Personal Finance Mid Term
5 C's of Credit
1. Character 2. Capacity 3. Capitol 4. Collateral 5. Conditions
Which of the following are considered to be personal financial statements?
Balance sheet and cash flow statement
opportunity cost of financial services
When making decisions about spending and saving, consider the trade-off between current satisfaction and long-term financial security. Consider the opportunity cost—what you give up—when you evaluate, select, and use financial services.
Having a relationship with a mentor can provide the following benefit(s):
access to influential people, growth in technical and social areas of a career, personalized training, emotional support during difficult times.
Time value of money
calculates increases in an amount of money as a result of interest earned.
Savings compounded ________ would have the highest effective yield.
daily
Compared to a job, a career:
demands regular updating of knowledge.
A decrease in net worth could be the result of:
expenses exceeding income for a month.
Long-term goals
involve financial plans that are more than five years off, such as retirement, money for children's college education, or the purchase of a vacation home.
Exemption
is a deduction from adjusted gross income for yourself, your spouse, and qualified dependents.
CD
is a savings plan requiring that a certain amount be on deposit for a stated time period (ranging from 30 days to five years or more) to earn a specific rate of return.
Cash flow statement
is a summary of cash receipts and payments for a given period, such as a month or a year.
Tax deduction
is an amount subtracted from adjusted gross income to arrive at taxable income.
The financial planning process
is the process of managing your money to achieve personal economic satisfaction. This planning process allows you to control your financial situation.
tax evasion
is the use of illegal actions to reduce one's taxes.
Attempts to increase income are part of the ________ component of financial planning.
obtaining
For an entry-level position, a person's resume is likely to be:
one page.
The main sources of networking include the following:
professional associates, business contacts, community organizations
Compounding
refers to interest that is earned on previously earned interest. Each time interest is added to your savings, the next interest amount is computed on the new balance in the account.
Consumer Credit
refers to the use of credit for personal needs (except a home mortgage) by individuals and families, in contrast to credit used for business purposes.
The financial planning process concludes with efforts to:
review and revise your actions.
APR
the percentage of increase in the value of your savings from earned interest.
tax avoidance
the use of legitimate methods to reduce one's taxes.
Regular checking account
usually have a monthly service charge that you may avoid by keeping a minimum balance in the account.
Characteristics of successful budgets include that they are:
well-planned, flexible, realistic, clearly communicated.
Six Steps in the financial planning process
1. Determine current financial situation 2. Develop your financial goals 3. Identify alternative course of action 4. Evaluate alternatives 5. Create and implement your financial action plan 6. Review and revise the financial plan
Advantages of Personal Planning
1. Increased effectiveness in obtaining, using, and protecting financial resources 2. Increased control of one's financial affairs 3. Improved personal relationships 4. Sense of freedom from financial worries
The budgeting Process
1. Set financial goals 2. estimate income 3. budget an emergency fund 4. budget fixed expenses 5. budget variable expenses 6. record spending amounts 7. review spending + saving patterns 8. Revise goals
What are the main components of personal financial planning?
1.Determine what your current financial situation is. 2.Determine financial goals for yourself. 3.Determine alternatives you could take within your current situation 4.Create a new financial plan for now and the future. 5.Go over the plan many times and revise if needed.
How many workers live pay check to pay check?
78%
Which of the following statements regarding debit and credit card liability is correct?
A debit card carries more risk of loss to the cardholder.
Which of the following would qualify a person for an exemption when computing taxable income?
A dependent
One aspect of financial planning is to control your use of credit. Which aspect of financial planning does this deal with?
Borrowing
What are the main types of financial institutions used by consumers?
Commercial Banks, Mutual savings Banks, Credit unions, saving institutions
Step 4
Consequences of choices: • opportunity cost • what you give up when you make a choice • the cost or trade-off of a decision cannot always be measured in dollars. Sometimes the cost is just in your time.
Step 5
Develop an action plan that identifies ways to achieve financial goals
A question associated with the saving component of financial planning is:
Do you have an adequate emergency fund?
Step 1
Evaluate income, savings, living expenses and debts: • prepare a list of current asset and debt balances and amount spent for various items
Which type of tax is imposed on specific goods and services at the time of purchase?
Excise
What is the purpose of a cover letter?
Express interest in a job
Step 6
Financial planning decisions need to be assessed regularly • review at least once a year • More frequent reviews may be required for changing personal, social and economic factors
Step 2
Identify feelings about money and the reasons for those feelings: • Determine the sources of your feelings about money • Determine the effects of the economy on your goals + priorities • Make sure that your goals are your own and are specific to your situation
General skills
In addition to technical training, managers, employers, and career counselors stress the importance of traits adaptable to most work situations, sometimes called social intelligence.
Which is an advantage of investing in Series EE U.S. Savings Bonds?
Interest is not taxed by the federal government until the bond is cashed.
ACCEPTING AN EMPLOYMENT POSITION
Investigate the work environment, Your initial salary will be influenced by your education and training, company size, and salaries for comparable positions.
_____are expenses that a taxpayer is allowed to deduct from adjusted gross income.
Itemized deductions
Assets
Items that you own with a monetary worth are referred to as:
Liquidity
Liquidity allows you to withdraw your money on short notice without a loss of principal or fees.
