Personal Finance Chapter 3
How to budget successfully
1. Practical 2. Flexible 3. Carefully Planned 4. Easily Accessible 5. Must be written (eh...)
Personal Balance Sheet (Net Worth Statement)
A financial statement that lists items of value owned, debts owed, and a person's net worth
Consumer Price Index (CPI)
A measure of the changes in prices commonly purchased goods and services in the US
Liabilities
The debts you owe
Net Worth
The difference between the amount that you own and the debts that you owe
Wealth
Is an abundance of valuable material possessions or resources
The key to establishing a sound financial future is to
increase your savings
An example of a variable expense
medical expenses
Personal Financial Statement
A document that provides information about an individual's current financial position and presents a summary of income and spending
Insolvency
A financial state that occurs if liabilities are greater than assets
Safety Deposit Boxes
A locked box in a bank where you can keep your valuables or papers; not easily accessible; banks usually have insurance to cover contents
Assets
Are any items of value that an individual or company owns, including cash, property, personal possessions, and investments
Liquid Assets
Cash and items that can be quickly converted to cash
Real Estate
Land and any other structures that are on it
Cash Flow
Money that actually goes into and out of your wallet and bank accounts
An example of cash outflow is
a credit card payment
The amount of income left after taxes and other deductions are taken out of your paycheck is called
net pay
Cars fall into the category of
personal possessions
Money Management
planning how to get the most from your money
Financial Documents
receipts, bills, agreements, titles/proof of ownership, taxes - ANYTHING that has to do with money
The condition that occurs when a person's liabilities are greater than his or her assets is called
solvency
Your budget shows a surplus when you
spend less money than you earn
An opportunity cost is a
trade-off
Take-home Pay (Net Pay)
The amount of income left after taxes and other deductions are taken out of your gross pay
Budget Variance
The difference between the budgeted amount and the actual amount that you spend
Deficit
The financial situation that occurs when more money is spent than is earned or received
Discretionary Income
The money left over after paying for the essentials
Income
The money you receive
Market Value
The price at which property would sell
Your net worth is the difference between your
assets and liabilities
A home file is the best place to keep
canceled checks
