Personal Finance CH 3 Questions

What are the basic money management activities

1. Creating and implementing a plan for savings 2. Storing and maintaining personal financial records 3.Preparing personal financial statements

Budgeting process in order

1.set financial goals 2.Estimate expected income 3.Budget for an emergency fund and savings 4.Budget fixed and variable expenses 5.record actual income and spending amounts

When saving for an emergency fund you should set aside

3 to 6 months of living expenses

What is a balance sheet

A personal financial statement that shows waht you own and owe as of a certain date.

when you finish categorizing assets and calculating total assets what should you do next

Classify liabilities calculate net worth

How to be succeessfull at Money Managment

Daily spending and saving are the main elements of fiancial PLanning Your decicions need to be corordinated with needs goals and personal situations

Money Management

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

Does a low current ratio better

False For a current ratio to be improving it would be larger tahn last period

What factors affect variable expenses

Health Economic conditions House hold situations Time of the year

What are common types of real estate held by individuals

Homes Condos Vacation property and land

What are the four categories for a balance sheet

Liquid Assets Personal Possessions Investment assets and real estate

what measure indicates a persons ability to weather an emergency financially is

Liquidity ratio

what could be an opportunity cost when making a purchase

Lost investment earnings

What is an example of opportunity cost

Lower Future investment as a result of purchase

Is real estate a liquid asset

No

Credit records include

Payment records monthly statements list of credit account numbers telephone numbers of issuers.

Examples of personal and employment records

Resume employee benefits booklet and social security card

Does a low debt ratio indicate a better financial condition

True

Financial experts recommend that you save 5% to 10% of your income

True

What would not be a financial statement record

W-2 Form

A balance sheet is a listing of what

Your assets liabilities Net Worth

When saving for specific goals what can you do.

a lump sum amount or periodic deposits that grow to desired amount

What actions can be taken to help families save $

adopting wise grocery shopping habits Switching to less expensive phone plan paying less taxes each month and saving monthy rather than waiting for a refund Monitoring energy usage to use less when possible

what are common sources of income

amounts received from pensions wages. salaries, commissions Gifts and Grants Social Security income payments Self employment income

You should keep an eye on change taking place in your financial situation by

calculating your financial ratios

What are examples of liabilities

credit card bills medical bills car loans mortgages

what should you asses when assesing your current financial situation

current financial situation determine your personal needs values and life situation

What is take-home pay?

earnings after deducting for taxes and other items

What are Financial ratios

guidelines for measuring changes in your financial situation

Cash Flow

inflow and outflow of cash during a given time period

Your retirement account is what type of asset

investment

Examples of short term liabilities

medical bills credit card balances

what are examples of fixed expenses

mortgage payments loan payments Rent

Physical budget

must have physical components such as paper files and folders

What would be examples of personal property on a balance sheet

old rugs, furniture automobiles

what are common reasons to save money

pay unexpected expenses pay for the replacement of appliance pay for vacation

What should you revise when evaluating your budget

revise your financial goals and budget allocations and review your financial progress.

Liquid assets include

savings account cash value of life insurance cash

What records are filed under consumer and automobile records

service and repair records for automobiles owners manuals for major appliances Receipts for major purchases Warranties

What are some examples of intermediate goals for a single college student

take a vacation to Europe pay off student loans in 5 yrs or less Attend graduate school after getting undergraduate

what is Insolvency

the ability to pay your bills as come due bc your liabilities exceed your assets

explain net worth

the amount you would have if you sold the assets and paid off the liabilities Assets - liabilities= net worth

Discretionary Income

what you have left after you havepaid for houseing, food, and other necessities

What should you do if your income is irregular

you should underestimate next years expenses

When comparison shopping you can incur opportunity cost bc

you spend time and time is money