Personal Finance Test 2 Flashcards
A forecast of future cast inflows and outflows
BUDGET
a) identify cash inflows/outflows (salary vs expenses)
b) create cash flow statement
STEP 1: CREATE PERSONAL/CASH FLOW STATEMENT
Forecast the next couple of months. Prepare for months that include: extra bills, vacation, holidays, tuition, insurance, emergency, etc.
STEP 2: TURN YOUR CASH FLOW STATEMENT INTO A BUDGET
The budget is a great planning tool. It helps save $$$ for major purchases, unexpected expenses, and unexpected opportunities.
IMPROVING YOUR BUDGET
Periodically check your forecasts and compare numbers. Logging every penny going in and out helps for future planning.
ACCURACY OF YOUR BUDGET
The difference between what you forecast to happen & what actually happens.
FORECAST ERROR
A financial statement that tells your financial position at specific point in time (summary of assets minus liabilities = net worth)
PERSONAL BALANCE SHEET
Items of value that person owns
ASSETS
Financial assets that are either cash or can be quickly & easy converted to cash without significant loss of value (ex. checking/savings accounts
LIQUID ASSETS
Assets typically owned by a household (ex. cars, houses, furniture)
HOUSEHOLD ASSETS
What something would be worth if you sold it today. When you create your personal balance sheet you need to evaluate the true market value today. (ex. cars, check Kelley blue book)
MARKET VALUE
Represent amount of debt a person owes (two categories - current/long-term)
LIABILITIES
Debts that must be paid off within 1 year (ex. credit cards.. when used properly you make payments monthly)
CURRENT LIABILITIES
Debts that will take longer than 1 year to pay off (ex. student loans, car loans, mortgage, etc.)
LONG-TERM LIABILITIES
Assets minus Liabilities =
NET WORTH
Your personal balance sheet changes as you acquire new assets and/or new liabilities
CHANGES/ANALYSIS IN YOUR PERSONAL BUDGET SHEET
a form completed by current and prospective college students (undergrad and grad) in the US to determine eligibility for student financial aid.
FAFSA
A grant/payment made to support student’s education, awarded on basis of academic or other achievement.
SCHOLARSHIPS
The most sought-out scholarships for college funding because they do not need to be repaid. Grants are highly competitive, so apply early to max chances of winning.
GRANT
Federally funded program that provides funds for employment of students who demonstrate need as determined by FAFSA. Work no more than 20 hr/week in positions on campus or off campus in positions serving community where you attend school.
WORK STUDY
Type of loan designed to help students pay for post-secondary education and associated fees (tuition, books, supplies, living expenses)
STUDENT LOANS
Student loan originated by government and available to undergrad, grad, and professional students. These loans have fixed interest rates and can be subsidized or unsubsidized.
FEDERAL STAFFORD LOAN
Are based on financial need and interest does not accrue while student is in college, as interest is paid by the federal government.
SUBSIDIZED LOANS
The interest starts accruing the moment you or your school receive the loan funds. That means interest starts adding up the first day the payment is made.
UNSUBSIDIZED LOANS
