Module 1 Flashcards
is a term that covers managing your money as well as saving and investing.
personal finance
is about meeting personal finance goals, whether it’s having enough for short-term financial needs, planning for retirement, or saving for your child’s college education
personal finance
is about knowledge of facts, concepts, principles, technological tools that are fundamental to being smart about money
financial literacy
formula for saving
I - S = E
is a system of managing resources of a country, state or community. it is a careful management of available resources
economy
is also known as business cycle or trade cycle
economic cycle
It consists of 4 stages these are
peak, trough, contraction, expansion
When there is an increase on the production and consumption in the economy over a period of time or another
economic growth
Is the highest point between the end of an economic expansion and the start of a contraction in a business cycle. Refers to the last month before several key economic indicators, such as employment and new housing starts, begin to fall
Peak
Is the phase of the business cycle where real GDP grows for two or more consecutive quarters, moving from trough to a peak.
Expansion
Is also referred to as an economic recovery
Expansion
Is teh stage of the economy’s business cylethat marks theendof a period of declining business activity and teh transitionto expansion
Trough
Refers to a phase of the business cyclein which the economy as whole is in decline. It generally occurs after the business cycle peaks, but before it becomes a trough
Contraction
Economic principles when making financial decisions
- People face trade-offs
- The cost of something is what you give up to get it
- Rational people think at the margin
- People respond to incentives
The four principles of individual decision-making are a set of concepts posited by Harvard economics professor and economic textbook author
N. Gregory Mankiw
This principle describes the decision-making process a person must go through before an activity. When a consumer goes to purchase a product, he must consider that the dollar he spends for the product represents a dollar that cannot be used to buy another need or desire. This creates an important check on spending power and tends to forcefully prioritize the consumer’s spending practices. He first meets his needs before fulfilling non-necessary desires. Marketeers are very aware of this principle and will often market materials to consumers based on need.
People Face Trade-offs
A consumer who simply compares the price of items may not be correctly calculating the true cost. Wise consumers will also take into account less-than-tangible costs of a given action or purchase. For instance, an item that costs less but that requires long-term manual maintenance may be more expensive in the long term, as the owner will have to give up his time and effort to maintain it. His time could be better spent earning money at his job.
The cost of something is what you give up to get it
Mankiw describes a rational person’s willingness to purchase a good as based on the marginal benefit that one more element of that good will bring to the person. Mankiw points to the difference in value between water and diamonds. A marginal increase in a person’s water supply rarely comes at a significant cost. However, a marginal increase in diamonds is extremely valuable.
Rational people think at the margin
There is a reason why consumers hold onto their hard-earned money until the next big sale. Retailers often use marketing to incentivize consumer behavior, convincing them to spend money now to save or earn a reward for later.
People respond to incentives
Is a basic financial concept that holds that money in the present is worth more than the same sum of money to be received in the future. This is true because money that you have right now can be invested and earn a return, thus creating a larger amount of money in the future. is sometimes referred to as the
(NPV) of money.
Time value of money
Four major types of employee benefits many employers offer
- Medical insurance
- Life insurance
- Disability insurance
- Returement plans
Manadatory employee benefits in the Philippines
- Social security system
- Government Service Insurance Scheme
The most common (and often most essential) type of benefits employers can offer is
Medical insurance
If one of your employees pass away, life insurance benefits will provide payments to the employee’s family to cover funeral costs and ongoing living expenses.
Life insurance
If an insured employee is injured or has a lengthy illness, the benefit pays them during the period of time they are unable to work
Disability
This allows employees to deduct a certain percentage of each paycheck to put towars retirement savings
Retirement plans
Top 10 financial certifications tolook for
- CPA
- CFP
- ChFC
- CFA
- CIC
- FRM
- CLU
- CAIA
- CMFC
- CMA
CPA
Certified public accountant
CFP
Certified financial planner
ChFC
Chartered financial consultant
CFA
Chartered financial analyst
CIC
Chartered investment counselor
FRM
Financial risk manager
CLU
Chartered Life Underwriter
CAIA
Chartered alternative investment analyst
CMFC
Chartered mutual fund counselor
CMA
Certfied managment accountant
is for accountants, tax preparers and financial analysts. It is one of the more widely recognized financial certifications in the industry. can be helpful for those looking for financial advice regarding reducing taxes and organizing investments
Cpa
are well-versed in topics across the financial field. They assess their clients’ full financial portfolio and then provide personalized financial plans.
