Chapter 1 Notes

Question 1

Why is learning to manage your money a very important skill?

Answer 1

-It can eliminate or minimize your mistakes.

It allows us to benefit for the future.

Question 2

personal finance

Answer 2

all of your financial decisions made to earn, budget, save, and spend

Question 3

___% of teens say they want to learn more about how to manage their money

Answer 3

55

Question 4

if you invest $___ a month you will be a millionaire at the age of ___

Answer 4

100

55

Question 5

the number one reason why college students drop out is ___

Answer 5

money problems

Question 6

___ out of 10 families in America live ________

Answer 6

7

paycheck to paycheck

Question 7

7 Key Components to a Successful Financial Plan

Answer 7

1. assess financial situation 2. set money goals 3. write out detailed plan to accomplish goals 4. execute plan 5. know your money personality 6. monitor and reassess ur financial plan 7. replace money myths with money truths

Question 8

personal finance is ___% head knowledge and ___% behavior

Answer 8

20

80

Question 9

2 reasons for widespread financial insecurity in America

Answer 9

1. most Americans have a low savings plan 2. Americans borrow more than we earn

Question 10

4 advantages of credit

Answer 10

1. immediate possession 2. credit is safer than carrying cash 3. emergency funds 4. character reference

Question 11

3 disadvantages of credit

Answer 11

1. higher costs (interest rates, late fees, etc.) 2. impulse buying 3. overspending

Question 12

5 phases of the History of credit

Answer 12

1. prior to 1917 2. 1920-Roaring 20s 3. 1929-Great Depression 4. 1939-World War II 5. 1945- post war

Question 13

prior to 1917

Answer 13

buying things on credit was extremely rare; there were laws that prevented lenders from charging high enough interest rates to profit so there was no lending

Question 14

loan sharks

Answer 14

shady, illegal people who loaned money at high interest rates to broke, scared, or desperate people

Question 15

1920 Roaring 20s

Answer 15

WWI over and consumer demand for big ticket items skyrocketed; relaxed the laws to legalize personal loans and make it profitable for loaners

Question 16

1929 Great Depression

Answer 16

gov’t under FDR tried to get the banks to stable, easier to get consumer loans, relaxed it even more

Question 17

1939 World War II

Answer 17

created a ton of new jobs; war goods

Question 18

1945 post war

Answer 18

need for consumer goods so Americans began buying with consumer credit

Question 19

Frank McNamara

Answer 19

during this time introduced the first credit card (diner’s club card)

Question 20

1970 to present

Answer 20

debt is now socially acceptable; society is addicted to debt

Question 21

average credit card debt per family is

Answer 21

over $7,000

Question 22

___% if people in our culture buy things they can’t afford

Answer 22

90

Question 23

an indication of financial security

Answer 23

letting your money work for you

Question 24

how were Americans outsmarted by lenders

Answer 24

buying on credit is now acceptable as normal behavior

Question 25

examples of how Americans are outsmarted

Answer 25

1. 90 days same as cash 2. 0 money down 3. O% APR

Question 26

what does APR mean

Answer 26

annual percentage rate

no money added annually to credit

Question 27

personal financial success is achieved when

Answer 27

you manage your money behavior

Question 28

income doesn’t solely determine wealth because

Answer 28

how much a person makes doesn’t dictate spending and saving

Question 29

after 1970

Answer 29

consumer debt skyrocketed

Question 30

how to become money smart

Answer 30

1. be comfortable with basic math 2. start understanding the language of money 3. learn how to manage your money behavior

Question 31

asset

Answer 31

anything that is owned by an individual

Question 32

liability

Answer 32

the state or quality of being obligated according to law or equity

Question 33

budget

Answer 33

a written cash flow plan

Question 34

commodities

Answer 34

a food, metal, or fixed physical substance that investors buy and sell, usually via future contracts

Question 35

consumer

Answer 35

a person or organization that uses a product or a service

Question 36

credit

Answer 36

the granting of a loan and the creation of a debt, any form of deferred payment

Question 37

debt

Answer 37

an obligation of repayment owed by one party to a second party, in most cases this includes repayment of the original loan amount plus interest

Question 38

disposable income

Answer 38

amount of money left over after all necessities and expenses are paid

Question 39

economy

Answer 39

a system by which goods and services are produced and distributed

Question 40

financial literacy

Answer 40

the knowledge and skill base necessary to be informed consumers and manage their financial effectively

Question 41

income

Answer 41

earnings from work or investment

Question 42

interest

Answer 42

charge for borrowed money generally defined as a percentage

Question 43

loan

Answer 43

temporary borrowing of a sum of money

Question 44

personal finance

Answer 44

the decisions which an individual or a family unit is required to make to obtain, budget, save, and spend money over time

Question 45

emergency fund

Answer 45

$500 in readily available cash to be used only in the event of an emergency

Question 46

compensation

Answer 46

the total wage or salary and benefits that an employee receives