FIN 381 chapter 3
Measurable Action
When setting financial goals they should Specific, _____, _____-oriented, Realistic, and Time-based.
Specific Realistic Time
When setting financial goals they should _____, Measurable, Action-oriented, _____, and _____-based.
Budgeting apps
Your cell phone or tablet has various money management features called _____ _____
Computerized
A _____ budget system is developed using spreadsheet software.
Balance sheet
A common starting point for financial planning that is a report on what you own and what you owe; also called a net worth statement or statement of financial position
Consumer price index (CPI)
A measure of the general price level of consumer goods and services in the united states
Take home pay
A person's earnings after deductions for taxes and other items; also called net pay
reduced
A person's net worth would increase as a result of _____ amounts owed to others.
goals
A personal balance sheet helps you measure progress toward financial _____.
Savings ratio
Amount saved each month divided by gross income=
realistic clearly communicated
Characteristics of successful budgeting are well-planned, _____, flexible, and _____ _____.
emergency
Financial advisors suggest that an _____ fund representing 3 to 6 months of living expenses should be established for use in periods of unexpected financial difficulty.
Variable expenses
Flexible payments that change from month to month
Investment assets
Funds set aside for long-term financial needs: financing for children's education, purchasing a vacation/home, planning for retirement
projected actual
Hey budget involves _____ income and expenses, while cash flow statements report the _____ income and expenses.
Assets
Liabilities+net worth=_____
Current ratio
Liquid assets divided by current liabilities=
Liquidity ratio
Liquid assets divided by monthly expenses=
records financial planning
Maintaining financial _____, creating personal _____ statements, and _____ your spending are essential money management activities for successful personal financial management.
Discretionary income
Money left over after paying for housing, food, and other necessities.
liquid asset
Nick Boss has a savings account with $550 in it. He knows that he can withdraw this money whenever he wishes. This would be an example of?
Time value of money
Refers to increases in an amount of money as a result of interest earned.
Money management
Refers to the day to day financial activities necessary to manage current personal economic resources while working toward long-term financial security.
Cash flow
The actual inflow and outflow of cash during a given time period.
Net worth
The difference between your total assets and your total liabilities; assets-liabilities= _____ _____
Insolvency
The inability to pay debts when they are due; when liabilities far exceed available assets; can result in bankruptcy
Personal possessions
The major portion of assets for most people: automobiles, furniture/appliances, stereo/video/entertainment equipment, computer, jewelry, and other personal belongings
Personal financial
The personal balance sheet and cash flow statement are called _____ _____ statements; provides information about your current financial position and a summary of your income and spending.
goals emergency savings
The steps of budgeting activities are first to set financial _____, estimate income, budget _____ fund and _____, budget fixed expenses, and finally budget variable expenses.
income fixed variable
The steps of budgeting activities are first to set financial goals, estimate _____, budget emergency fund and savings, budget _____ expenses, and finally budget _____ expenses.
insurance
When filing financial records your original insurance policies, list of insurance premium amounts with due dates, medical information including health and prescription history, and claims report should be kept in a folder called _____ records.
tax
When filing financial records your paycheck stubs, W-2 forms, 1099 forms, receipts for tax deductible items, records of taxable income, and past income tax returns and documentation should be kept in a folder called _____ records.
credit
When filing financial records your unused credit cards, payment books, receipts in monthly statements, and list of credit account numbers with telephone numbers of issuers should be kept in a folder called _____ records.
consumer purchase automotive
When filing financial records your warranties, major purchase receipts, owners manuals for major appliances, automobile service records, automobile registration, and automobile owners manual should be kept in a folder called _____ _____ and _____ records.
cash flow
A _____ _____ statement provides the foundation for preparing and implementing a spending, saving, and investment plan.
Safe deposit box
A private storage area in a financial institution with maximum security for valuables and difficult to replace documents.
Cash flow statement
A report that is a summary of cash receipts and payments for a given; Also called personal income and expenditure statement.
Budget
A spending plan that is necessary for successful financial planning.
Written budget
Allows you to provide a detailed plan for spending can be in a notebook, budget record book, or on accounting paper.
Liabilities
Amounts owed to others now, but does not include items not yet due such as next months rent
online
An _____ budget may be used through a website such as mint.com, or financial institutions with various budgeting and personal financial management tools on their websites.
Long-term liabilities
Auto loans, educational loans, and mortgages are considered _____ _____ _____.
not
Bonuses, gifts, or on expected income should _____ be considered until the money is actually received.
