Budgets and Financial Records Flashcards
Disposable Income
money left after bills and taxes
Budget
spending and saving plan based on income and expenses
4 steps to Preparing a Budget
- Estimate your income
- Estimate your expenses
- Decide how much to save
- Balance your budget
Fix Expenses
costs that do not change from month to month
Examples of fixed expenses
bills, rent, car loans
Variable Expenses
costs that vary in amount and type, depending on you choices
Examples of variable expenses
shopping, groceries
Rule of Thirds
All income should go towards Fixed, Variable, and Savings (50% 30% 20%) or (30% 30% 30%)
4 types of Budgets
Traditional, zero-based, envelope, reverse
Traditional
log income and expenses in a notebook and base income and costs on previous months or years
Zero based
all money is allocated to a category in advance. There’s no money left at the end of the cycle
Envelope
Divide available money into envelopes by spending category, when money runs out, there is non left for that time period for that category
Reverse (pay yourself first)
Prioritize savings and put money into savings before making any purchases for the month. Whatever is left over after meeting your savings foal is what you have left to spend
Net worth Statement
shows a person’s net worth based on their assets and liabilities
How do you calculate Net worth
Assets - Liabilities = Net worth
Insolvent
when liabilities are greater than your assets
Personal Property Inventory
list of the valuable items you own, along with their purchase price and approximate current value
Prenuptial Agreements
states who receives what assets and liabilities if a marriage end in divorce
Express contract
terms are spelled out verbal and written
Examples of express contracts
loans, mortgages, rental agreements
Implied contract
Inferred by the actions of the parties involved
Examples of implied contracts
doctors visit, neighbors agreeing to scoop snow and mow lawns
Counteroffer
when one person makes an offer and another person changes it
Promissory Note
a written promise to pay a certain sum of money to another person or to the holder of the note on a specified date and can be enforced by law
Co signer
person who promises to pay the debt of another person if the original maker fails to pay
Warranty
a “guarantee” is a statement assuming quality and performance of a product or service
Implied warranty
states that the product will operate as it is intended to by design
Express warranty
states a guarantee that the product will last or function for a length of time
Gross Pay
pay before deductions
Net pay
pay after deductions
Where can you go to notarize a document
Bank, court house
Notarize
someone who verifies a signature
