Personal finance chapter 4

Trade off

Going up one option in exchange for another

Which of the following is not listed on a personal net worth statement? -income -assets -liabilities -net worth

Income

Which of the following is a fixed expense? -food -rent -entertainment -utilities

Rent

Budget

A spending and saving plan based on expected income and expenses

T or F a favorable variance results from spending less than you budgeted for spending

T

Net worth

The difference between assets and liabilities

Opportunity cost

The value of your next best option-what you are giving up

Wants

Things people desire for reasons beyond survival and basic comfort (examples: new cars, vacations, luxury items)

Financial plan

A comprehensive plan listing goals alone with steps and a timeline for reaching them

Variable expenses

Costs that can go up and down each month (examples: entertainment)

Fixed expenses

Costs that do not change each month (examples: rent, insurance, loan payments)

Liabilities

Debts that you owe

Charitable giving

Donating money or time to a cause in which you believe

Cash outflows

Expenses, or items for which you must spend money

T or F Financial resources are unlimited and growing

F

Which of the following is a variable expense? -rent -food -insurance -car payment

Food

T or F keeping good records will help you prepare a better budget

T

Needs

Things needed for survival (examples: food, clothing, shelter)

T or F a personal net worth statement lists income and expenses

F

T or F a trade off is the value of what you are giving up when you make a purchase

F

T or F charitable giving is a mandatory fixed expense

F

Cash inflows

Income from your job, investments, and other sources like allowance or interest income

Assets

Money and items of value that you own (example: boat or a car)

Financial resources

Money or other items of value that are used to acquire goods and services

T or F the amount of money a person has to spend after needs are met is called discretionary income

T