Personal Finance CH 3 Questions
What are the basic money management activities
1. Creating and implementing a plan for savings 2. Storing and maintaining personal financial records 3.Preparing personal financial statements
Budgeting process in order
1.set financial goals 2.Estimate expected income 3.Budget for an emergency fund and savings 4.Budget fixed and variable expenses 5.record actual income and spending amounts
When saving for an emergency fund you should set aside
3 to 6 months of living expenses
What is a balance sheet
A personal financial statement that shows waht you own and owe as of a certain date.
when you finish categorizing assets and calculating total assets what should you do next
Classify liabilities calculate net worth
How to be succeessfull at Money Managment
Daily spending and saving are the main elements of fiancial PLanning Your decicions need to be corordinated with needs goals and personal situations
Money Management
Day-to-day financial activities necessary to manage current personal economic resources while working toward long-term financial security.
Does a low current ratio better
False For a current ratio to be improving it would be larger tahn last period
What factors affect variable expenses
Health Economic conditions House hold situations Time of the year
What are common types of real estate held by individuals
Homes Condos Vacation property and land
What are the four categories for a balance sheet
Liquid Assets Personal Possessions Investment assets and real estate
what measure indicates a persons ability to weather an emergency financially is
Liquidity ratio
what could be an opportunity cost when making a purchase
Lost investment earnings
What is an example of opportunity cost
Lower Future investment as a result of purchase
Is real estate a liquid asset
No
Credit records include
Payment records monthly statements list of credit account numbers telephone numbers of issuers.
Examples of personal and employment records
Resume employee benefits booklet and social security card
Does a low debt ratio indicate a better financial condition
True
Financial experts recommend that you save 5% to 10% of your income
True
What would not be a financial statement record
W-2 Form
A balance sheet is a listing of what
Your assets liabilities Net Worth
When saving for specific goals what can you do.
a lump sum amount or periodic deposits that grow to desired amount
What actions can be taken to help families save $
adopting wise grocery shopping habits Switching to less expensive phone plan paying less taxes each month and saving monthy rather than waiting for a refund Monitoring energy usage to use less when possible
what are common sources of income
amounts received from pensions wages. salaries, commissions Gifts and Grants Social Security income payments Self employment income
You should keep an eye on change taking place in your financial situation by
calculating your financial ratios
What are examples of liabilities
credit card bills medical bills car loans mortgages
what should you asses when assesing your current financial situation
current financial situation determine your personal needs values and life situation
What is take-home pay?
earnings after deducting for taxes and other items
What are Financial ratios
guidelines for measuring changes in your financial situation
Cash Flow
inflow and outflow of cash during a given time period
Your retirement account is what type of asset
investment
Examples of short term liabilities
medical bills credit card balances
what are examples of fixed expenses
mortgage payments loan payments Rent
Physical budget
must have physical components such as paper files and folders
What would be examples of personal property on a balance sheet
old rugs, furniture automobiles
what are common reasons to save money
pay unexpected expenses pay for the replacement of appliance pay for vacation
What should you revise when evaluating your budget
revise your financial goals and budget allocations and review your financial progress.
Liquid assets include
savings account cash value of life insurance cash
What records are filed under consumer and automobile records
service and repair records for automobiles owners manuals for major appliances Receipts for major purchases Warranties
What are some examples of intermediate goals for a single college student
take a vacation to Europe pay off student loans in 5 yrs or less Attend graduate school after getting undergraduate
what is Insolvency
the ability to pay your bills as come due bc your liabilities exceed your assets
explain net worth
the amount you would have if you sold the assets and paid off the liabilities Assets - liabilities= net worth
Discretionary Income
what you have left after you havepaid for houseing, food, and other necessities
What should you do if your income is irregular
you should underestimate next years expenses
When comparison shopping you can incur opportunity cost bc
you spend time and time is money