Personal Finance Chapter 3

liabilities

the debts that you owe

income

the money you receive

discretionary expense

a cost which is not essential for the operation of a home or a business

personal financial statement

a document that provides information about an individual's current financial position and presents a summary of income and spending

insolvency

a financial state that occurs if liabilities are greater than assets

budget

a plan for using money to meet wants and needs

To create a personal balance sheet, you will need to:

determine your assets determine your liabilities calculate your net worth evaluate your financial situation

A personal balance sheet helps you to:

determine your net worth manage your money to meet financial goals

surplus

extra money that can be spent or saved, depending on a person's financial goals and values

real estate

land and any structures that are on it that a person or family owns

To create a personal cash flow statement, you will need to:

record your income record your expenses determine your net cash flow

take-home pay

the amount of income left after taxes and other deductions are taken out of your gross pay

net worth

the difference between the amount that you own and the debts that you owe

budget variance

the difference between the budgeted amount and the actual amount that you spend

deficit

the financial situation that occurs when more money is spent than is earned or received

discretionary income

the money left over after paying for the essentials—food, shelter, clothing, transportation, and medication

cash flow

the money that actually goes into and out of your wallet and bank accounts

market value

the price at which property would sell

personal balance sheet

also called a net worth statement; a financial statement that lists items of value owned, debts owed, and a person's net worth

assets

any items of value that an individual or company owns, including cash, property, personal possessions, and investments

liquid assets

cash and items that can be quickly converted to cash

A monthly cash flow statement is used to:

determine a person's net cash flow

A personal balance sheet is used to:

determine a person's net worth

A personal cash flow statement helps you to:

determine the amount of cash you receive determine how you use this cash

A monthly budget report is used to:

determine variance and identify a surplus/deficit