Chapter One Personal Finance

Financial plan

A formalized report that summarizes your current financial situation, analyzes your financial needs, and recommends future financial activities.

Inflation

A rise in the general level of prices.

Bankruptcy

A set of federal laws allowing you to either restructure your debts or remove certain debts.

Values

Ideas and principles that a person considers correct, desirable, and important.

time value of money

Increase in an amount of money as a result of interest earned.

Future Value

The amount to which current savings will increase based on a certain interest rate and a certain time period; also referred to as compounding.

Present Value

The current value for a future amount based on a certain interest rate and a certain time period; also referred to as discounting.

personal financial planning

The process of managing your money to achieve personal economic satisfaction.

Adult life cycle

The stages in the family situation and financial needs of an adult.

Economics

The study of how wealth is created and distributed.

opportunity cost

What a person gives up by making a choice.