Chapter 16 Study Guide- Intro To Business 2

What is a budget?

A plan for saving and spending money

What is a financial plan?

A report that summarizes your current financial condition

What is a Roth IRA?

A retirement account where contributions are NOT tax deductible, all funds are tax free when withdrawn after age 59.5

What is a traditional IRA?

A tax sheltered retirement plan, annually invest earnings up to a certain amount -contributions are tax deductible -accumulate tax free until withdrawn after the age of 59.5

What is a variable expense?

An expense that changes from month to month

What is a fixed expense?

An expense that stays the same each month

What is money management?

Day-to-day financial activities associated with using limited income to satisfy unlimited needs and wants

What does a personal balance sheet find?

Finds Net Worth (value) of a person or family

How do you find owner's equity?

the difference between assets and liability (assets-liability)

What is social security and who receives the benefits?

-It provides pensions to retired workers and their families. -It provides death benefits to dependents of workers who die -Provides benefits to disabled workers and their families

What are the five steps to the financial planning process?

-analyze your current financial condition -develop financial goals that are responsive to your vision -create your financial plan -implement the plan -revise your financial plan

What are the characteristics of a successful budget?

-be realistic -be flexible -should be evaluated regularly -must be well planned and clearly communicated -should have a simple format

What are the four steps to the budget process?

-set financial goals -plan budget categories -maintain financial records -evaluate your budget

What are the main purposes of a budget?

-to help you live within your income -achieve your financial goals -to buy wisely -to avoid credit problems -plan for financial emergencies -develop good money management skills

What is does a personal cash flow statement report?

Reports net wages and other income along with spending for a period of time

What are pensions?

Series of regular payments made to a retired worker under an organized plan

What is budget variance?

The difference between actual and budgeted amounts