Personal Finance Chapter 4

Why would you prepare a personal property inventory?

As a safeguard or proof of what you have in the event of a natural disaster, fire, or robbery.

Financial Plan

A set of goals for spending, saving, and investing money

Variable Expenses

Costs that change in amount and type, based on your choices

Fixed Expenses

Costs that do not change from month to monthb

Personal Inventory List

List of all valuable items you own, along with their purchase prices and approximate current values

Liabilities

Money that you still have to pay people back

Net Worth Statement

a snapshot of an individual's financial health, at one particular point in time.

Budget

a spending and saving plan based on your expected income and expenses

Explain the importance of budgeting.

Budgeting allows you to create a spending plan and savings for your money, and it ensures that you will always have enough money for the things you need or may need in the future or that you will be able to buy the things you have invested your money towards. It also helps to keep you out of debt or helps you work your way out of debt

How are fixed expenses different from variable expenses?

Fixed expenses are different from variable expenses because fixed expenses are consistent cost that need to be paid at specific times. Variable expenses are inconsistent costs that vary depending on the choices you make.

Disposable Income

Income you receive each month that you are able to spend

Assets

Items of value that you own

Why would you prepare a net worth statement?

To see if you can get a loan on something (usually when applying for one)

Why do you usually financially plan?

- Determines and evaluates options for your money -Prioritize your options so your money goes as far as possible -Avoid careless and wasteful spending -Organize your financial resources so you can achieve your financial goals -Avoid money worries by planning your saving, spending, and borrowing to live within your income

Examples of fixed expenses?

Rent, Insurance, Car Payment and Utilities