SFL 260 -- Exam 1

budgeting steps

-set goals to address family needs and wants, and determine financial resources needed to meet those goals -categorize your current come and spending (family income and expense statement) -develop your family budget by allocating income to budget categories that will meet your family's goals -implement your budget by tracking income and expenses against your budget -on a regular basis (usually monthly), compare your budget to your actual expenses and make changes to your budget when necessary to achieve your goals

Annual inflation rate in the US in 2014

.8%

what degree the FDIC insures deposits in member banks.

250,000

cost for bouncing first check on ave

30.47

What is an income and expense statement

A record of a family's PAST cash inflows and outflows. For some period of time Usually a few months or a year Used as the basis to project in to the future Getting a reasonable budget.

Records you should keep forever

Adoptions papers Birth certificates Citizenship papers Death certificates Divorce decrees Education records Marriage licenses Military discharge papers Passports even expired passports Safe deposit box (key and inventory) Social security cards

records you should keep forever and update as needed

Advance directives (living wills) Family and personal journals Family and personal photos, videos, audio recordings Household inventory Life histories (Family Search) Password list Powers of attorney Safe deposit box inventory Social security statement (current year) Vaccination records Wills

Annuity

Annuity: cash flow that takes place more than once May be received by you (allowance, bi-monthly paycheck...) Or leaving you (monthly payment on a loan....)

records you should save for at least 7 years

Anything that could be used in an I.R.S. audit Tax deductible receipts (e.g., end-of-year contribution receipt given to you by ward clerk) Donation receipts from Deseret Industries Access to bank statements Access to credit card statements Medical receipts W-2 forms Other documents for deductions

records you should keep ask long as you are the owner

Contracts Home purchase and improvement records Life insurance policies Loan documents Real estate deeds Receipts for items under warranty Receipts for large purchases Service contracts and warranties Stock and bond certificates Vehicle titles

Criteria for comparing financial institutions

Convenience, Cost and fees, Consideration, security, Gain

HALT

Hungry, Angry, Lonely, Tired

equation for interest paid and interest earned

I=PRT

What category is often overlooked in a budget?

Miscellaneous

MMA

Money Market account. This si similar to a savings account, but instead of having a fixed rate of interest, its interest rate varies with the current level of market interest rates

Net worth

Net worth = Current market value of your family assets MINUS the liabilities you have (debt) on a particular date (snapshot).

other family records you might want to save

Photo albums Digital copy Be sure to label (when, where, with whom) Children's drawings and schoolwork Family and personal journals Communication Letters Personal e-mails Video or Audio Records Blogs Any other treasured records Put these in an accessible form!

Characteristics of a SMART goal

Specific Measurable Attainable Relevant Timely

investment

a current commitment of your money in the expectation of reaping future returns

income and expense statement

a record of your family's past cash inflows and outflows over a specified period of time

budget

a spending plan in which family income is allocated to specific categories of expenditures

effective yield

actual interest rate that occurs given that compounding occurs more than once per year Usually called Annual Percentage Yield (APY) Sometimes called Effective Annual Yield (EAY)

savings ratio

amount saved monthly divided by gross income (I recommend >.10)

stewardship

an ethic that emobdies the responsible planning and management of resources

variable expenses

at least some measure of control (food, clothing, utilities, vacations, entertainment, etc.)

inflation

decrease in the purchasing power of money

creating your family financial plan

divide what you are about evaluate your financial health define your family goals develop a plan of action implement your plan revis as necessary

cash outflow

family expenditures

cash inflow

family income

monetary asset

financial resources that are legal tender (cash) or can be converted to legal tender v. quickly. (money in your wallet, coins in a pickle jar, checking and savings accounts, certificates of deposit, money market accounts

FV

future value; the monetary value of an investment at some point in the future

compound interest

interest earned on interest

debt ratio

liabilities divided by net worth (lower the better)

current ratio

liquid assets (cash, savings, stocks, bonds ... not 401ks or IRAs until older) divided by current liabilities (higher the better)

liquidity ratio

liquid assets divided by monthly household expenses (expenses after taxes, tithing, savings). Number of months you could live on your liquid assets.

emergency fund/financial reserveq

liquid financial resources to meet unexpected and immediate needs; at least 3-6 months of living expenses

fixed expenses

little or no control (tithing, rent, mortgage, car payment, insurance, tuition, etc.)

debt-payments ratio

monthly credit payments divided by after-taxes take-home pay (<.15)

NCUA

national credit union administration. Governmetn agency with insures deposits at credit unions for up to 250,000 per depositor or 500000 or joint depositors

Know the three things that Dr. Hill wants everyone to remember.

o Life is hard, but you can do hard things o When life doesn't go as planned, don't get frustrated, make the best of it o TTT—Things take time

Know the four "what's"

o Ownership - God owns everything o Stewardship - meet all needs and as many worthy wants as possible o Agency - make wise financial choices to save and sacrifice o Helps you master the flesh. o Accountability - to each other and to God

Know the 8 "how's"

o Pay the Lord first in tithes, offerings, and other contributions o Create, use, and update a budget o Minimize and eventually eliminate debt o Prepare for emergencies and build a reserve (3 to 6 months) o Invest early, consistently, and wisely o Always contribute to a Roth 401k at least to the match. o Protect yourself and your family through adequate insurance. o Share finance as equal partners in your marriage o Teach your children and family about finances.

Know the four "why's"

o Spiritual: To bring us to Christ o Temporal: To help us become wise stewards. o Individual: To accomplish your divine mission. o Family: To return with your family back to Heavenly Father's presence.

Know the primary purposes of SFL 260

o To teach you to magnify your financial stewardship and use prudent financial management so you can more fully bless yourself, your family, and others. o It is NOT primarily to teach you how to get rich or accumulate wealth.

lumpsum

one payment at a specific time

ways to budget

online internet services spreadsheets/written computer software methods the envelope method zero-based budgeting do nothing and hope

CD's

pay a fixed interest rate for keeping your funds in the account

PMT

payment; a periodic amt invested or received during the life of the investment

PV

present valeu; current value of money

nominal rate

rate of interest using annual compounding Annual Percentage Rate (APR)

interest

remuneration for investing or loaning money

annuity

the disbursement of money on a periodic basis--a series of equal payments which are made at a specific tie

coupounding periods (n)

the frequency with which interest is applied to an investment

meaning of opportunity cost

the loss of potential gain from other alternatives when one alternative is chosen. "idle cash balances represent an opportunity cost in terms of lost interest"

principal

the original amount of money borrowed or invested (generally synonymous w/ pv)

opporunity cost

the potential loss or gain that occurs when one financial option is chosen over another

real return

the rate of return on an investment after the impacts of taxes and inflation are taken into accoun

Interest rate

the rate you will receive for investing at a specified compounding period for a specified period of time (generally expressed in percent per year

after-tax return

the return on an investment after the impact of federal, state, and local taxes has been taken into account

nominal return

the return on an investment before the impacts of inflation and taxes are taken into account

purchasing power

the value of monetary funds based on the mat of goods or services that one unit of money can buy

TVM

time value of money; how the value of money changes over time due to inflation and interest