Certified financial planners CFP
How do financial planners get compensated
- Client fees
- Commissions
- Salaried advisors
- Free structures: Fee-Only and Fee-Based
These fees are earned when they recommend and sell specific financial products, such as mutual funds or annuities, to a client.
Commissions
Some advisors are paid a salary from the investment firm that employs them, rather than earning commissions or charging fees. These advisors may also have opportunities to earn bonuses or incentives for meeting certain milestones, such as onboarding a certain number of new clients each year.
Salary
Many financial advisors and firms will earn fees directly from their clients. A management fee (for investment management services) is frequently charged a percentage of the assets they’re managing on your behalf.
Client fees
May be definedas a sequence of jobs that constitute what a person does for a living. It is also known as the lifework chosen by a person to use personal talent, education, and training
Career
Is a process of systematically matching career goals and individual capabilities with opportunities for their fulfillment. It is also known as Finding employment that will use your interests and abilities and that will support you financially
Career planning
Preferred work-style personality
- Work conditions
- Work purposes
- Work relationships
a form of payment from an employer to an employee, which may be specified in an employment contract. It is contrasted with piece wages, where each job, hour, or other unit is paid separately, rather than on a periodic basis. From the point of view of running a business, this can also be viewed as the cost of acquiring and retaining human resources for running operations, and is then termed personnel expense or salary expense. In accounting, this are recorded on payroll accounts.
Salary
fixed amount of money or compensation paid to an employee by an employer in return for work performed. It is commonly paid in fixed intervals, for example, monthly payments of one-twelfth of the annual salary.
Salary
is the amount of money needed to sustain a certain standard of living by affording basic expenses such as housing, food, taxes, and healthcare. This is often used to compare how expensive it is to live in one city versus another.
Cost of living
Compares the cost of living in a major city tona corresponding metropolitan area. This incorporate the expense of various living expenses creating an aggregate measure that workforce entrants can use a benchmark
Cost of living index
Are defined as indirect, non-cash, or cash compensation paid to en employee above and beyond regular salary or wages
Employee benefits
Steps in Career Planning
- create your career goal and plan
- Clarify your interests
- Review your abilities, experiences and education
- Identifyyour values
- Considers costs, benefits, and lifestyle trade-offs
- Align yourself with tomorrow’s employment trends
- Take advantage of networking
8, target preferred employers - Be willing to change career goals and plan
People have preferences in three areas based on their personaloty
- Work conditons
- Work purposes
- Work relationships
refers to the working environment and all existing circumstances affecting labor in the workplace, including job hours, physical aspects, legal rights and responsibilities
work conditions
Work, besides making money, is meaningful daily life activity —
making something, serving someone, providing something of worth to others
(either individually or to the community in which you live [local or globally])
work purposes
work relationships produce these types
social support
mentoring
service of others
role models
This means both seeking and providing support to another person. As a business owner or leader that is seeking, focus on engaging with someone you can trust, someone who is interested in your well-being. A good way to define this person is “normally our conversations improve the situation,
not hinder it.” A peer advisory group may be a good option to consider for
social support.
social support
is a great win-win relationship. As a mentor, you usually are
teaching on a competency you already are familiar with. And it is proven that
teaching is the most effective way to become even more proficient on a subject.
The mentees win because they are increasing their aptitude via the positive
advice and support of the mentor.
mentoring
Doing good deeds for others, acts of kindness, helping others, and even community projects—these are all ways to serve others. There have been some great examples of how random acts of kindness trigger a succession of events. One recently in the news was a driver who paid the toll
of the next person, who decided to pay for the next person, too. Each recipient
repeated the gesture for hours at a toll booth.
service of others
This is the relationship of modeling after someone else to make
yourself better, someone you want to emulate. Nelson Mandela and Mother
Teresa were two individuals who inspired millions. What made them stand out
as role models were the value systems they lived by. Mandela spent 27 years
in prison because of what he believed in, and Mother Teresa dedicated her life
to serving the poorest of the poor.
role models
is a process between two parties, namely the employer and the
union, where the terms and conditions of employment are fixed and agreed upon. In
collective bargaining, the two parties also decide upon a method for resolving grievances.
