
| Reconcile | To match your bank statement with your checkbook |
| Zero-Based Budget | A cash flow plan that assigns an expense to every dollar of your income, wherein the total income minus the total expenses equals zero |
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ACC124