Exam One Financial Management

Personal Mission Statement

Your personal mission statement should reflect your strengths (the things you do best),passions (the things you enjoy doing), Page 13gifts (the things you naturally do well), and stakeholders (those who have helped you and those who you have helped).

Future Value Interest Factor

a factor multiplied by today's savings to determine how the savings will accumulate over time

401k Plan

a form of retirement plan where employees and employers can make tax-deferred contributions to a trust and direct funds to be invested across a number of provided options, taking payment when they retire or leave employment

Reverse Mortgage

a loan secured by the value of one's home whereby the homeowner receives either a monthly or a lump sum from the lender; the loan is paid in full from the proceeds of the sale of the house when the homeowner dies or moves out of the house

Credit Union

a nonprofit depository institution that serves members who have common affiliation

Mission

a purpose for being

A regular savings account usually offers:

a safe place to put your money

Negotiable Instrument

an agreement that is dated, payable for a specific amount of money, signed by the person who owns the account, and payable to another party

Budget

an estimate of income and expenditure for a set period of time.

Certificate of Deposit (CD)

an instrument used by a bank that guarantees the payment of a fixed interest rate for holding a sum of money until a designated time in the future; also called time deposits

Personal Values

are unique to you and influence your actions and decision making.

One method to help paying yourself first is to set up_________transfers from your paycheck to your savings account.

automatic

A stop payment order is designed to

avoid payment of a specific check

Frugal

avoiding waste; to be resourceful when filling ones needs for goods and services

A positive net cash flow results when cash inflows are greater than cash outflows and is also known as being in the_______.

black

Debts due within short time, usually the next 12 months, would be classified as_______(current/noncurrent) liabilities.

current

Present Value

current value of an asset to be received in the future

Private Banker

customer service representative and/or loan officer trained to provide special services and help meet the financial needs of high net worth customers

Current Liability

debt due within a short time, usually a year

Unearned Income

defined by the IRS as income from investments and savings

Vision Statement

defines a sense of purpose and paints a picture of the future. Your vision will tie directly into your long-term goals.

_______deposits include checking accounts and other payment methods.

demand

Which investment method can be utilized with an automatic investment plan?

dollar-cost averaging

Annual Percentage Yield

effective yearly rate of return taking into account compounding interest

A 401k plan is a plan offered by:

employers

Which life stages is typically making the most money in their career?

empty nest

A person who understands what they value will

help in creating a financial plan, reduce inner conflict

If you have equity in your home then you can borrow money in the form of

home equity line of credit

When using a debt card, the money is deducted from the account:

immediately

Dollar-Cost Averaging

is the practice of investing a fixed dollar amount at regular intervals of time, regardless of market conditions or your personal financial outlook

Financial Independence

is when passive income exceeds expenditures

What is an investor lacking in the SMART approach if their goal is making more money for the rest of their life?

lacking a set time frame to meet

Foreclosure

legal process in which the lender can seek a court-ordered sale of the property due to the nonpayment by the borrower; money from the sale of the property goes to paying off the debt of the mortgage

Needed to calculate the time value of money

length of time, principle, interest rate

People usually spend_____when they use cash as opposed to credit cards.

less

Home Equity Line of Credit

line of credit secured by a mortgage on a home; similar to a credit card

Financial_________is the ability to understand how money is earned, invested, spent, and to understand the risks and rewards of investments.

literacy

80-10-10 Rule

living on 80% of income, saving 10%, and giving away 10%

When people first begin planning for retirement, saving for a Childs education, and planning the purchase of a vacation home they usually are:

long term goals

A bison statement is related to your______goal.

long-term

Spending money from your savings account means:

lost intrest

Intermediate Goal

may be attained in one to five years

Short Term Goal

may be reached in less than one year

Personal Cash Flow Statement

measures your cash inflows and outflows in order to show your net cash flow for a specific time period

Which combination of liabilities would be classified as current liabilities or net worth statement?

