personal finance: ch 1 smartbook

Bill is concerned about his year-end tax payments. What are some options that are available to him to lessen his concerns?

Bill can file quarterly tax payments. Bill can increase his tax withheld from each paycheck.

define personal financial planning

the process of planning your spending, financing, and investing in order to optimize your financial situation

What is the definition of the adult life cycle?

the stages in the family and financial needs of an adult

What is the definition of economics as described in this text under economic factors?

the study of how wealth is created and distributed

What measures the increase in an amount of money as a result of interest earned?

time value of money

Liquidity is the ability to buy or sell an investment quickly without substantially affecting the investments value.

true

True or false: A financial plan is a formalized report that summarizes your current financial situation, analyzes your financial needs, and recommends future financial activities.

true

True or false: A key factor in making financial decisions is time value of money.

true

True or false: Frank can invest some of the money he has been saving in the stock market now; however, that would probably require some trade-offs on his part.

true

Your life situation, personal values, and economic factors influence what?

your financial plan

According to your text, when there are influences on personal financial planning, what three elements should be assessed?

your life situation, personal values, and economic factors

Amy is creating and implementing her new financial action plan. As a result, she asks for more hours at work and she begins to save more money. Why is she doing this?

Amy has identified ways she can achieve her financial goals and has implemented her plan.

What are examples of well-written financial goals?

Developing a savings plan of $100 per week to make a down payment on a car in a year Investing $250 per month for retirement in 40 years

According to the text, why is goal setting an important aspect for personal financial growth?

Goal setting assists with the financial decision-making process.

Bill recently created his financial plan after much thought and decision-making. He implemented his plan, and so far the plan is working. What must Bill do now?

He must maintain his financial plan. He must continue to review and revise his plan.

You have developed a savings plan and will be setting aside money for the next one year to make an investment. You plan to use the return from this investment to make down payment to purchase a home after three years. What are key time frames for this goal? Look at the timing of goals in the chapter.

achieving short-term and intermediate goals

The different stages of the financial and family needs of an adult is called the:

adult life cycle.

Saving for four years for a down payment on a house affects how soon you are able to purchase a home. This is an example of:

an intermediate goal that affects a long-term goal.

The first step in the financial planning process is:

determining your financial situation regarding income, savings, living expenses, and debts.

The ___ environment includes various institutions, including businesses, labor, and government, that work together to satisfy needs and wants. (Enter one word per blank.)

economic

True or false: Creating and implementing a financial action plan is the third step of the financial planning process.

false

True or false: Everyone has the same personal financial goals.

false

True or false: When creating a financial plan, it is a simple, static process that is easy to implement and requires little maintenance moving forward.

false

A formalized report that summarizes your current financial situation, analyzes your financial needs, and recommends future financial activities is called a(n) Blank______.

financial plan

Which of the following is the outcome of poor financial management and extensive selling efforts by Americans?

financial problems

Determining your current financial situation regarding income, savings, living expenses, and debts is the Blank______ step in the financial planning process.

first step

The third step in the financial planning process is:

identifying alternative courses of action

The ability to buy or sell an investment quickly without substantially affecting the investments value is called _____.

liquidity

When people first begin planning for retirement, saving for a child's college education, and planning the purchase of a vacation home, these are usually:

long-term goals.

When setting financial goals, you should ensure they are:

measurable. action-oriented. specific. time-based.

Personal opportunity costs include using your time, in addition to or in place of money, to

meet your needs. achieve your goals. satisfy your personal values.

So many Americans have money problems because:

of poor planning. of weak money management habits.

A working mother of two children decides she wants to work less so she can spend more time with her children. This is an example of a(n)

opportunity cost.

Paul can invest his money in the stock market now instead of buying a new car; however, that would require a trade-off or:

opportunity costs.

Personal financial planning is the process of managing your money to achieve:

personal financial goals.

Selecting your time rather than your money to meet your needs, achieve your goals, and satisfy your personal values are examples of:

personal opportunity costs.

Three methods that help develop successful financial habits are:

providing adequate insurance coverage focusing on a defined spending plan understanding tax and investment information

Two methods that will not help develop long-term successful financial habits are:

regularly using your emergency fund for routine expenses. saving as much money as possible for only one year.

When determining goal-setting guidelines, what three things should you take into account?

saving investing activities spending

What type of cost do you indirectly incur if you decide to go to school and not work?

the opportunity cost of not earning current income