Personal Finance Chapter 3

Long-Term Liabilities

Debts that are not required to be paid in full until more than a year from now.

Current Liabilities

Debts that must be paid within a short time, usually less than a year.

Take-Home Pay

Earnings after deductions for taxes and other items; also called disposable income.

Income

Inflows of cash to an individual or a household

Discretionary Income

Money left over after paying for housing, food, and other necessities.

Balance Sheet

A financial statement that reports what an individual or a family owns and owes; also called a net worth statement.

Cash Flow Statement

A financial statement that summarizes cash receipts and payments for a given period.

Safe Deposit Box

A private storage area at a financial institution with maximum security for valuables.

Budget

A specific plan for spending income.

Liabilities

Amounts owed to others

Liquid Assets

Cash and items of value that can easily be converted to cash.

Assets

Cash and other property with a monetary value.

Money Management

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

Cash Flow

The actual inflow and outflow of cash during a given time period.

Deficit

The amount by which actual spending exceeds planned spending.

Surplus

The amount by which actual spending is less than planned spending.

Budget Variance

The difference between the amount budgeted and the actual amount received or spent.

Net Worth

The difference between total assets and total liabilities.

Insolvency

The inability to pay debts when they are due because liabilities far exceed the value of assets.