Quiz 1 Flashcards
1
Q
Six Step Procedure for Financial Planning
A
- Determine your current financial situation
- Develop your financial goals
- Identify alternative courses of action
- Evaluate alternatives
- Create and Implement a financial action plan
- Review and revise financial plan as needed
- Complete review should be done at least every once a year, more often if you’re younger or have changing personal, social and economic factors
2
Q
Liabilities
A
- Things you owe; debt balances
3
Q
S M A R T
A
- Specific
- Measurable
- Action-oriented
- Realistic
- Time-based
4
Q
Time frames of goals
A
- Short term: 0-1 years from now
- Short intermediate: 1-5 years from now
- Long intermediate: 6-10 years from now
- Long Term: beyond 10 years from now
5
Q
What a financial plan accomplishes
A
- Summarizes your current financial situation
- Analyzes your financial needs
- Recommends future financial activities
6
Q
8 major personal financial planning areas
A
- Obtaining
- Planning
- Spending
- Saving
- Want your savings to be liquid - Borrowing
- Managing risk
- Investing
- Investors looking for long-term growth should choose stocks, mutual funds, etfs, real estate, etc
- Investors looking for current income select investments that pay regular dividends (stocks) or interest (bonds) - Retirement and estate planning
7
Q
Rule of 72
A
72/interest rate = y years
- Tells you how many years it will take your money to double in value by dividing 72 by your interest rate
8
Q
Future Value
A
- The amount to which current savings will increase based on a certain interest and a certain time period
9
Q
Annuity
A
- Series of deposits; even payment stream over time
10
Q
Present value
A
- The current value of a future amount based on a certain interest rate and a certain time period
11
Q
Discounting
A
- The opposite of compounding
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12
Q
Money Management
A
- The day-to-day financial activities needed to manage personal economic resources while working toward long-term financial security or independence; aka your earning, spending, saving, and investing to support your financial plan
Key Money Management activities:
1. Keep, store, and maintain financial records
2. Create Personal Financial Statements
3. Create and maintain a financial plan and associated budgets to achieve financial goals
13
Q
Items you store in your home file include
A
- Personal and employment records
- Money management records (banking)
- Tax records
- Consumer purchases, auto and credit records
- House records
- Insurance records
- Investment records
14
Q
Items you store in a safe deposit box
A
- Birth, marriage and death certificates; copy of will
- Citizenship and military papers
- mortgage papers and tithes
- List of insurance policy numbers
Coins and other collectibles
15
Q
Balance Sheet
A
- Also called a Net Worth Sheet or a Statement of Financial Planning
- Step 1: List your assets
- Step 2: Determine your liabilities
- Step 3: Compute net worth
