Personal Finance Flashcards

Flashcards about personal finance, covering topics like budgeting, saving, credit, investing, and retirement planning.

What is a budget?

A detailed schedule that documents your expected financial inflows (revenues earned and received) and outflows (expenses incurred and paid).

What are discretionary costs?

Costs that you have control over.

What are non-discretionary costs?

Costs that you have little control over.

How do savings accounts differ from chequing accounts?

Savings accounts are interest-earning accounts.

What is the meaning of 'Pay yourself first!' in the context of saving?

Prioritize setting aside money for savings before other expenses.

What is credit?

Your ability to obtain goods and resources without immediate payment.

What is a credit score?

A numerical indicator of your creditworthiness.

List important components of a credit score.

Payment history, debt/credit ratio, length of credit use, variety of credit, new credit, and some credit checks.

What is a credit rating?

A measurement of risk; it indicates the likelihood of paying back borrowed money.

What do credit cards allow holders to do?

Make a purchase now and pay later.

List some potential drawbacks of credit cards.

They can make financial discipline hard, have high interest rates and fees, and late payments can damage your credit.

What are some details to understand in your credit card agreement?

Grace period, interest rate, late fees, and annual fees.

What are some tips for using credit wisely?

Put the credit card down when you are in trouble, do not use credit until you can control your credit habits, consistently pay a substantial amount each month toward the debt, and consider using cash or a debit card.

What is investing?

Reducing consumption in the current period in order to build wealth.

What is the key to building wealth?

Consistency and starting early.

What is compounding?

A powerful force in growing investments over time.

Name some investment options.

Common stock, preferred stock, bonds, certificates of deposit, mutual funds, and exchange traded funds.

What role does a brokerage firm play in acquiring financial assets?

Investors rely on a brokerage firm to buy/sell securities.

How does diversification affect risk?

Diversification reduces risk.

How does risk relate to potential returns?

Investments with potential high returns are usually riskier.

What is a good investment?

YOU! Devote time, effort, and money to your education, training, and health.

List the three types of good debt.

Education, appreciating assets, and investments.

What are some options when considering how to take control of your finances?

Avoid borrowing as much as possible, pay in cash, use debit card instead, and reduce your spending.

What should you evaluate when investing for retirement?

Tax advantages and company matching.