Chapter 2- Money Management Skills

If Joe and Mary Smith's have a money market accounts of $100,000, real estate holdings of $300,000, loans of $25,000, and investment of $10,000, what were their total assets be

$410,000

Assets

Cash or other tangible property with a monetary value

Likely intermediate term goals for college student

Pay off student loans within five years or less, attend graduate school, take a vacation to Europe

Cash flow statements show a summary of cash _________ and payments forgiven., Such as a month or a year. This is taken directly from the text

Receipts

What is a liquid asset

Savings account, cash value of life insurance, cash, money market account

Which are basic major money management activities?

-creating and implementing a plan for savings -storing and maintaining personal financial records -preparing for a personal financial statements

Steps for budgeting

-set financial goals -estimate expected income -allocate an emergency funds in savings -Budget known expenses -budget estimated expenses -Record spending amounts and evaluate revisions

Copies of tax returns should be retained for at least

7 years

Personal personal_______________ She also called a net worth statement or statement of financial position, reports what you own and what you owe

Balance

How is a cashier plus (or deficit) on a statement of cash flow's calculated

Cash flows (receipts) less cash outflows (expenditures) during a given period of time

liquid assets

Cashion items of value that can be easily converted to cash. Money in checking and savings account is liquid and is available to the Scott family for current spending. the cash value of their life insurance maybe borrow it if needed while assets other than liquid assets can be converted into cash the process is not quite as easy.

After categorizing assets and calculating total assets, what would you do next when comparing the balance sheet

Classify liabilities, total the liabilities, and calculate the net worth

And example of cash flow for the month would be a plumber coming to your home on a service call and billing you for the work done. You will pay the bill next month.

False

Direction area income is the same as net pay

False

Personal balance sheet and the cash flow statement come from financial institutions, businesses, or the government

False

To measure changes taking place in your financial situation, you probably need to calculate financial __________

Ratios

Characteristics of good financial goals

Realistic to achieve, measurable, have a definite time frame

A cash _____________ results when cash inflows (receipts) are greater than the cash outflows (expenditures)

Surplus

money management

The day-to-day financial activities necessary to manage current personal economic resources while working towards long-term financial security.

insolvency

The inability to pay your bills as they come to you because of your liabilities exceed your assets

The balance sheet equation is

Total assets minus total liabilities equal net worth

True or false: Money management is the day-to-day financial activities necessary to manage current personal economic resources while working towards long-term financial security.

True

Joe borrowed $100,000 for a four year loan at 10% interest on January 2, 2017. During the course of the year, he paid back 30,000 on the debt. What would his December 31, 2017 balance sheet show for his debt? Interest is an expense and not part of the loan balance.

$70,000 because the balance sheet should report on what is owed of the balance sheet date

safe deposit box

A private storage area and a financial institution with maximum-security for valuables and difficult to replace documents

Invoices, credit card statements,__________ policies and tax forms are the basics of financial record-keeping and personal economic choices

Insurance

Liabilities

Amounts owed to others but do not include items not yet do you such as months rent. A liability is a debt you owe now, not something you mayo in the future.

Items that are difficult to replace should be kept in a safety deposit box so that they won't be destroyed if there's a fire or flood in the home

True

Balance Sheet

Also called a net worth statement or statement of financial position, reports what you own and what you owe. You prepare a personal balance sheet to determine your current financial position using the following process: Items of value- amounts owned=net worth

Money management involves financial activities necessary to manage current personal economic resources, while working for the achievement of long-term financial security. True or false

True

Flexible payments that change from month-to-month or called

Variable expenses

When you calculate a budget________________, you determine the difference between the actual amount spent or received an amount budgeted. This is a one-word answer tree taken from the text

Variance

Take-home pay is

Earnings salary wages and commissions after deducting taxes and other items

long-term liabilities

Debts you do not have to pay in full until more than a year from now. Common long-term liabilities include auto loans, educational loans, and and mortgages.

Currently Liabilities

Debts you must pay within a short time, usually less than a year. These liabilities include such things as medical bills, tax payments, insurance premiums, cash loans, and charge accounts.