Personal Finance Unit 2
What is a variable expense and what is an example of one?
An expense that can vary from month to month, water bill
What is a periodic expense and what is an example of one?
An expense that happens not every month, property tax
What is a fixed expense and what is an example of one?
An expense that will not change from month to month, mortgage
What is net worth?
Assets- liabilities= net worth
What is a liability and give an example of a liability you have?
Financial obligations, my car loan
How can you increase your net worth?
Getting more assets and getting rid of liabilities
How can you decrease your net worth?
Getting more liabilities, having less assets
What is net pay and how is it calculated?
Gross pay - deductions= net pay
Will your budget ever change? Why or why not?
Yes, if income changes
Personal Balance Sheet
a financial statement that show net worth
What is discretionary income and would it be used to pay for needs or wants?
The amount of income you have left after you have paid for all of your needs, need
What is cash flow?
The money that actually goes in and out of your wallet or bank
What is gross pay?
The money you make before taxes
What is a budget deficit?
When you plan/ actually spent more than you make
What is a budget variance?
Difference between estimated and actual expenses
How do you calculate a variance?
Estimated - actual= variance
How do you calculate net cash flow?
Income- expenses- net cash flow
What is a budget?
Is a plan for managing your money for a given period of time
What is an asset and give an example of an asset you have?
Item that has economic value, my cloths
What is income and what are some sources of income?
Money you make, job, gifs, allowance
Expense-
Money you must pay to others Food Gasoline Clothing Entertainment
Does a budget use gross pay or net pay? Why?
Net pay bc you don't get all the money from gross pay
Why should you add savings as an expense item in your budget?
So you can insure a secure and comfortable future for yourself
What is an expense?
Stuff you have to pay for, like rent or car insurance
Why is it important to create a budget?
To insure a comfortable life and not going into debt
What does Pay Yourself First mean?
Treating your savings as a fixed expense
What determines how your budget looks (where you plan to spend your money and how much you plan to spend)?
Wants, needs, income, dependents, expenses
What is a budget surplus?
When you plan/ actually have less expenses than you do of income
Liquidity
ability to turn an asset into cash while maintaining its value
Zero balance
income=expenses Achieved by adjusting Variable Expenses and Savings
Income
money you receive Pay check Gifts Allowance
Liquidity Risk-
possibility of having a difficult time turning an asset into cash or its value is now smaller
Net force-
take home pay (the amount of the paycheck) Net pay/net income- after deductions-what you actually put in your wallet/use/check
Payroll deductions
taxes, retirement, health benefits
Discretionary income
the amount of income you have left after you have paid for all of your needs Total income- Rent and food and utilities and ect. = discretionary income It is what you use to pay for your wants
Gross income
total amount of money earned during a pay period(salary of hourly wage x hours worked)
