Chapter 1: Planning in Action

Question 1

personal financial planning

Answer 1

managing money to achieve economic satisfaction

Question 2

financial literacy

Answer 2

knowledge of earning, saving, spending, and investing to achieve goals

Question 3

financial plan

Answer 3

formal report summarizing financial situation by analyzing needs

Question 4

adult life cycle

Answer 4

stages in the family situation and financial needs of an adult

Question 5

values

Answer 5

ideas/principles that someone believes are correct

Question 6

economics

Answer 6

study of how wealth is created/distributed

Question 7

economic environment includes

Answer 7

business, labor, and gov’t working to satisfy needs

Question 8

federal reserve system does?
to encourage? (3)

Answer 8

maintains adequate money consumerism, business growth, and job creation

Question 9

inflation vs. deflation

Answer 9

rise in prices
decrease in prices

Question 10

consumer price index is made by?
does?

Answer 10

bureau of Labor Statistics
measures avg. change in prices consumers pay for things

Question 11

rule of 72 is used for?
what is it?

Answer 11

to find out speed of prices or when savings double
divide 72 by annual inflation or interest rate

Question 12

interest rates represent?
influenced by?

Answer 12

cost of money
supply and demand

Question 13

short term goals
intermediate
long term

Answer 13

acheived within the next year or so
time frame of 2-5 yrs.
take longer than 5+ yrs.

Question 14

consumable product goals

Answer 14

involve items used quickly

Question 15

durable product goals

Answer 15

involve infrequently purchased expensive items

Question 16

effective goals should be smart:

Answer 16

specific
measurable
action-oriented
realistic
time-based

Question 17

opportunity cost is?
aka?

Answer 17

what you give up when making a choice (tradeoff)

Question 18

time value of money

Answer 18

increase in money due to interest earned

Question 19

annuity

Answer 19

series of equal depostis

Question 20

6 steps to financial planning

Answer 20

1 determine the current financial situation
2 financial goals
3 other courses of action
4 evaluate other options
5 create and implement a plan
6 review and revise plan