Personal Finance Flashcards

Flashcards about Needs and Wants, Resources, Income and Wealth Measurement, Financial Choices, Budgeting, Recordkeeping, Financial Planning

Needs

Things needed for survival, such as food, water, clothing, shelter, and medical care.

Wants

Things people desire for reasons beyond survival and basic comfort.

Financial Resources

Money or other items of value that are used to acquire goods and services.

Cash Inflows

Income from your job, investments, and other sources.

Cash Outflows

Expenses, or items for which you must spend money.

Assets

Money and items of value that you own.

Liabilities

Debts that you owe.

Net Worth

The difference between your assets and liabilities.

Trade-off

Giving up one option in exchange for another.

Opportunity Cost

The value of your next best option; what you are giving up.

Budget

A spending and saving plan based on expected income and expenses.

Fixed Expenses

Costs that do not change each month.

Variable Expenses

Costs that can go up and down each month.

Charitable Giving

The act of donating money or time to a cause in which you believe.

Variances

The differences between planned amounts and actual amounts.

Manual Records

Information recorded in hard-copy format using pen and paper.

Electronic Records

Soft-copy formats of your financial information stored on your computer.

Spreadsheet Software

A computer program that allows you to insert numbers and formulas to compute amounts and then easily change them later as needed.

Encryption

The process of converting data into a coded form.

Financial Plan

A set of personal and financial goals, along with steps and a timeline for reaching them.

Personal Goals

Things you want to achieve in your life.

Financial Goals

Plans for how you will pay for your personal goals.

Short-term Goals

Things you expect to achieve within one week to one year.

Intermediate Goals

Things you with to achieve in the next two to five years.

Long-Term goals

Things you want to achieve more than five years from now.

Timeline

A visual display of how long it will take to achieve each phase of a plan.

Benchmarks

Standards against which progress is measured.

Phishing

A common internet scam that uses email messages to deceive you.

Identity Theft

The use of your personal information by someone else without permission to commit fraud or other crimes.

Risk

The chance of injury, damage, or economic loss.

Loss

A physical injury, damage to property, or disappearance of property or other assets.

Probability

The likelihood of a risk resulting in a loss.

Risk Assessment

The process of identifying risks and deciding how serious they are.

Risk Reduction

Finding ways to lower your chance of incurring a loss.

Risk Avoidance

Stopping behavior that leads to a risk.

Risk Transfer

Passing risk to another party.

Premium

The price you pay for insurance coverage.

Risk Assumption

Accepting the consequences of risk.

Self-insure

Setting aside money to be used in the event of injury or loss of assets.

Health Insurance

A plan for sharing the risk of medical costs resulting from injury or illness.

Unmanaged Care

You choose any doctor and pay a deductible and % of remaining costs

Fee-for-service plan

A type of health insurance plan that allows patients to choose any doctor or other provider for medical services

Managed car

must choose from a “network” of Doctors, Hospitals, etc.

Health Maintenance organization (HMO)

A group plan that provides prepaid medical care for its members

Preferred provider organization (PPO)

A network of independent health care providers that band together to provide health care services for a set fee

Basic Health care

Pays for routine care

Major Medical Costs

Only covers major expenses for serious injury/illness

Stop/loss provision

An insurance clause that sets a maximum that the insured has to pay out of pocket during any calendar year

Disability insurance

Insurance that provides income to replace a portion of normal earnings when the insured is unable to work due to a nonwork-related injury or illness

Life Insurance

Insurance that pays money to a beneficiary upon the death of the insured person

Beneficiary

The person designated to receive money from a life insurance policy

Temporary “Term” life insurance (Cheaper)

A policy that remains in effect for a specific period of time

Permanent Life Insurance

A policy that remains in effect for the insured’s lifetime and builds cash value

Homeowners Insurance

A policy that protects property owners from risk of loss to their real and personal property

Liability Coverage

Protection against injuries suffered by others while on your property or as a result of your actions

Home Inventory

A list of items of value in your home; used for insurance purposes

Replacement Value

The cost of replacing an item regardless of its actual cash (market) value

Renters Insurance

A policy that protects renters from personal property and liability risks

Auto Insurance

A policy that protects a car owner from losses as a result of accidents and other events

Collision coverage

A policy that protects against damage to your own vehicle if you hit another car or lose control and roll over

Comprehensive coverage

Protection against damage to your car from causes other than collision or rolling over

Personal Injury Protection (PIP)

Coverage for medical, hospital, and funeral costs of the insured and passengers in the event of an accident, regardless of who is at fault

Uninsured/underinsured motorist coverage

Protection against damage caused by a motorist with no or insufficient insurance

Umbrella Liability Insurance

A supplement to your basic auto and homeowners’ coverage that expands limits and includes additional risks

Systematic decision making

The process of making choices that reflect goals by considering all of the pros and cons along with the costs

Financial Responsibility

Being able to meet your financial goals through planned earning, spending, and saving

Financial Irresponsibility

Failing to live up to your financial obligations to meet your goals and needs

Buying Plan

An organized method for making good buying decisions

Criteria

Standards or rules by which something is judged

Spending limit

The maximum amount you are willing to pay for an item

Rebate

A refund of part of the purchase price of an item

Extended Warranty

Additional coverage that you can buy to pay for repairs or replacements needed beyond that original warranty period

Credit

The ability to borrow money and pay it back later

Debt

Money that must be repaid

Credit Card

A plastic card linked to a credit account that can be used to make purchases

Store account

A credit account that allows you to charge items or services only at that store or with that merchant

Revolving Credit

An account on which the account holder can charge repeatedly up to a maximum limit

Charge Cards

A form of credit card for which the cardholder must pay the balance in full by the due date

Consumer Loans

Direct loans of cash made to a consumer at a fixed interest rate for a set period of time

Installment Credit

To finance the purchase of a single high-priced item through a series of equal payments made over a set period of time

Collateral

Property that can be used as security for a loan

Line of Credit

A preapproved loan amount that a debtor can borrow as needed with no collateral

Service Credit

The ability to receive services and pay for them later Ex. Utilities (Electric Bill, Water Bill, Cell Phone Service)

Fixed Interest Rate

An interest rate that is set and does not change from month to month

Variable Interest Rate

An interest rate that goes up and down with inflation and other economic conditions

Balance Transfer

Moving a balance from one credit card account to another

Cash Advance

Money borrowed against your credit card account

Penalty

A fee charged for violating a term of the credit agreement

Grace Period

The amount of time you have to pay your current credit card balance in full to avoid paying interest

Billing Cycle

The period of time between credit card billings

Roommate

A person with whom you share living space, living expenses, and other responsibilities

Shared Responsibility

Two or more people who each agree to bear a portion of an obligation

Living Habits

Your daily routine, or the way you choose to live your life

Security Deposit

A refundable amount paid to cover damages to property caused by a tenant

Logistics

The act of making a plan and carrying it out to ensure that an event takes place

Contract

A legally binding agreement that specifies the rights and duties of each party to the agreement

Consideration

Something of value exchanged for something else of value

Lease

A written agreement that allows a tenant to use property for a set period of time at a set rent payment

Rental Agreement

A written contract that allows you to leave any time as long as you give the required notice

Eviction

The legal process of removing a tenant from rental property