Unit 1 Study Guide Flashcards
Economics
The Study of choice in relation to scarcity
Scarcity
We have unlimited wants but limited resources.
Opprtunity Cost
The most desirable alternative given up when you make a choice.
Incentives
What motivates us.
Budget
A plan for saving and spending money.
Why is it important to study personal finance?
To learn to manage money and protect your financial health.
3 Components of Financial Planning
- Writing out a detailed plan for accomplishing goals.
- Replace money myths with money truths.
- Regulary monitor and reacess your financial plan.
Personal Finance success is primalry the result of what?
Managing your money behavior
Managing your money is about what?
20% Knowledge and 80% Behavior
3 Consequences of spending more than you make?
- Missed oppertunity to solve and invest.
- Stress
- Cycle of debt
Income does NOT determine wealth. What does determine wealth?
managing your financial behavior.
3 Types of Budgeting expenses and examples
- Fixed —> rent
- Variable —> groceries
- Discretionary —> entertainment
How does a typical millionare spend their money?
A typical millionare spends LESS than what they make.
What percentage of Americans live paycheck to paycheck?
70% of Americasn live paycheck to paycheck.
How much money should you have left over in your budget each month?
0.
If you are not maintaining a zero-based budget, what expense should you make cuts in?
Discretionary
What is the most accurate record to check your balance?
Your own record (Everydollar, Nerdwallet).
3 Consequences of Overdrawing/Overdrafting your checking account?
- Bounced Check fee from business.
- Stress
- Overdraft Fee
What are the 2 largest categories of US consumer spending?
Housing and Transportation
What is the purpose of Insurance?
To financially protect you from unexpected things that you can’t plan for.
What discounts can your receive for lowering your insurance premium?
Good grades, Increase deductible, bundle, multiple line, good driver, safety features on car, less stolen kind of car.
Which types of insurance are REQUIRED by law?
Home, Health, and Auto.
What type of insurance is NOT required by law?
Life Insurance
Liability Coverage
Protects others if the accident is your fault. Pays medical bills/replaces damaged vehicles.
Collision Coverage
Protects your vehicle even if its your fault.
Comprehensive Coverage
Protects your car from theft, falling objects, and natural disasters.
Uninsured/Underinsured Coverage
Protects you from drivers that don’t have insurance or whose insurance isn’t enough.
Medical Coverage
Medical bills are payed and lost income is covered.
3 Basic reasons for saving
- Emergencey fund
- Make large purchases with cash.
- Build wealth overtime.
What is the purpose of having a savings account?
Emergencey fund
What is the point of having a money-market account?
Accomplishing a short term goal.
Emergencey Fund
Economic concept of setting aside money for unexpected financial emergencies and providing a sense of financial security.
