Personal Finance Definitions

Interest (Saving)

Income earned from allowing someone else to use your money.

fraud

Intentional deception to influence someone to part with something of value.

Expense

Money spent to buy or do something.

Opportunity Cost

The NEXT BEST alternative given up when a choice is made.

credit

The ability to buy goods or services now BUT pay later.

Compound Interest

The interest a person earns on today's money that will compound (add) to the amount of money that will earn interest LATER.

Saving

Setting as idea portion of current income for future use.

How many years will it take to double your money invested at a 3% interest rate?

72/3 = 24

How many years will it take to double your money invested at a 4% rate?

72/4 = 18

How many years will it take to double your money invested at a 6% interest rate?

72/6 = 12

identity theft

A crime that occurs when someone uses ANOTHER PERSONS name, Social Security number, credit card number or other personal informa tion WITHOUT permission.

insurance

A means of guaranteeing financial protection against various risks

Consumer

A person who purchases AND uses goods and lor services. YOU!

credit report

A record of your personal financial transactions (YOUR credit history or report card).

Budget

A spending plan for managing money during a given period of time.

installment loan

Borrowed money that is repaid in equal payments.

Principal

an initial amount of savings OR an original amount $$ borrowed.

Five Elements of Good Financial Planning 1. _________ money 2. __________ money 3. __________ money ___________ 4. Use _________ CAUTIOUSLY!! 5. __________ your finances!

1. Earn 2. Save 3. Spend, Wisely 4. Credit 5. Protect

Investing

Putting money into a venture that offers the POSSIBILITY of earnIng more money.

Income

Any money earned or received (wages or gifts).

Fixed Expenses

Expense that DO NOT change from month to month ... IE- Rent.

variable expenses

Expenses that DO VARY from month to month. IE movies, car repairs, doctor bills, etc ...

PYF

Pay Yourself First - Setting aside money for saving prior to paying monthly expenses.

Interest (Borrowing)

Payment for the use of money (cost of using the money).

risk management

Predicting and minimizing the chance of financial loss.

PSA

Public Service Announcement -An advertisement sent through mass media with a message for the common good. Often done via radio, television, billboards or other electronic and print media.

Savings

The money left over after expenses have been paid.

Personal Finances

The practice of determining AND managing a person's financial needs and goals for the future.

debt

money owed to someone else.

Rule of 72

n order to find the NUMBER OF YEARS required to double your investment (money) at a given interest rate, you divide the compound return (% interest rate) into 72.