medical bills, income tax payments owed, insurance premiums to be paid next month, and charge accounts

Drawbacks of CD

minimum deposit, early withdrawal penalty

Wealthy families are creating______statements to reduce feuds and pass on the moral values of families.

mission

Asset

money and other items of value that you own

Passive Income

money received through investments and savings

Sustainable consumption means:

not spending more than you make

One of the best resources for learning about different careers is

occupational outlook handbook

Current liabilities are liabilities due within:

one year

Every financial decision has a trade off also known as:

opportunity cost

Investment Account

outlay of money into a bank or stock with the objective of making a profit

Online payments do not include

smart cards

Three steps that will help with your current financial situation:

spending journal, cash flow statement, understand personal financial situations

Methods used to compute time value of money

spreadsheet software, financial calculator, formula calculator

When your investments are increasing you may also be concerned with any amount of growth. What is one way to ensure that you do not lose sight of your actual goal-taken from the SMART approach?

state your goals in specific and measurable terms

Commercial banks are in business to make money for their______.

stockholders

Annuity Due

stream of equal payments that occurs at the beginning of a period

Ordinary Annuity

stream of equal payments that occurs at the end of a period

When preparing a personal balance sheet, do not:

subtract assets from liabilities to determine net worth

Which activities for Empty Nest Life Stage

take less risk for investing as retirement nears, pay in cash, consider moving to a smaller home

Long-Term Goal

take more than five years to attain

Tax-Defered

taxes are not paid on the money or interest earned until the year is withdrawn; a delay in taxation meaning that funds are taxed at the time of the withdrawal; IRA and 401 (k) grow tax deferred, but they are taxed when the retiree taps them

What measures the increase in amount of money as a result of interest earned?

time value of money

Activities for people in the Independent Life Stage:

track spending, buy and sell at consignment shops, research college grants and scholarships

Debit Card

transfers money from a checking account to the account of the retailer

One of the main sources of cash inflow for most people is the income from their wages.

true

Savings institutions are usually for nonprofit and locally owned

true

The opportunity cost of going to college is the money you would have earned had you worked instead.

true

The personal cash flow statement is a summary of cash receipts and payments for a given period.

true

You should have a personal financial plan if you want to meet your financial goals

true

Home Equity

value of the house minus any loans secured by the house

Personal______are the ideas and principles that a person develops early in life and are influenced by family, religion, social groups, and culture.

values

Typical time Frame for an intermediate goal

1-5 years

Financial experts recommend savings of ____ of your earnings for each pay period for retirement and emergency fund.

10%

Your genes contribute to how much of your happiness?

50%

Commercial Bank

A financial institution that accepts demand deposits and makes loans and personal loans and provides other services for the public

Demand Deposit Account

A transaction account that is payable on demand; commonly referred to as a checking account

Personal Financial Plan

Based on an analysis of what you owe (liabilities), the money you have coming in and going out (cash flows), and your savings and investments, a good financial plan will provide a strategy to improve your financial situation.

Overdraft Fee

Charge assessed by the financial institution for taking more money out of the account than is in it

Liquidity

How quickly and easily an asset can be converted into cash without loss

SMART Goal

S - Specific M - Measurable A - Attainable R - Realistic T - Time-bound

Annual Percentage Rate (APR)

The annual rate that is charged for borrowing (or made by investing), ignoring the effect of compounding

Opportunity Cost

The cost of an alternative that must be forgone in order to pursue a certain action.

