FIN 381 chapter 3

Measurable Action

When setting financial goals they should Specific, _____, _____-oriented, Realistic, and Time-based.

Specific Realistic Time

When setting financial goals they should _____, Measurable, Action-oriented, _____, and _____-based.

Budgeting apps

Your cell phone or tablet has various money management features called _____ _____

Computerized

A _____ budget system is developed using spreadsheet software.

Balance sheet

A common starting point for financial planning that is a report on what you own and what you owe; also called a net worth statement or statement of financial position

Consumer price index (CPI)

A measure of the general price level of consumer goods and services in the united states

Take home pay

A person's earnings after deductions for taxes and other items; also called net pay

reduced

A person's net worth would increase as a result of _____ amounts owed to others.

goals

A personal balance sheet helps you measure progress toward financial _____.

Savings ratio

Amount saved each month divided by gross income=

realistic clearly communicated

Characteristics of successful budgeting are well-planned, _____, flexible, and _____ _____.

emergency

Financial advisors suggest that an _____ fund representing 3 to 6 months of living expenses should be established for use in periods of unexpected financial difficulty.

Variable expenses

Flexible payments that change from month to month

Investment assets

Funds set aside for long-term financial needs: financing for children's education, purchasing a vacation/home, planning for retirement

projected actual

Hey budget involves _____ income and expenses, while cash flow statements report the _____ income and expenses.

Assets

Liabilities+net worth=_____

Current ratio

Liquid assets divided by current liabilities=

Liquidity ratio

Liquid assets divided by monthly expenses=

records financial planning

Maintaining financial _____, creating personal _____ statements, and _____ your spending are essential money management activities for successful personal financial management.

Discretionary income

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

liquid asset

Nick Boss has a savings account with $550 in it. He knows that he can withdraw this money whenever he wishes. This would be an example of?

Time value of money

Refers to increases in an amount of money as a result of interest earned.

Money management

Refers to the 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.

Net worth

The difference between your total assets and your total liabilities; assets-liabilities= _____ _____

Insolvency

The inability to pay debts when they are due; when liabilities far exceed available assets; can result in bankruptcy

Personal possessions

The major portion of assets for most people: automobiles, furniture/appliances, stereo/video/entertainment equipment, computer, jewelry, and other personal belongings

Personal financial

The personal balance sheet and cash flow statement are called _____ _____ statements; provides information about your current financial position and a summary of your income and spending.

goals emergency savings

The steps of budgeting activities are first to set financial _____, estimate income, budget _____ fund and _____, budget fixed expenses, and finally budget variable expenses.

income fixed variable

The steps of budgeting activities are first to set financial goals, estimate _____, budget emergency fund and savings, budget _____ expenses, and finally budget _____ expenses.

insurance

When filing financial records your original insurance policies, list of insurance premium amounts with due dates, medical information including health and prescription history, and claims report should be kept in a folder called _____ records.

tax

When filing financial records your paycheck stubs, W-2 forms, 1099 forms, receipts for tax deductible items, records of taxable income, and past income tax returns and documentation should be kept in a folder called _____ records.

credit

When filing financial records your unused credit cards, payment books, receipts in monthly statements, and list of credit account numbers with telephone numbers of issuers should be kept in a folder called _____ records.

consumer purchase automotive

When filing financial records your warranties, major purchase receipts, owners manuals for major appliances, automobile service records, automobile registration, and automobile owners manual should be kept in a folder called _____ _____ and _____ records.

cash flow

A _____ _____ statement provides the foundation for preparing and implementing a spending, saving, and investment plan.

Safe deposit box

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

Cash flow statement

A report that is a summary of cash receipts and payments for a given; Also called personal income and expenditure statement.

Budget

A spending plan that is necessary for successful financial planning.

Written budget

Allows you to provide a detailed plan for spending can be in a notebook, budget record book, or on accounting paper.

Liabilities

Amounts owed to others now, but does not include items not yet due such as next months rent

online

An _____ budget may be used through a website such as mint.com, or financial institutions with various budgeting and personal financial management tools on their websites.

Long-term liabilities

Auto loans, educational loans, and mortgages are considered _____ _____ _____.

not

Bonuses, gifts, or on expected income should _____ be considered until the money is actually received.

