Hassel Personal Finance Chapter 1 review

short term goals

a goal that can be achieved in a short amount of time; it may take a few days, weeks, or months but not longer than a year

consumer price index (CPI)

a measure of inflation based on changes in the cost of consumer goods and services

inflation

a state of the economy in which the general price level is increasing

personal financial planning

a systematic process that considers important elements of an individual's financial affairs in order to fulfill financial goals

liquid assets

cash, savings accounts, and money market funds

fee-only planners

charge fees based on the complexity of the plan they prepare

commission-based planners

earn commissions on the financial products they sell

Intermediate goals

goals that take 2-5 years to achieve

real property

immovable property such as a home

financial assets

intangible, paper assets such as savings accounts and securities

money

medium of exchange

personal property

moveable property such as automobiles, clothing, jewelry, appliances, household furnishings, home electronics

Tangible assets

physical assets such as real estate and automobiles

financial goals

results that an individual wants to attain, such as buying a home, building a college fund, or achieving financial independence

liability

something that we owe, measured by the amount of debt we incur

investments

stocks, bonds, mutual funds

utility

the amount of satisfaction received from purchasing certain types or quantities of goods and services

trough

the phase of the economic cycle when a contraction ends and an expansion begins

peak

the phase of the economic cycle when an expansion ends and a contraction begins

contraction

the phase of the economic cycle when real GDP falls

gross domestic product (GDP)

the total of all goods and services produced within a country; used to monitor economic growth

wealth

the total value of all items owned by an individual such as savings, bonds, accounts, stocks, home

long term goals

these take longer than a 6 year period of time

assets

things you own

medium of exchange

used to measure value

government, business, consumer

what are 3 vital groups?

expansion, peak, contraction and trough

what are the 4 phases of the economic cycle?

taxation and regulation

what constrains financial planning that the government has power over?

age, education, where you live, career

what determines your personal income?

consumer

who is the central player in the financial planning environment?

fiscal policy

Government policy that attempts to manage the economy by controlling taxing and spending.

monetary policy

Government policy that attempts to manage the economy by controlling the money supply and thus interest rates.

expansion

The phase of the economic cycle when levels of employment and production are high and the economy is growing, generally accompanied by rising prices for goods and services.