Chapter 1 Understanding the Financial Planning Process Flashcards
Average Propensity to Consume
The percentage of each dollar or income, on average, that a person spends for current needs rather than savings.
Consumer Price Index(CPI)
A measure of inflation based on changes in the cost of consumer goods and services.
Contraction
The phase of the economic cycle when real GDP falls.
Expansion
The phase of the economic cycle when real GDP increases until it hits a peak.
Financial Assets
Intangible assets, such as savings accounts and securities, that are acquired for some promised future return.
Financial Goals
Results that an individual wants to attain, such as buying a home, building a college fund, or achieving financial independence.
Flexible- Benefit (cafeteria) Plans
the employer allocates a certain amount of money to each employee and then lets the employee? spend? that money for benefits that suit his or her age, marital status, Number of dependent children, and level of income.
Goal Dates
target dates in the future when certain financial objectives are expected to be completed.
Inflation
A state of the economy in which the general price level is increasing.
Money
The amount of exchange used as a measure of value in financial transactions.
Peak
The phase of the economic cycle when an expansion ends and a contraction begins.
Personal Financial Planning
A systematic process that considers important elements of an individual’s financial affairs in order to fulfill financial goals.
Purchasing power
the amount of goods and services that each dollar buys at a given time.
Standard of Living
the necessities, comfort, and luxuries enjoyed or desired by an individual or family.
Tangible assets
Physical assets, such as real estate and automobiles, that can be held for either consumption or investment purposes.
