Chapter 1 personal financial planning in action Flashcards
Financial and Personal satisfaction are the result of an organized process that is commonly referred to as ____.
Personal economic satisfaction.
What is personal financial planning?
The process of managing your money to achieve personal economic satisfaction
A _____ can enhance the quality of your life and increase your satisfaction by reducing uncertainty about your future needs and resources.
A comprehensive financial plan
What is a financial plan?
a formalized report that summarizes your current financial situation, analyzes your financial needs, and recommends future financial activities.
What are some advantages of personal financial planning?
- increased effectiveness in obtaining, using, and protecting your financial resources throughout your life.
- increased control of your financial affairs by avoiding excessive debt, bankruptcy, and dependence on others
- improved personal relationships resulting from well-planned and effectively communicated financial decisions
- A sense of freedom from financial worries obtained by looking to the future anticipating expenses, and achieving personal economic goals.
What is an adult life cycle?
The stages in the family situation and financial needs of an adult.
What are values?
Ideas and principles that a person considers correct, desirable and important.
What are economics?
The study of how wealth is created and distributed.
What is inflation?
a rise in the general level of prices
To achieve a successful financial situation you must coordinate various components through a(n)_____.
organized plan and wise decision making.
What are the financial planning activities?
- Obtaining financial resources
- Planned spending through budgeting
- savings plan
- Credit buying
- spending plan
- insurance coverage
- investing
- retirement and estate planning
What is bankruptcy?
A set of federal laws allowing you to either restructure your debts or remove certain debts.
Why do people have money problems?
Weak money management habits in areas such as spending and the use of credit
What are short term goals?
goals achieved within the next year or so, such as saving for a vacation or paying off small debts.
What are intermediate goals?
have a time frame of two to five years
What are long term goals?
financial plans that are more than five years off, such as retirement, money for children’s college education, or the purchase of a vacation home.
How should long term goals be planned?
in coordination with short term and intermediate goals.
What are consumable- product goals?
items that are used up relatively quickly such as food clothing and entertainment.
What are durable product goals?
involve infrequently purchased, expensive items such as appliances, cars, and sporting equipment/ tangible items.
What are intangible purchase goals?
personal relationships, health, education, community service, and lea sure.
____: is central to financial decision making.
goal setting.
What should effective financial goals be?
- realistic
- stated in specific measurable terms
- based on a time frame
- action oriented.
What is opportunity cost?
what a person gives up by making a choice.
what is time value of money?
increase in an amount of money as a result of interest earned