Two types of IRA

Traditional and Roth

Present Value Interest Factor

a factor multiplied by a future value to determine the present value of that amount

Annuity

a series of equal payments made at equal intervals over time; a financial product designed to accept and grow funds, and then pay out a stream of payments at a later point of time

Personal Financial Statement

a snapshot of your equity at a given point in time, derived from a summary of your assets and liabilities

Mortgage

a type of long-term loan used to buy property where the property is held as collateral until the loan is paid in full

Personal Financial Success

achieving financial goals and living life in accordance with your values, vision, and mission

Types of mortgage loans

adjustable rate, ballon payment, fixed rate

Net Worth

amount leftover if you sold all your assets and repaid all your liabilities

Net Worth Statement

amount leftover if you sold all your assets and repaid all your liabilities

Face Value

amount of money beneficiary receives when you die

Checking Account

an account that allows the owner to write checks against deposited money

A college_____center offers tools to help students learn about their passions and talents.

career

What should be listed as an asset for your life insurance?

cash

Cash Inflow

cash coming in

Cash Outflow

cash going out

Net Cash Flow

cash inflows - cash outflows

Independent life stage should consider adding:

checking account, individual retirement account

share accounts are typically offered by:

credit unions

Deposit-type institutions that serve as financial intermediariesediaries

credit unions, commercial banks, savings and loans

Liability

debt or obligation that you owe

One method to help stick to a budget is by putting cash in separate_________for every category in your budget.

envelopes

Future Value Interest Factor of Annuity

factor multiplied by the annuity to determine the amount in the account at a future date

Present Value Interest Factor of Annuity

factor multiplied by the annuity to determine the value of the annuity today

Medical bills, credit card balances, and home equity are all examples of current liabilities

false

Personal financial statements can come from financial institutions, businesses, or the government.

false

Financial Intermediaries

financial institutions that accept money for deposits and then lend the money to others

Discounting

finding the present value of some future payment

Expenses that remain the same from month to month

fixed expenses

Individual Retirement Arrangement (IRA)

funds set aside to be drawn out by the age 59.5

What should be included in your personal mission statement?

gifts, passions, stakeholders, strengths

Examples of Voluntary Simplicity Lifestyle:

increase spirituality, to increase time with family, reduce stress, to live more environmental friendly

Financial Plan

is a goal-based activity that incorporates your future income plan (career goals), budget plan (spending goals), investment plan (gaining assets goals), insurance plan (protection goals), and estate plan (giving goals).

529 Plan

is an account—technically called a qualified tuition plan—designed to encourage saving for future college expenses.

Voluntary Simplicity

is selecting a simplified lifestyle and reducing meaningless or idle consumption in order to focus energy on other priorities.

Financial Literacy

is the ability to understand how money is earned, invested, and spent, and to understand the risks and potential rewards of the different investments and financial products and services available to help you achieve your goals.

Financial independence is when_____exceeds expedentures.

passive

Your money_____represents the style and habits of money management you are most comfortable with.

personality

Enough

point at which increased spending has a diminishing rate of fulfillment

Another name for discounting is

present value

Compounding

process whereby the value of an investment increases exponentially over time due to earning interest on interest previously earned

Future Value

projected value of an asset based on the interest rate and time in the account

Goals that should be incorporated into your financial plan:

protection, giving, spending, career

Least liquid asset?

real estate

Comparing your checkbook register with the bank statement each month

reconciliation

Downshifting

reducing spending, cutting back

Share accounts are the same as

regular savings accounts

Normally fixed expenses example:

rent, mortgage payments, car insurance for the year, installment loan plans

90-10 Rule

saving 10% of income and living on 90%

Activities for people in the Dependent Life Stage:

saving money for college, create savings, spending, and will, develop money management skills

Lump Sum

single, one-time payment

Financial Life Stages

that represent the general financial situations that people experience throughout their lifetime. Your current financial life stage impacts your financial plan.

Cash Value

the amount received after giving up a life insurance policy

Share Draft Account

the credit union equivalent of a demand deposit account

Budget Variance

the difference between the budgeted amount and the actual amount that you spend

Time Value of Money

the principle that a dollar received today is worth more than a dollar received in the future

Money Personality

the style and habits of money management you are most comfortable with

Overdraft protection is an automatic loan made checking account customers to cover checks written in excess of:

their balance

When devloping goal setting timelines you should have a set______frame for the goals to be achieved.

time

You should evaluate your budget each_____to compare your spending with what you have budgeted.

week