One aspect of financial planning is to make sure you maintain adequate insurance coverage for your needs. Which aspect of financial planning does this deal with?
Managing Risk
Safety
Most savings plans at banks, savings and loan associations, and credit unions are insured by agencies affiliated with the federal government.
Which of the following is the process of making and using contacts in the business world for obtaining and updating career information and job possibilities?
Networking
Step 3
Possible course of action: • Continue the same course of action • Expand the current situation • Change the current situation • Take a new course of action
The following information is generally not included on a resume:
References
What activities are commonly suggested when preparing for a job interview?
Role play, study the place in which you are applying, make sure you are prepared, print off resume and/or cover letter.
Which of the following is an example of opportunity cost?
Saving money instead of taking a vacation
Technical skills
Specialized career training refers to technical skills for a specific profession.
One aspect of financial planning is to make wise decisions as to what to purchase and when to purchase it. Which aspect of financial planning does this deal with?
Spending
tax shelter
Tax-deferred retirement plans are a type of:
Balance sheet
The current financial position (including net worth) of an individual or family is best presented with the use of a(n):
Determining net cash flow
The difference between income and outflows can be either a positive (surplus) or a negative (deficit) cash flow. A deficit exists if more cash goes out than comes in during a given month. This amount must be made up by withdrawals from savings or by borrowing.
Net Worth
The value of items owned minus the amounts owed to others equals:
Alimony payments
Which of the following would be deducted from gross income to obtain adjusted gross income?
Exclusions
Which of the following would result in a reduction of taxable income?
Standard deduction
Which one of the following items is a set amount of income on which no taxes are paid?
Which of the following is a way to reduce ATM surcharges?
Withdraw larger amounts rather than making multiple smaller withdrawals
Training Opportunities
Your initial salary will be influenced by your education and training, company size, and salaries for comparable positions.
Career
a commitment to a profession that requires continued training and offers a clear path for occupational growth.
The main goal of personal financial planning is:
achieving personal economic satisfaction.
The stages that an individual goes through based on age, financial needs, and family situation is called the:
adult life cycle.
A major activity in the planning component of financial planning is:
allocating current resources for spending.
Job
an employment position obtained mainly to earn money.
The first step of the financial planning process is to:
analyze your current personal and financial situation.
Comparison of earnings for different savings plans can best be accomplished using the:
annual percentage yield.
Long term liabilities
are debts you do not have to pay in full until more than a year from now.
current liabilities
are debts you must pay within a short time, usually less than a year.
Itemized Deduction
are expenses a taxpayer is allowed to deduct from adjusted gross income.
APY
as the percentage rate expressing the total amount of interest that would be received on a $100 deposit Page 162based on the annual rate and frequency of compounding for a 365-day period.
Net worth
assets - liabilities
The problem of bankruptcy is associated with poor decisions in the ________ component of financial planning.
borrowing
Liquid assets refer to:
cash and other items that are easily converted to cash.
Activity accounts
charge a fee for each check written and sometimes a fee for each deposit, in addition to a monthly service charge.
The Federal Deposit Insurance Corporation provides deposit insurance for:
commercial banks and savings and loan associations.
A tax ________ is an amount subtracted directly from the amount of taxes owed.
credit
A cash flow statement reports a person's or a family's:
current income and payments.
Sources for financial planning can be found from:
financial experts, digital sources, print and media, financial institutions.
A formalized report that summarizes your current financial situation, analyzes your financial needs, and recommends a direction for your financial activities is a(n):
financial plan.
The purpose of an informational interview is to:
gather information about a firm or for career planning.
Intermediate
have a time frame from one to five years.
The success of a financial plan will be determined by:
how resources are used.
Exclusion
is an amount not included in gross income. For example, the foreign earned income exclusion allows U.S. citizens working and living in another country to exclude a certain portion ($101,300, as of 2016) of their incomes from federal income taxes.
Credit
is an arrangement to receive cash, goods, or services now and pay for them in the future.
Opportunity cost
is what you give up by making a choice.
Short term goals
is what you give up by making a choice.
The ability to convert financial resources into usable cash with ease is referred to as:
liquidity.
An advantage credit unions may have over other financial institutions is:
low-cost personal loans.
The time value of money refers to:
ncreases in an amount of money as a result of interest.
An interview designed to reduce the number of candidates for a position to a workable size is a(n) ________ interview.
screening
The finalists for a job position are invited for a(n) ________ interview.
selection
Interest-earing checking accounts
sometimes called NOW accounts (NOW stands for negotiable order of withdrawal), usually require a minimum balance.
SMART goals
specific, measurable, action oriented, realistic, time based
When an individual makes a purchase without considering the financial consequences of that purchase, ignores the ________ aspect of financial planning.
spending
A person's net worth is computed by:
subtracting total liabilities from total assets.
An example of a personal opportunity cost would be:
time comparing several brands of personal computers
The purpose of a debit card is to:
transfer money electronically.
Opportunity cost refers to:
what a person gives up by making a choice.
Current liabilities differ from long-term liabilities based on:
when the debt is due.
Making tax payments
withholding, estimated payments, deadlines