Personal Finance Unit 2 Review

Assets

Any item of value you own

Balance Sheet

Financial statement that lists the items of value that you own, the debts you owe, and your net worth.

Allowance

The amount of money you plan to use for a certain budget category

3 examples of variable expenses

-food -clothing -electricity

Cash Flow Statement

A document that provides a summary of your cash flow during a particular period, usually a month or year

Money Management

The method of planning how to get the most from your money.

Discretionary income

The money left over after essentials are paid

Cash Flow

The money that goes into and out of your wallet and accounts

Disposable Income

The portion of your income that is spent on the basic living necessities

3 steps to budgeting

-pay for basic needs -save for future expenses -spending discretionary income

Surplus

A positive cash flow; extra money that can be spent or saved

Deficit

A situation that occurs if a persons more than he or she receives

Variable Expense

A type of expense that changes from one month to the next

Take-home pay

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

Income

Cash inflow, or the money you recieve

Fixed Expense

Expenses that are consistent from one month to the next

What is the difference between GROSS INCOME and NET INCOME?

Gross is before the taxes and net is what you take home

Liabilities

The debts that you owe

Net Worth

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

Budget variance

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

What % of your net income should be spent on transportation?

15%

What % of your net income should be spent on housing?

30%

3 examples of a fixed expense

-mortgage -college -car