Personal Finance, Test #1-Chapters 1-3
Liquid Assets
Cash and items of value that can easily be converted to cash
Assets
Cash and other property with monetary value
Variable Expenses
Flexible payments that change month to month
Value
Ideas and principles (time and money) that a person considers desirable and important
personal financial planning
PFP is the process of managing your money to acheive personal economic satisfaction - to create one you must fallow a specific 6 step proccess -a comprehensive PFP can improve quality of life by reducing uncertanty about needs and resources.
Fully Vested
The point which retirement payments made by an organization on your behalf belong to you completely even if you no longer work for the organization.
Balance Sheet
a financial statement that reports what an individual and/or family owns or owes
Cash flow Statement
a financial statement that summarizes cash receipts and payments for a given period of time
Annuity
a series of equal deposits or payments
Assets on a Balance Sheet
assets on a balance sheet are listed under four categories 1. liquid assets 2. Real Estate 3. Personal 4. Investment assets
Budget Variance
A change in what you thought was going to happen in your budget. an unexpected expense or surplus.
Liabilities
Amounts owed to others (aka Debts)
Current Liabilities
Debts that have to be paid in a short time- usually under a year EXAMPLES: medical bills, tax payments, insurance premiums, etc.
Steps of Personal Financial Planning
Step #1: Determining Your CurrentFinancial Situation Step #2: Develop Financial Goals Step #3: ID Alternative Course of Action Step #4-Evaluate Your Alternatives Step #5- Create and Implement Your Financial Action Plan Step #6- Review and Revise Your Plan *see note cards
Long Term Liabilities
debts that are not required to be paid in full until more then a year from when you acquire it EXAMPLES: Auto loans, educational loans and, mortgages
Fixed Expenses
payments that do not vary month to month EXAMPLES: rent, general utilities, etc.
Future Value of money
the amount to which current savings will increase based on a certain interest rate and a certain time period
Present Value of money
the current value for a future amount based on a certain interest rate and a certain time period
Insolvency
the inability to pay debts when they are due because the liabilities (debts) far exceed the value of the assets
Economics
the study of how wealth is created and distributed
Time Value of money
value increases in an amount of money as a result of intrest earned