MIDTERMS Flashcards
Three Categories of Finance
Public Finance
Corporate Finance
Personal Finance
- Behavioral Finance
a term that covers managing your money as well as saving and investing. It encompasses budgeting, banking, insurance, mortgages, investments, retirement, tax, and estate planning.
Personal Finance
5 MAIN AREAS OF PERSONAL FINANCE
Earning Income
Spending
Saving
Investing
Protection
It refers to a source of cash inflow that an individual receives and uses to support themselves and their family.
Earning Income
It refers to all types of expenses an individual incurs related to buying goods and services or anything that is consumable.
Spending
It refers to excess cash that is retained for future investing or spending.
Saving
It relates to the purchase of assets that are expected to generate a rate of return, with the hope that overtime the individual will receive back more money than they originally invested.
Investing
It refers to a wide range of products that can be used to guard against an unforeseen and adverse event.
Protection
Personal finance enables individuals to build a safety net against unexpected events like medical emergencies, job loss, or other unforeseen circumstances.
Financial Security
These targets can help you find effective ways to spend and save money, both at work and in your personal life. In the long term, these aspirations can help you improve your lifestyle, reduce debt, and plan for a comfortable retirement. It can be short-, medium-, or long-term goals.
Financial Goals
First observed around 10,000 – 3000 BCE. It is the oldest form of payment for the exchange of goods and services. The Exchange of Goods and Services is executed based on perceived equal value.
The barter observes the ‘IOU’ concept.
Barter System
6 CHARACTERISTICS OF MONEY
Must have value
Must be durable
Must be portable
Must be uniform
Must be limited
Must be divisible
5 KEY FUNCTION OF MONEY
Store of Value
Item of Worth
Means of Exchange
Unit of Account
Standard of Deferred Payment
Money must not be perishable for people to store it as their wealth in the future and people should be able to use it anytime, anywhere.
Store of Value
Money contains an intrinsic value, such as that of a precious metal that was used to make a coin. Hence, it will act as a guarantee of acceptance to pay for transactions.
Item of Worth
Money must be freely and widely used for exchange of goods and services, and there must be stability to the money being used.It should easily be divisible and there are sufficient denominations.
Means of Exchange
Money must be used to record wealth possessed, traded, or spent personally or nationally. must only be issued and recognized by one authorized government body, otherwise, trust in its value would disappear.
Unit of Account
Money must be widely accepted to value a debt thereby allowing good and services to be acquired now and paid for in the future.
Standard of Deferred Payment
2 TYPES OF STORE VALUE
INTRINSIC AND EXTRINSIC VALUE
has an equivalent backup of Gold, used in the present.
Intrinsic
no backup of gold, face value/physical value.
Extrinsic
a special savings facility with a 5-year maturity, designed for Pag-IBIG Fund members who wish to save more and earn even higher dividends, in addition to their Pag-IBIG Regular Savings. The program is also open to pensioners and retirees who were former Pag-IBIG Fund members. OPTIONAL.
PAGIBIG MP II slash The MP2 Savings
PAGIBIG FUND STANDS FOR
Pagtutulungan sa Kinabukasan: Ikaw, Bangko, Industriya, at Gobyerno.
Mandatory deduction
THE REGULAR PAGIBIG SAVINGS
The Four Budgeting System
Zero-Based Budgeting
Envelope Budgeting System
Pay Yourself First
60/30/10 Rule
A method of budgeting in which all expenses must be justified for each new period. every function within an organization is analyzed for its needs and costs. not fixed (changing).
Zero-Based Budgeting
budget has you put a portion of your paycheck into your savings account before you spend any of it. The 80/20 rule breaks out putting 20% of your income toward savings (paying yourself) and 80% toward everything else.
Pay Yourself First
60% of the budget goes to Essential Needs
30% Discretionary Needs
10% Savings
60/30/10 Rule
This method requires dividing the available spending money into separate envelopes that represent your key spending categories.
Envelope Budgeting System
is the ability to borrow money under the agreement that you’ll repay the debt later. agreements typically come with repayment terms that include when payments will be due, plus any interest and fees you’ll need to pay. can also refer to an individual’s history of borrowing and repaying debt.
Credit/Revolving Credit
lists the individual’s assets and liabilities, just as business lists all the assets and liabilities of the company. assets and liabilities (net worth).
Personal Balance Sheet
lists out all flow variables affecting an individual’s financial position—income and expenses (net income).
Personal Income Statement
is the total value of all final goods and services produced in an economy, measured yearly or quarterly. It is commonly used to assess a country’s economic health, reflecting the extent of economic growth and the standard of living by measuring this total value.
GDP, or Gross Domestic Product.
The 3 approaches to computing GDP
- Production (or Output) Approach:
- Income Approach:
- Expenditure Approach:
is a measure that compares a country’s total debt to its gross domestic product (GDP). also used to evaluate a country’s ability to repay debt.
The debt-to-GDP ratio
the use of technology to improve and automate the delivery and use of financial services.
FINANCIAL TECHNOLOGY
refers to equality or equivalence. a state of balance or sameness across different elements.
Parity
Exchange rates should adjust so that identical goods cost the same in different countries. Essentially, it means that a basket of goods should have the same price when converted to a common currency.
Purchasing power parity
The 4 Sources of Social Influences
● Family and peer pressure
● Media and advertising
● Social Comparison
● Desire to belong
3 TYPES OF CONFORMITY
● Compliance
● Identification
● Internalization
Created by Filipinos to justify consumerism
The Dasurv Culture
when people or companies invest money in businesses or assets in a different country. a cross-border investment. This leads to an increase in income, job opportunities, and investment opportunities.
Foreign Direct Investment
banking services provided by physical banks and financial institutions.
Traditional Banking
What is the Impact of Debt-to-GDP Ratio in Personal Finance
can influence higher interest rates, slower economic growth, limited public services, inflation, and overall financial stability.
The process whereby people change their beliefs, attitudes, actions, or perceptions to more closely match those held by groups to which they belong or want to belong to or by groups whose approval they desire.
CONFORMITY
occurs when an individual adopts the beliefs or behaviors of a group because they genuinely accept and agree with them. This change is deeply rooted and becomes part of the person’s value system.
Internalization Conformity
Involves changing one’s behavior or attitudes to gain approval or favor from a group. The individual may not genuinely agree with the group’s views but adjust their behavior to fit in.
Ingratiational Conformity
Production (or Output) Approach: Formula
GDP = Gross Output − Intermediate Consumption.
- Income Approach: Formula
GDP = COMPENSATION OF EMPLOYEES + GROSS OPERATING SURPLUS + GROSSED MIXED INCOME + TAXES ON PRODUCTION AND IMPORTS - SUBSIDES
- Expenditure Approach: Formula
GDP= CONSUMPTION + INVESTMENT +GOV. SPENDING+(EXPORTS-IMPORTS)
