Chapter 1 Notes Flashcards
Why is learning to manage your money a very important skill?
-It can eliminate or minimize your mistakes.
It allows us to benefit for the future.
personal finance
all of your financial decisions made to earn, budget, save, and spend
___% of teens say they want to learn more about how to manage their money
55
if you invest $___ a month you will be a millionaire at the age of ___
100
55
the number one reason why college students drop out is ___
money problems
___ out of 10 families in America live ________
7
paycheck to paycheck
7 Key Components to a Successful Financial Plan
- 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
personal finance is ___% head knowledge and ___% behavior
20
80
2 reasons for widespread financial insecurity in America
- most Americans have a low savings plan 2. Americans borrow more than we earn
4 advantages of credit
- immediate possession 2. credit is safer than carrying cash 3. emergency funds 4. character reference
3 disadvantages of credit
- higher costs (interest rates, late fees, etc.) 2. impulse buying 3. overspending
5 phases of the History of credit
- prior to 1917 2. 1920-Roaring 20s 3. 1929-Great Depression 4. 1939-World War II 5. 1945- post war
prior to 1917
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
loan sharks
shady, illegal people who loaned money at high interest rates to broke, scared, or desperate people
1920 Roaring 20s
WWI over and consumer demand for big ticket items skyrocketed; relaxed the laws to legalize personal loans and make it profitable for loaners
1929 Great Depression
gov’t under FDR tried to get the banks to stable, easier to get consumer loans, relaxed it even more
1939 World War II
created a ton of new jobs; war goods
1945 post war
need for consumer goods so Americans began buying with consumer credit
Frank McNamara
during this time introduced the first credit card (diner’s club card)
1970 to present
debt is now socially acceptable; society is addicted to debt
average credit card debt per family is
over $7,000
___% if people in our culture buy things they can’t afford
90
an indication of financial security
letting your money work for you
how were Americans outsmarted by lenders
buying on credit is now acceptable as normal behavior
examples of how Americans are outsmarted
- 90 days same as cash 2. 0 money down 3. O% APR
what does APR mean
annual percentage rate
no money added annually to credit
personal financial success is achieved when
you manage your money behavior
income doesn’t solely determine wealth because
how much a person makes doesn’t dictate spending and saving
after 1970
consumer debt skyrocketed
how to become money smart
- be comfortable with basic math 2. start understanding the language of money 3. learn how to manage your money behavior
asset
anything that is owned by an individual
liability
the state or quality of being obligated according to law or equity
budget
a written cash flow plan
commodities
a food, metal, or fixed physical substance that investors buy and sell, usually via future contracts
consumer
a person or organization that uses a product or a service
credit
the granting of a loan and the creation of a debt, any form of deferred payment
debt
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
disposable income
amount of money left over after all necessities and expenses are paid
economy
a system by which goods and services are produced and distributed
financial literacy
the knowledge and skill base necessary to be informed consumers and manage their financial effectively
income
earnings from work or investment
interest
charge for borrowed money generally defined as a percentage
loan
temporary borrowing of a sum of money
personal finance
the decisions which an individual or a family unit is required to make to obtain, budget, save, and spend money over time
emergency fund
$500 in readily available cash to be used only in the event of an emergency
compensation
the total wage or salary and benefits that an employee receives
