FIN C.2
budget
a specific plan for spending income; also called a spending plan.
savings ratio
amount saved each month divided by gross income
liabilities
amounts owed to others.
mortgage
an amount borrowed to buy a house or other real estate that will be repaid over a period of 15, 20, or 30 years.
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.
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.
investment asset
funds set aside for long-term financial needs.
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.
market value
your possessions listed at their current value.
take-home pay
earnings after deductions for taxes and other items; also called disposable income. also called net pay.
income
inflows of cash to an individual or a household.
debt ratio
liabilities divided by net worth
current ratio
liquid assets divided by current liabilities
liquidity ratio
liquid assets divided by monthly expenses
discretionary income
money left over after paying for housing, food, and other necessities.
debt payment ratio
monthly credit payments divided by take-home pay
cash flow
the actual inflow and outflow of cash during a given time period.
deficit
the amount by which actual spending exceeds planned spending.
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.
personal financial statements
the personal balance sheet and the cash flow statement
balance sheet
a financial statement that reports what an individual or a family owns and owes; also called a net worth statement or statement of financial position.
cash flow statement
a financial statement that summarizes cash receipts and payments for a given period; also called a personal income and expenditure statement.
safe deposit box
a private storage area at a financial institution with maximum security for valuables.