Personal Finance - Chapter 3
Day-to-day financial activities necessary to manage current personal economic resources while working toward long-term financial security
Money Management
The difference between total assets and total liabilities
Net Worth
Cash and other property with a monetary value
Assets
A specific plan for spending income
Budget
The actual inflow and outflow of cash during a given time period
Cash flow
A financial statement that summarizes cash receipts and payments for a given period
Cash flow statement
Debts that must be paid within a short time, usually less than a year
Current liabilities
The amount by which actual spending exceeds planned spending
Deficit
Money left over after paying for housing, food, and other necessities
Discretionary income
Assets represent amounts owed to others that must be paid within the next year
False
Most financial records should be kept in a safe-deposit box
False
Definite financial obligations are referred to as
Fixed expenses
Inflows of cash to an individual or a household
Income
A personal cash flow statement presents
Income and payments
The inability to pay debts when they are due because liabilities far exceed the value of assets
Insolvency
Earnings after deductions for taxes and other items; also called disposable income
Take-home pay
A budget deficit exists when actual spending exceeds projected spending
True
A personal balance sheet reports the financial position of a person or family on a given date
True
Spending less than your income will increase net worth
True
The difference between the amount budgeted and the actual amount received or spent
Budget variance
A financial statement that reports what an individual or a family owns and owes; also called a net worth statement
Balance sheet
An example of a liquid asset would be
A checking account
A (n) ______________________ is a specific plan for spending
Budget
Amounts owed to others
Liabilities
________________________ represents amounts owed to others
Liabilities
Cash and items of value that can easily be converted to cash
Liquid assets
Debts that are not required to be paid in full until more than a year from now
Long-term liabilities
A private storage area at a financial institution with maxim security for valuables
Safe deposit box
The amount by which actual spending is less than planned spending
Surplus