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Personal Finance > Chapter 1 > Flashcards

Chapter 1 Flashcards

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1
Q

Personal Finance

A

financial issues that affect an individual

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2
Q

Personal Financial Planning

A

the process of planning every aspect of your personal finances.

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3
Q

What is personal financial planning?

A
  • become knowledgeable about financial issues that affect you
  • make a plan for you spending, borrowing, and financing, and saving and investing.
  • learn to manage your cash wisely.
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4
Q

Liquid Assits

A

things you might have that can be rapidly converted to cash without a risk of significant loss.

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5
Q

Steps to Personal Financial Planning

A
  1. create a budget for yourself
  2. manage your liquid assets.
  3. manage your borrowing
  4. plan to have enough insurance to protect your assets
  5. develop a plan for investing
    6 develop a plan for retirement.
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6
Q

Bankruptcy

A

a legal process in which a court takes over some of the finances of a person who is unable to pay his or her bills.

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7
Q

The need for personal financial planning

A
  • over 30% of high school students and more than 80% of undergraduate students use a credit card.
  • 1.3 million people filed for bankruptcy in 2012
  • 25% of consumers have more credit card debt than emergency savings.
  • about half of all people surveyed in the US are working full-time tell us that they are living pay check to pay check.
  • about 40% of people that work full-time do not save money for retirement.
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8
Q

Opportunity Costs

A

cost of pursuing one option instead of another expressed as the value of the activity you gave up.

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9
Q

The benefits of good financials decision making

A
  • understanding personal finance helps you to make informed financial decisions
  • every purchase you make incurs an opportunity cost
  • viewing purchases in terms of its opportunity costs might help you change your spending habits.
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10
Q

What are you planning for

A
  • goals can be reduced to 3 categories: short-term, medium-term, and long-term
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11
Q

Short-term goals

A

buying a car

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12
Q

Medium-term goals

A

education, emergencies, buying a home (down payment)

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13
Q

Long-term goals

A

having a family, retirement

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14
Q

Education

A
  • decide what kind of higher education is right for you
  • research various career options
  • determine the education required to pursue each option.
  • understand the relationship between education and annual salary
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15
Q

Emergencies/Rainy day fund

A
  • save money to prepare for unexpected events such as: car breakdowns, job changes, medial emergencies
  • financial planning forces you to think about and plan for those unexpected expenses.
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16
Q

Buying a Car

A
  • when do you want to own a car by?
  • will your parents or you pay for it?
  • what type of car do you want?
  • keep in mind other types of car expenses: gas, car insurance, car maintenance
17
Q

Buying a Home

A
  • what kind of house do you want?
  • where do you want to live?
  • what type of neighborhood do you want to live in.
  • these are the types of questions to ask yourself while thinking of owning a home. Start saving now and you could have a down payment ready for when you buy your first house.
18
Q

Retirement

A
  • what age would you like to be when you retire?
  • do you know anyone who retired young and now does what they want to do?
  • financial planning can allow you to build your wealth at an early age, although it may be difficult to think of now, it may be a good idea to save for retirement.
19
Q

Charitable giving

A
  • an important component of many financial plans, some people give a large sum to one charity, while others give smaller amounts on a regular basis.
  • knowledge of financial planning can have you achieve whatever goals you may have in this area.
20
Q

Sources of financial planning information

A
  • there are many resources available to help you make good financial choices
  • some examples include the internet and financial advisors
  • time is on your side when it comes to financial planning.
21
Q

The Internet (pros)

A
  • research prices of major purchases
  • look up investments performance data
  • there are many websites that can provide payment calculators or information on wealth building.
22
Q

The Internet (cons)

A
  • be cautious about advice from sources that are selling a service
  • can be a source of people trying to defraud you and increase their wealth at your expense.
23
Q

Judging the advice of financial planners/advisors and financial information

A

financial advisors understand tax laws and can monitor investments closely, this job requires training, education, and certification.

Personal Finance (1 decks)

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