Unit 1 Vocabulary

Personal Finance

Personal financial planning

The process of managing to achieve personal economic satisfaction/goals

Opportunity cost

What a person gives up by making a choice

Values

Ideas and principles that a person considers correct, desirable, and important

Economics

The study of how wealth is created and distributed

Time value of money

Increases in an amount of money as a result of interest earned

Future value

The amount to which current savings will increase based on a certain interest rate and a certain time period (compounding)

Present value

The current value for a future amount based on a certain interest rate and a certain time period (discounting)

Adult life cycle

The stages in the family situation and financial needs of an adult

Inflation

A rise in the general level of prices

Bankruptcy

The legal status of a person who is not able to pay debts owed

Liquidity

The ability to readily convert financial resources into cash without a loss in value

Financial plan

A formalized report that summarizes your current financial needs and recommends future financial activities