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.

safe deposit box

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

budget

A specific plan for spending income; also called a spending plan.

liabilities

Amounts owed to others

liquid assets

Cash and items of value that can easily be converted 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.

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.

income

Inflows of cash to an individual or a household.

discretionary income

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

cash flow

The actual inflow and outflow of cash during a given time period.

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 the value of assets.

long-term liabilities

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

deficit

the amount by which actual spending exceeds planned spending.