Personal Finance Unit 3

personal finance statement

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

insolvency

a financial state that occurs if liabilities are greater than assets

consumer price index (CPI)

a measure of the changes in prices for commonly purchased goods and services in the United States

budget

a plan for using money to meet wants and needs necessary for successful financial planning to learn to live within income. Spend money wisely

safe-deposit box

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

real estate

land and any structures that are on it that a person or family owns

money management

planning how to get the most from your money

take-home pay

the amount of income left after taxes and other deductions are taken out of your gross pay

liabilities

the debts that you owe

net worth

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

budget variance

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

deficit

the financial situation that occurs when more money is spent than is earned or received

discretionary income

the money left over after paying for the essentials—food, shelter, clothing, transportation, and medication evaluate the strength of a person's income by measuring this

cash flow

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

market value

the price at which property would sell

Creating Personal Balance Sheet

Step 1: Determine Your Assets Step 2: Determine Your Liabilities

Creating Cash Flow Statement

Step 1: Record Your Income Step 2: Record Your Expenses Step 3: Determine Your Net Cash Flow

creating a budget

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

personal balance sheet

also called a net worth statement; a financial statement that lists items of value owned, debts owed, and a person's net worth

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

net cash flow

by subtracting expenses from income

liquid assets

cash and items that can be quickly converted to cash (Money in savings and checking accounts)