Personal Finance Final Exam December 2023 Flashcards
Define APR.
Annual Percentage Rate, measure used to calculate the cost of borrowing, such as on a loan or credit card.
Define Asset.
Something of value that a person or entity owns.
Define bankruptcy.
Legal process that individuals or businesses go through when they are unable to repay their debts.
Define cash flow.
Movement of money in and out of a business or individual’s finances.
Define certificate of deposit.
Low-risk investment where you deposit a certain amount of money for a fixed period of time.
Define closed end credit.
The borrower receives a set amount of money upfront and agrees to repay it in installments.
Define cover letter.
One-page letter that introduces yourself to the employer and highlights your qualifications, skills, and experiences.
Define credit bureau.
Organization that collects and maintains credit information on individuals and businesses.
Define creditor.
Someone that lends money or extends credit to another person.
Define current liability.
Debt or obligation that is expected to be settled within a short period.
Define deductible.
Amount of money that someone is responsible for paying out of pocket before their insurance coverage kicks in.
Define deficit.
Situation where expenses exceed income or resources.
Define economy.
System that involves the production, distribution, and consumption of goods and services within a country.
Define employee.
Person who works for a business in exchange for wages.
Define employer.
Person that hires people to work for their business.
Explain the 3 different timelines of goals.
Short-term: Right now
Medium-term: A little in the future
Long-term: Long future
Explain the 5 C’s of Credit.
Character: Reputation
Capacity: Ability to pay
Capital: Resources/Assets
Collateral: Security deposit
Conditions: External factors
Explain the difference between a job and career.
A job is temporary while career is long-term.
Explain the difference between a need and a want.
A need is something crucial to survival while a want is not required.
Explain the importance of net worth.
It gives you a snapshot of your overall financial health.
Explain the importance of cash flow statement.13
It helps you keep track of the money flowing in and out of your business.
Explain the importance of check book register.
It helps you keep track of all your transactions and manage your personal finances.
Explain the importance budget.
Helps you take control of your money and make sure you’re spending it wisely.
Explain the importance of bank reconciliation.
Helps you make sure that your records match the bank’s records.
Define endorsement.
Someone publicly supports or approves of something or someone.
Define expenses.
Costs or money that you spend on various things or services.
Define FDIC.
Federal Deposit Insurance Corporation, safety net for your bank deposits.
Define Federal Reserve System.
Responsible for managing the country’s monetary policy and overseeing the banking system.
Define finance charge.
Additional fee or cost that you have to pay when you borrow money or use credit.
Define fixed expense.
Regular and consistent cost that you have to pay on a recurring basis.
Define fraud.
When someone deceives or tricks others for personal gain or to cause harm.
Define grace period.
Specific period of time after a deadline that you can still complete a task without facing penalties.
Define income.
Money or earnings you receive from various sources, such as your job, investments, or business ventures.
Define inexpensive loan.
A loan that doesn’t cost a lot in terms of interest or fees.
Define inflation.
When the general prices of goods and services in an economy increase over time.
Define insolvency.
When a person is unable to pay their debts or meet their financial obligations.
Define interest.
Additional amount of money that is charged or earned on top of the original amount of money borrowed.
Define investments.
Financial assets or items that you purchase or put your money into with the expectation of generating income or earning a profit in the future.
Define lease.
Legal agreement between a landlord and a tenant to rent a property.
Give examples of open and closed end credit.
Open-end: Credit card
Closed-end: Morgage
List the steps in writing a check.
- date
- payee
- amount in numbers
- amount in words
- sign
- note the reason
Explain the relationship between education, potential earning power, and unemployement.
Higher levels of education can increase your ability to find employment and have higher earning power.
List the steps taken to balance your checkbook.
- start with your bank statement
- record your deposits
- record your withdrawals
- compare transactions
- reconcile your balance
- make adjustments
- update your register
- keep track of future transactions
What are 2 things you can do to increase your net worth?
Save and invest, reduce debt
What are 2 things you can do to decrease your net worth?
