Personal Finance

Financial Plan

A set of goals for spending, saving and investing money

Budget

A spending and savings plan

Variable Expenses

Costs that change in amount and type based on your choices

Fixed Expenses

Costs that do not change from month to month

Liabilities

Debts you owe to others

How are fixed expenses different from variable expenses?

Fixed expenses are costs that don't change from month to month, while variable expenses are costs that vary.

What is the importance of budgeting?

In order to plan your spending and saving so that you won't have to borrow money to meet your daily needs. A budget helps you balance the money coming in and going out.

Assets

Items of value that you own

Disposable Income

Money you have left to spend each month

Net Worth

The difference between assets and liabilities

Why would you prepare a net worth statement?

To apply for a loan or credit. If you pay back your debts than you are a "good risk" and are more likely to get a loan.

Why would you prepare a personal property inventory?

To show all the valuable items you own in case they are lost in a flood or a fire or if they are stolen.