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Flashcards in Quiz 1 Deck (18)
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1
Q

Six Step Procedure for Financial Planning

A
  1. Determine your current financial situation
  2. Develop your financial goals
  3. Identify alternative courses of action
  4. Evaluate alternatives
  5. Create and Implement a financial action plan
  6. Review and revise financial plan as needed
    - Complete review should be done at least every once a year, more often if you’re younger or have changing personal, social and economic factors
2
Q

Liabilities

A
  • Things you owe; debt balances
3
Q
S
M
A
R
T
A
  • Specific
  • Measurable
  • Action-oriented
  • Realistic
  • Time-based
4
Q

Time frames of goals

A
  • Short term: 0-1 years from now
  • Short intermediate: 1-5 years from now
  • Long intermediate: 6-10 years from now
  • Long Term: beyond 10 years from now
5
Q

What a financial plan accomplishes

A
  • Summarizes your current financial situation
  • Analyzes your financial needs
  • Recommends future financial activities
6
Q

8 major personal financial planning areas

A
  1. Obtaining
  2. Planning
  3. Spending
  4. Saving
    - Want your savings to be liquid
  5. Borrowing
  6. Managing risk
  7. Investing
    - Investors looking for long-term growth should choose stocks, mutual funds, etfs, real estate, etc
    - Investors looking for current income select investments that pay regular dividends (stocks) or interest (bonds)
  8. Retirement and estate planning
7
Q

Rule of 72

A

72/interest rate = y years

- Tells you how many years it will take your money to double in value by dividing 72 by your interest rate

8
Q

Future Value

A
  • The amount to which current savings will increase based on a certain interest and a certain time period
9
Q

Annuity

A
  • Series of deposits; even payment stream over time
10
Q

Present value

A
  • The current value of a future amount based on a certain interest rate and a certain time period
11
Q

Discounting

A
  • The opposite of compounding

* ****

12
Q

Money Management

A
  • The day-to-day financial activities needed to manage personal economic resources while working toward long-term financial security or independence; aka your earning, spending, saving, and investing to support your financial plan
    Key Money Management activities:
    1. Keep, store, and maintain financial records
    2. Create Personal Financial Statements
    3. Create and maintain a financial plan and associated budgets to achieve financial goals
13
Q

Items you store in your home file include

A
  • Personal and employment records
  • Money management records (banking)
  • Tax records
  • Consumer purchases, auto and credit records
  • House records
  • Insurance records
  • Investment records
14
Q

Items you store in a safe deposit box

A
  • Birth, marriage and death certificates; copy of will
  • Citizenship and military papers
  • mortgage papers and tithes
  • List of insurance policy numbers
    Coins and other collectibles
15
Q

Balance Sheet

A
  • Also called a Net Worth Sheet or a Statement of Financial Planning
  • Step 1: List your assets
  • Step 2: Determine your liabilities
  • Step 3: Compute net worth
16
Q

Net Worth

A
  • Net worth in an indication of your financial position at any given date
  • Items of value (what you own) - Amounts owed (what you owe) = Net worth
17
Q

Insolvency

A
  • The inability to pay debts when they are due
18
Q

Cash Flow Statement

A
  • Also called the personal income and expenditure statement
  • The actual inflow or outflow for a given time period
  • Total cash received during time period - cash outflow during time period = cash surplus or deficit
  • Positive means savings
  • Cash Flow Statements provide the foundation for preparing and implementing a spending, saving, and investment plan