Focus on personal finance chapter 2

Balance sheet

A financial statement that reports what an individual or a family owns and owes; also called a net worth statement or statement of financial position

Cash flow statement

A financial statement that summarizes cash receipts and payments for a given period; also called a personal income and expenditure statement

Liabilities

Amounts owed to others

Discretionary income

Money left over after paying for housing, food, and other necessities

Income

Inflows of cash to an individual or a household

Cash flow

The actual inflow and outflow of cash during a given period

Deficit

The amount by which actual spending exceeds planned spending

Surplus

The amount by which actual spending is less than planned spending

Budget variance

The difference between the amount budgeted and the actual amount received or spent

Net worth

The difference between total assets and total liabilities

Insolvency

The inability to pay debts when they are due because liabilities far exceed from value of assets

Safe deposit box

A private storage area at a financial institution with minimun security for valuables

Budget

A specific plan for spending income also called a spending plan

Liquid assets

Cash and items of value that can easily be covered to cash

Assets

Cash and other property with a monetary value

Money management

Day to day financial activities necessary to manage current personal economic resources while working toward long term financial security

Long term liabilities

Debts that are not required to be paid in full until more than a year from now

Current liabilities

Debts that must be paid within a short time, usually less than a year

Take home pay

Earnings after deductions for taxes and other items; also called disposable income