Personal Finance Chapter 1 Vocab

Personal Financial Planning

The process of managing your money to achieve personal economic satisfaction

Opportunity Cost

What a person gives up by making a choice

Adult Life Cycle

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

Values

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

Economics

The study of how wealth is created and distributed

Inflation

A rise in the general level of prices

Interesting Forumla

Amount in Savings x Annual Interest Rate x Time Period

Future Value

The amount to which current savings will increase based on a certain interest rate and a certain time period; also referred to as “compounding”.

Present Value

The current value for a future amount based on a certain interest rate and a certain time period; also known as “discounting”.

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 situation, analyzes your financial needs, and recommends future financial activities