Personal Finance: Money Management

Characteristics of a Good Budget

1-Carefully planned, 2-Practical, 3-Flexible and 4-Written and easily accessible.

Steps to Create a Personal Balance Sheet

1-Determine Your Assets, 2-Determine Your Liabilities, 3-Calculate Net Worth, 4-Evaluate Financial Situation.

Ways to Increase Your Savings

1-Pay Yourself First, 2-Payroll Savings, 3-Spending Less to Save

Steps to Create a Cash Flow Statement

1-Record Your Income, 2-Record Your Expenses, 3-Determine Your Net Cash Flow, 4-Evaluate your Financial Position

Steps to Create a Practical Budget

1-Set Your Financial Goals, 2-Estimate Your Income, 3-Budget for Unexpected Expenses, 4-Budget for Fixed Expenses, 5-Budget for Variable Expenses, Step 6-Record What You Spend, and 7-Review Spending and Saving Patterns.

Insolvency

A financial state that occurs if liabilities are greater than assets. [You owe more than you own.]

Liabilities

The debts that you owe.

Net Worth

The difference between the amount that you own and the debts that you owe.

Personal Balance Sheet

Also called Net Worth Statement. A financial statement that lists items of value owned, debts owed, and a person's net worth.

Take Home Pay

Also known as "net pay". The amount of income left after taxes and other deductions are taken out of your gross pay.

Market Value

Also referred to as "Fair Market Value". The price at which property would sell.

Wealth

An abundance of valuable material possessions or resources.

Assets

Any items of value that an individual or company owns, including cash, property, personal possessions and investments. Includes liquid assets, real estate, personal possessions and investment assets.

Liquid assets

Cash and items that can be quickly converted in cash.

Fixed Expenses

Expenses that do not change month to month.

Variable Expenses

Expenses that vary month to month.

Real estate

Land and any structures on it such as a house or other building that a person owns.

Long Term Liabilities

Long term debts that do not have to be fully repair for at least one year. Ie, car loans, student loans and mortgage loans.

Deficit

Negative cash flow. A financial situation that occurs when more money is spent that is earned or received.

Storage locations for Financial Documents

1-Home Files [frequently accessed, relatively easy to replace], 2-Safe Deposit Box [important and hard to replace documents and items], 3 Computer [financial record storage, access account information online, etc.]

Benefits of Organizing Your Financial Documents

1-Makes it easier to pan and measure progress, 2-Handle routine money matters, 3-know how much money is available, and 4-Make effective decisions.

Personal Financial Statement

A document that provides information about an individual's current financial position and presents a summary of income and spending.

Budget

A plan for using moey to meet wants and needs.

Safe-Deposit Box

A small, secure storage compartment that you can rent in a bank, usually for $100 a year or less.

Money Management

Planning how to get the most from your money.

Surplus

Positive cash flow. Extra money that can be spent or saved depending on a person's financial goals and values.

Investment Assets

Retirement accounts and securities such as stocks and bonds.

Current Liabilities

Short term debts that have to be paid within one year. Ie, medical bills, cash loans, and taxes.

Budget Variance

The difference between the budgeted amount and the actual amount that you spend.

Discretionary Income

The money left over after paying for the essentials such as food, clothing, shelter, transportation and medication.

Cash Flow

The money that actually goes into and out of your wallet and bank accounts.

Income

The money you receive, also know as cash inflow.