Overspending, making poor investment decisions
What are 3 advantages and disadvantages of owning your own home?
advantages: stability and equity, investment potential, pride of ownership
disadvantages: financial responsibility, lack of flexibility, maintenance and repairs
What are 3 advantages and disadvantages of renting?
advantages: flexibility, lower financial commitment, maintenance and repairs
disadvantages: lack of equity, limited control and customization, rent increases and lease terms
Define liability.
Legal responsibility or obligation that someone has for their actions or debts.
Define liquid asset.
Asset that can be easily converted into cash without significant loss in value.
Define liquidity.
The ease in which an asset or investment can be bought or sold in the market without causing a significant change in its price.
Define money management.
Process of effectively managing and controlling one’s financial resources.
Define needs.
Essential things that are necessary for our survival, well-being, and basic functioning.
Define net income.
The amount of money a person or a business earns after deducting all expenses and taxes from their total income.
Define net worth.
The value of an individual’s or entity’s assets minus their liabilities.
Define open end credit.
Credit that allows borrowers to repeatedly borrow and repay funds up to a certain credit limit.
Define opportunity cost.
Weighing the pros and cons of different choices.
Define overdraft protection.
Service offered by banks that helps prevent your account from going into a negative balance when you don’t have enough funds to cover a transaction.
Define personal financial planning.
Process of managing your money and making informed decisions about your finances to achieve your financial goals.
Define personal possessions.
Belongings or items that an individual owns and considers as their personal property.
Define point of sale transaction.
When a purchase is made at a physical or virtual location where goods or services are sold.
Define policy.
Set of rules, guidelines, or principles that are established to guide decision-making and behavior within a group.
Define potential earning power.
The capacity or ability of an individual to earn income based on their skills, qualifications, and experience.
What are four characteristics of a successful budget?
Realistic, specific, flexible, regularly monitored.
What are the 4 requirements/characteristics of a Good Financial Goal?
Specific, measurable, attainable, time-bound.
What are the 6 steps in the Financial Planning Process?
- establishing goals
- gathering data
- analyzing and evaluating
- developing a plan
- implementing the plan
- monitoring and reviewing
What are the 6 warning signs of someone experiencing financial/debt problems.
- persistent difficulty paying bills
- increasing debt levels
- borrowing to meet basic needs
- frequent overdrafts or late payments
- lack of savings or emergency fund
- avoiding or ignoring financial matters
What are the differences between common stock and preferred stock?
Common have voting rights, preferred have higher priority when receiving dividends.
Define rate of return.
Gain or loss on an investment relative to the amount of money invested.
Define real estate.
Property consistent of land and any structures or improvements on it.
Define rebate.
Refund or partial refund given to a customer after they have purchased a product or service.
Define renter’s insurance.
Type of insurance coverage that is designed specifically for tenants who are renting a property.
Define resume.
Document that provides a summary of a person’s education, work experience, skills, and qualifications.
Define safe deposit box.
Secure storage space provided by banks or other financial institutions.
Define service.
Activity or task that is performed to meet a specific need or provide assistance to someone.
Define stop payment order.
Request made by an account holder to their bank or financial institution to stop the payment of a specific check or transaction.
Define surplus.
Excess or an abundance of something beyond what is needed or expected.
Define time value of money.
Concept that money available today is worth more than the same amount of money in the future.
Define variable espense.
Cost or expenditure that fluctuates or changes in amount from one period to another.
Define wants.
Desires or preferences for things that are not necessary for survival.
What is the difference between Chapter 7 & Chapter 13 Bankruptcy?
Chapter 7 focuses on liquidating assets to pay off creditors, while Chapter 13 involves creating a repayment plan based on the debtor’s income.
What steps do you take to fix a mistake on your credit report?
Obtain a copy of your credit report, review your credit report, dispute the errors, contact the furnisher of the information, follow up.
Who is the Consumer Credit Counseling Service and what do they do?
Provides financial education and counseling services to individuals and families.
Why would a bank be interested in your net worth?
It gives them an idea of your overall financial health and stability.