Liquid assets

Cash and items of value that can easily be converted to cash: money in checking and savings accounts, life insurance cash value

Assets

Cash or other tangible property with a monetary value

planned flexible

Characteristics of successful budgeting are well-_____, realistic, _____, and clearly communicated.

Long-term liabilities

Debts you do not have to pay in full until more than a year from now

Current liabilities

Debts you must pay within a short time, usually less than a year.

mental budget

Exists only in a person mind, a simple system appropriate for limited resources and minimal financial responsibilities but can't get dangerous when you forget the amounts you plan to spend.

mistakes

Failing to save, never creating a budget, under estimating expenses, and not planning for large costs are the main budgeting _____ people make.

Ratios

Financial _____ provide guidelines for measuring the changes in your financial situation.

Variable

Food, clothing, telephone, electricity, personal care, medical expenses, eating out, recreation/entertainment, gifts, donations are all examples of _____ expenses.

Real estate

Includes a home, condominium, vacation property, or other land that a person or family owns

Income

Inflows of cash for an individual or household.

Physical budget

Involves envelopes, folders, or containers to hold money or slips of paper representing amount allocated for spending categories; allows you to actually see where your money goes

balance sheet

Karen Price has created a financial statement for herself that lists all of the assets she owns as well as the debts she owes. This would be an example of:

opportunity cost

Kyle Burroughs has decided to put $25 more per week in his savings account. He knows this will reduce his ability to go out to eat each week but thinks building his savings is important. This would be an example of?

Debt ratio

Liabilities divided by net worth=

Debt payments ratio

Monthly credit payments divided by take home pay=

Fixed expenses

Payments that do not vary from month to month

Fixed expenses

Rent/mortgage, loan payment, cable television, monthly train tickets/commute for work, life insurance, apartment insurance are all considered _____ _____.

Budget

Spending plan

T

T/F: Cutting insurance costs, adopting wise grocery shopping habits, using less energy, switching to a less expensive cable/phone plan, avoiding the fees and high payments that come with debt, and choosing not to receive a tax refund are ways households can save money each month.

T

T/F: Daily purchasing decisions influence cash outflows and long-term financial goals.

F

T/F: For many years, the United States has ranked highest among industrial nations in savings rate. True

F

T/F: Furniture, jewelry, and an automobile are examples of liquid assets.

T

T/F: Insolvency is a result of having more liabilities than assets.

F

T/F: Money management activities refer to long-term investment decisions.

F

T/F: Opportunity costs are only associated with money management decisions involving long-term financial security.

F

T/F: Your net worth is the amount of money available for use.

law of 72

The _____ _____ _____ can help you budget for price rises: at 2% inflation, prices will double in 36 years (72/2=36), at 6% inflation, prices will double in 12 years (72/6=12)

Deficit

The amount by which actual spending exceeds planned spending

Surplus

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

Budget variance

The difference between the amount budgeted and the actual amount received/spit.

Cash flow statement

This type of report provides data on your income and spending patterns which are helpful when preparing a budget

Balance sheet

To determine a person's solvency, which financial document should be consulted?

assess plan implement evaluate

When creating and implementing a budget one must _____ current situation, _____ financial direction, _____ budget, then _____ budget.

month

When estimating income for a given time period, a _____ is often used as a budgeting period since many payments are due monthly.

money management

When filing financial records your Current budget, recent personal financial statements, list of financial goals, list of safe deposit box contents should be kept in a folder called _____ _____ records.

investment

When filing financial records your Records of stock, bond, and mutual fund purchases and sales, list of investment certificate numbers, brokerage statements, dividend record, and company annual reports should be kept in a folder called in the _____ records.

financial services

When filing financial records your checkbook and unused checks, bank statements and canceled checks, savings statements, and local information and number of safe deposit box should be kept in a folder called ____ ____ records.

Personal employment

When filing financial records your current resume, employee benefit info, Social Security numbers, and birth certificates should be kept in a folder called _____ and _____records.

housing

When filing financial records your lease (if renting), property tax records, and home repair for improvement receipts should be kept in a folder called _____ records.

estate planning retirement

When filing financial records your well, pension plan info, IRA statements, social security information, and trust agreements should be kept in the _____ _____ and _____ records folder.

Current liabilities

medical bills, tax payments, insurance premiums, cash loans, and charge accounts, Credit card balances are all considered _____ _____.