Collective bargaining results in a contract called a Collective Bargaining Agreement
(CBA).
collective bargaining
is a document created and used by a person to present their background, skills, and accomplishments. can be used for a variety of reasons, but most often they are used to secure new employment. A typical résumé contains a “summary” of relevant job experience and education
resume
are the most commonly used format. They list work history in chronological order, starting with your most recent job down to your earliest. This resume is preferred by most employers because it provides a quick
snapshot of work history, with most recent positions up front.
Who should use - If you have a solid work history, your experience is aligned with
the job you are applying to, and you have no lapses between employment, use this
format
chronological
Unlike chronological resumes, these resumes focus on your skills
and experience first. This type of resume de-emphasizes the dates in which you
have worked. Employment history is secondary, and is listed under the details of
your skills.
Who should use - If you have lapses in employment, are in the middle of a career
transition, are a recent college grad with limited work experience, or have a diverse
background with no clear career path, this is the most effective type of resume.
functional resume
let you detail both your skills and experience,
while also backing this up with a chronological listing of work history. Flexible in
nature, the combination resume lets you tailor to the prospective job opening and
tell hiring managers a story.
Who should use - Use this resume if you want to detail work experience to show
hiring managers the type of employee you are.
combination resume
are customized in detail to the prospective job you are seeking. Everything from your objective, your qualifications to educational
experience mirrors the job requirements.
Who should use - These resumes are the most time-consuming, but can generate
the best results as the qualifications and experience you outline mirror the
prospective job opening closely. Be careful, however When you develop a targeted
resume you need to be as accurate as possible and not embellish career highlights
simply to mirror the job.
targeted resume
is used by recruiters when they are trying to convince you to apply for a job. They are trying to convey a feeling that this is a rare “opportunity” that you should snatch quickly, otherwise you will regret for the rest of your life. Well actually, it can be extremely difficult to land a job. With this being the case, it is imperative that people first attempt to identify the job opportunities and vacancies that are available. Here are some examples of where to look to find that perfect job opening.
job opportunities
Identify Job Opportunities, Using:
the internet
career fairs
classified advertisements
employment agencies
is an agency that exists for
the sole purpose of making money by trying to match job applicants to jobs
which may be best suited for them. These employment agencies are
valuable because not only do they inform people about vacant job
opportunities, but they are also hired by organizations to find qualified job
prospects for them.
This connection with an organization is beneficial because if the
employment agency likes you, then you have a higher probability of landing
a job with the organization. Although many of these employment agencies
are temporary, they allow a person to get his foot in the door and make a
great impression, which often leads to permanent employment with the
company.
employment agencies
is a form of advertising which is particularly common in newspapers, online and other
periodicals which may be sold or distributed free of charge. Classified advertisements are much cheaper than larger display advertisements used by businesses, although display advertising is more widespread. Job advertisement is One of the small advertisements in a newspaper,
magazine, or on a website that offers a job. To find job opportunities in your
area, look through classified ads and sign up with local employment recruiters.
classified advertisements
can be defined as an event that is generally held for the public that allows employers to gain information from prospective job
candidates. Although career fairs are typically hosted by employers and
schools, other types of recruiters can also take part in career fairs and obtain information from prospective candidates for their own unique purposes. Individuals seeking to know about job opportunities should attend career fairs because the employers are able to give specific information about which jobs are available at their companies, along with how to apply
for them. In many instances, the employers may be able to provide people with a
paper application or instruct them on how to apply for job vacancies online. Individuals attending a career fair should also dress professionally because an on-site interview may be a possibility.
career fairs
provides you with many options and tools for a comprehensive job search. You can identify job openings throughout the
world, locate and copy files of employer literature, exchange messages with
professionals in your field, share ideas and information with specialty user
groups, and find advice on résumé writing, interviewing, etc. Employers
the internet
Letter of introduction sent to a prospective employer to get an interview. It
is also known as a written document commonly submitted with job application outlining the applicant’s credentials and interest in the open position.
cover letter
is a recommendation letter from a known personality who will explain
who you are and why you are qualified to recommend as candidate. He/She will write a
line or two of praise about your professional and personal strengths, perhaps with a
summary of the main points you will present in the rest of the letter
strong reference
Formal meeting between employer and potential employee to discuss job qualifications and suitability
job interview
Make some research before the interview
- The company’s culture, mission and values.
