Personal Financial Stewardship {Chapter 2}

Balance Sheet

A financial statement that reports what an individual or a family owns and owes; also called a net worth statement or statement financial position.

Cash Flow Statement

A financial statement that summarizes cash receipts and payments for a given period; also called a person income and expenditure statement.

Safety Deposit Box

A private storage area at a financial institution with maximum security for valuables

Budget

A specific plan for spending income; also called a spending plan

Liabilities

Amounts owed to others

Liquid assets

Cash and items of value that can easily be converted to cash.

Assets

Cash and other property with a monetary value

Money Management

Day-to-day financial activities necessary to manage current personal economic resources while working toward long-term financial security.

Long-term liabilities

Debts that are not required to be paid in full until more than a year from now

Current Liabilities

Debts that must be paid within a short time, usually less than a year

Take-home pay

Earnings after deductions for taxes and other items; also called disposable income

Income

Inflows of cash to an individual or a household

Net Worth Calculation

Items of Value (what you own)- Amounts owed(what you owe)=Net worth (your wealth)

Discretionary Income

Money left over after paying for housing, food and other necessities.

Cash Flow

The actual inflow and outflow of cash during a given time period

Deficit

The amount by which actual spending exceeds planned spending

Surplus

The amount by which actual spending is less than planned spending

Budget Variance

The difference between the amount budgeted and the actual amount received or spent

Net Worth

The difference between total assets and total liabilites

Insolvency

The inability to pay debts when they are due because liabilities far exceed the value of assets