PERSONAL FINANCE Flashcards
a contrarian approach?
going after bargains when everybody else seems to be selling.
That isn’t a bad idea. However, keep in mind that investing in stocks isn’t a form of gambling. To be a savvy investor, you must master what it takes to appraise a company, including understanding how to read financial news and assess financial statements. In a nutshell, the more you know about what you’re buying, the better your chances of making wise choices.
Steps to Controlling Your Assets:
Step 1—Take an inventory of your financial assets. You can create your own balance sheet based on the accounting equation: Assets – Liabilities = Owner’s Equity. Overall, your assets will be what you own free and clear, plus the proportion of equity to outstanding debt on things you’re buying, like a car or home. Your liabilities will be what you own on credit cards and loans.
Step 2—Keep track of all your expenses. This takes some effort, but it can be done. Take note of expense categories. How much are you spending for food, gasoline, car payments, rent, credit card balance reduction, utilities, entertainment, and incidentals?
Step 3—Prepare a budget. Doing so will be easier if you’ve got a clear understanding of your spending patterns. The purpose of a budget is to fit your expenses into your income. This often requires cost-cutting measures.
Step 4—Pay off your debts. This can be tricky when so many of us rely on credit cards for unexpected or even ordinary expenses. But it can be done if your income level permits you to make a decision to pay off your debts.
Step 5—Start a savings plan. Part of any healthy, forward-looking budget is setting aside money for savings from each and every pay check. There are good habits and bad habits. Getting into a savings habit is definitely in the good category.
Step 6—Borrow money only to buy assets—namely, things that can potentially grow in value or generate income.
a FICO score is?
FICOis an acronym for Fair Isaac Corporation, which is the company that provides the best-known and most widely used credit assessment model. Your FICO score will determine the interest rates you’ll be charged on credit card debt as well as your eligibility for a bank loan.