- The company’s recent achievements and news.
- Insider information such as remuneration, employee functions and the hiring process.
Being equipped with the company’s
views on things like flexible working hours and locations, as well as other cultural
values such as their input to employee development can help you prepare your own
questions at the end of the interview.
The company’s culture, mission and values.
This is an effective tool especially
when wanting to find out about the company’s recent involvement in industry events
and the community, as well as achievements and other general news. Another great
tip; search the company’s name in the News” section of Google to find out information
they may not be willing to self-publish. This will help give you a more balanced and
realistic view of the company you may work for in the future.
The company’s recent achievements and news.
Use company reviews to read honest reviews from past and present
employees on the kind of topics you wouldn’t read elsewhere. You will find people
sharing their thoughts and first-hand experiences from managerial styles to monetary
Insider information such as remuneration, employee functions and the hiring
process.
Top 3 Financial Missteps in Career Planning
1.Don’t learn as much as possible about a company before going for an interview.
2.Failing to match your interests and preferred work style with the requirements of the
career.
3.Failing to network by not getting involved in professional associations.
are the monetary targets you strive to hit, such as saving for a wedding or eliminating student loan debt.
financial goals
are the personal, big-picture objectives you set for how you will
save and spend money. They can be things you hope to achieve in the short term or
further down the road. Either way, it is often easier to reach your goals if you identify
them in advance
financial goals
deals with the availability of sources, usages, and management of funds. It focuses on the alignment of financial management with the corporate and business objectives of an organization to gain strategic advantage.
financial strategy
written records that convey the business activities and the financial performance of a company. Financial statements are often audited by government agencies, accountants, firms, etc. to ensure accuracy and for tax, financing, or investing purposes.
financial statements
Financial statements include:
balance sheet
income statement
cash flow statement
measures how well a company generates cash to
pay its debt obligations, fund its operating expenses, and fund investments
cash flow statement
primarily focuses on a company’s revenues and expenses
during a particular period. Once expenses are subtracted from revenues, the
statement produces a company’s profit figure called net income
income statement
provides an overview of assets, liabilities, and stockholders’ equity as a snapshot in time.
balance sheet
can be well defined as a comparative magnitude of two selected
statistical values taken from the financial statements of a business enterprise.
financial ratio
5 types of ratio
liquidity ratio
activity ratio
leverage ratio
performance ratio
valuation ratio
they provide a
picture of whether or not the stock makes a compelling investment at current levels. How
much cash, working capital, cash flow, or earnings do you get for each dollar invested?
These ratios may also be called market ratios, as they evaluate a company’s
attractiveness on the market.
valuation ratio
valuation ratios include
price/earnings
price/cashflow
price/sales
price/earnings/growth rate
leverage ratios include
debt ratio
debt to equity ratio
interest-coverage ratio
tell investors about a company’s profit, which explains why they
are frequently referred to as profitability ratios.
performance ratio
performance ratio include
Gross profit margin
Operating profit margin
Net profit margin
Return on assets
Return on equity
demonstrate a company’s ability to pay its long-term debt. These ratios examine a company’s dependence on debt for its operations and the likelihood it can repay its obligations
leverage ratio
demonstrate a company’s efficiency in operations. In other words,
you can see how well the company uses its resources, such as assets available, to
generate sales.
activity ratio
activity ratio include
Inventory turnover
Receivables turnover
Payables turnover
Working capital turnover
Fixed asset turnover
Total asset turnover
demonstrate a company’s ability to pay its debts and other liabilities.
If it does not have enough short-term assets to cover short-term obligations, or it does not
generate enough cash flow to cover costs, it may face financial problems
liquidity ratio
liquidity ratio include
Current ratio
Quick ratio
Cash ratio
Operating cash flow margin
is the sum of money allocated for a particular purpose and the summary
of intended expenditures along with proposals for how to meet them. It may include
budget
Rules for successful budgeting:
- Keep it simple.
- Prioritize.
- Keep it flexible.
- Be positive. “
techniques for budgeting
1.Piggy Bank OR envelope
2.Use automatic deposit to deposit a certain amount in savings
3.Payroll deduction
