Personal Finance Ch.3

Normally, an audit will go back only ____ years, but under certain circumstances the IRS may request information from 6 years back

3

Federal law states that copies of tax returns and supporting data should be saved for how many years?

7

This method can be used to help set financial goals

SMART

True/False: You can keep good financial records by separating them by category (ex. credit records, housing records, tax records, etc)

True

The term describes items of values (such as cash, real estate, jewelry, cars and any personal possessions like cars)

assets

This term also called a net worth statement or statement of financial position reports what you own and what you owe

balance sheet

What is another name for a spending plan?

budget

A __________ ____________ is the difference between the amount budgeted and the actual amount received or spent

budget variance

What term describes the actual inflow and outflow of cash during a given time period?

cash flow

This term describes a summary of cash receipts and payments for a given periods (actual flow and outflow of cash), such as a month or year. Also called a personal income and expenditure statement

cash flow statement

Income from employment is an example of __________ _____________

cash inflow

Payments for items such as rent, food and loans are examples of _______ _________

cash outlfow

The __________ ________ _________ (CPI) is measure of the general price level of consumer goods and services in the US

consumer price index

Which type of liabilities are due within the fiscal year (within the current year) and include things such as medical bills, tax payments, insurance premiums, cash loans and charge accounts?

current

This term describes the amount by which actual spending exceeds planned spending

deficit

This type of income is money left over after paying for housing, food and other necessities

discretionary

The formula: items of value (what you owe) - amounts owed (what you owe) = net worth (your wealth) is how you determine your current _____________ _______________

financial position

Invoices, credit card statements, insurance policies, taxes and forms are all examples of ____________ ____________

financial records

What are the three components to money management?

financial records financial statements budget

The ________ __________ is a 12 month period a business operates on and does not necessarily have to be from Jan-Dec.

fiscal year

These type of expenses are payments that do not vary from month to month (ex. rent or mortgage payments, installment loan payments)

fixed

This term is the inflows of cash for an individual or a household

income

This term means that you are unable to pay debts when they are due because your liabilities exceed assets

insolvency

This term describes the amounts that are owed to others

liabilities

This term describes assets that can be easily converted to cash (ex. money in checking and saving accounts)

liquid assets

Which type of liabilities are debts that due more than a year from now and include such things as auto loans, education loans and mortgages

long term

This term refers to the day-to-day financial activities to mange current personal economic resources while working toward long-term financial security

money management

A _______________ is the amount borrowed to buy a house or other real estate that will be repaid over a period of 15, 20 or 30 years

mortgage

Your _______ _________ is the difference between your total assets and your total liabilities

net worth

An example of a trade-off situation (also known as an ______________ ________________) is spending money on a current living expenses reduces the amount you can use for saving and investing for long-term financial security

opportunity cost

A personal balance sheet and a cash flow statement are examples of ____________ _____________ ______________

personal financial statements

This term means that you have assets in excess of liabilities and you are able to pay one's debt

solvent

This term describes the amount by which actual spending is less than planned spending

surplus

__________-_________ pay also called net pay, is a person's earnings after deductions for taxes and other items also called disposable income (amp a person or household has available to spend)

take-home

This term refers to increases in an amount of money as a result of interest earned

time value of money

True/False: The equation: total cash received during the time period - cash outflows during the time period = cash surplus or deficit is how you prepare a cash flow statement

true

These type of expenses are flexible payments that change from month to month (ex. food, clothing, utilities, medical expenses, gifts and donations)

variable