Liquid assets
Cash and items of value that can easily be converted to cash: money in checking and savings accounts, life insurance cash value
Assets
Cash or other tangible property with a monetary value
planned flexible
Characteristics of successful budgeting are well-_____, realistic, _____, and clearly communicated.
Long-term liabilities
Debts you do not have to pay in full until more than a year from now
Current liabilities
Debts you must pay within a short time, usually less than a year.
mental budget
Exists only in a person mind, a simple system appropriate for limited resources and minimal financial responsibilities but can't get dangerous when you forget the amounts you plan to spend.
mistakes
Failing to save, never creating a budget, under estimating expenses, and not planning for large costs are the main budgeting _____ people make.
Ratios
Financial _____ provide guidelines for measuring the changes in your financial situation.
Variable
Food, clothing, telephone, electricity, personal care, medical expenses, eating out, recreation/entertainment, gifts, donations are all examples of _____ expenses.
Real estate
Includes a home, condominium, vacation property, or other land that a person or family owns
Income
Inflows of cash for an individual or household.
Physical budget
Involves envelopes, folders, or containers to hold money or slips of paper representing amount allocated for spending categories; allows you to actually see where your money goes
balance sheet
Karen Price has created a financial statement for herself that lists all of the assets she owns as well as the debts she owes. This would be an example of:
opportunity cost
Kyle Burroughs has decided to put $25 more per week in his savings account. He knows this will reduce his ability to go out to eat each week but thinks building his savings is important. This would be an example of?
Debt ratio
Liabilities divided by net worth=
Debt payments ratio
Monthly credit payments divided by take home pay=
Fixed expenses
Payments that do not vary from month to month
Fixed expenses
Rent/mortgage, loan payment, cable television, monthly train tickets/commute for work, life insurance, apartment insurance are all considered _____ _____.
Budget
Spending plan
T
T/F: Cutting insurance costs, adopting wise grocery shopping habits, using less energy, switching to a less expensive cable/phone plan, avoiding the fees and high payments that come with debt, and choosing not to receive a tax refund are ways households can save money each month.
T
T/F: Daily purchasing decisions influence cash outflows and long-term financial goals.
F
T/F: For many years, the United States has ranked highest among industrial nations in savings rate. True
F
T/F: Furniture, jewelry, and an automobile are examples of liquid assets.
T
T/F: Insolvency is a result of having more liabilities than assets.
F
T/F: Money management activities refer to long-term investment decisions.
F
T/F: Opportunity costs are only associated with money management decisions involving long-term financial security.
F
T/F: Your net worth is the amount of money available for use.
law of 72
The _____ _____ _____ can help you budget for price rises: at 2% inflation, prices will double in 36 years (72/2=36), at 6% inflation, prices will double in 12 years (72/6=12)
Deficit
The amount by which actual spending exceeds planned spending
Surplus
The amount by which actually spending is less than planned spending.
Budget variance
The difference between the amount budgeted and the actual amount received/spit.
Cash flow statement
This type of report provides data on your income and spending patterns which are helpful when preparing a budget
Balance sheet
To determine a person's solvency, which financial document should be consulted?
assess plan implement evaluate
When creating and implementing a budget one must _____ current situation, _____ financial direction, _____ budget, then _____ budget.
month
When estimating income for a given time period, a _____ is often used as a budgeting period since many payments are due monthly.
money management
When filing financial records your Current budget, recent personal financial statements, list of financial goals, list of safe deposit box contents should be kept in a folder called _____ _____ records.
investment
When filing financial records your Records of stock, bond, and mutual fund purchases and sales, list of investment certificate numbers, brokerage statements, dividend record, and company annual reports should be kept in a folder called in the _____ records.
financial services
When filing financial records your checkbook and unused checks, bank statements and canceled checks, savings statements, and local information and number of safe deposit box should be kept in a folder called ____ ____ records.
Personal employment
When filing financial records your current resume, employee benefit info, Social Security numbers, and birth certificates should be kept in a folder called _____ and _____records.
housing
When filing financial records your lease (if renting), property tax records, and home repair for improvement receipts should be kept in a folder called _____ records.
estate planning retirement
When filing financial records your well, pension plan info, IRA statements, social security information, and trust agreements should be kept in the _____ _____ and _____ records folder.
Current liabilities
medical bills, tax payments, insurance premiums, cash loans, and charge accounts, Credit card balances are all considered _____ _____.
