Personal finance chapter 4

assets

money and items of value that you own

benchmarks

standards against which progress is measured

budget

a spending and saving plan based on expected income and expenses

cash inflows

income from your job, investments, and other sources

cash outflows

expenses, or items for which you must spend money

charitable giving

donating money or time to a cause in which you believe

electronic records

soft-copy formats of your financial information stored on your computer

encryption

process of converting data to a coded form

financial goals

plans for how you will pay for your personal goals

financial plan

a comprehensive plan listing goals along with steps and a timeline for reaching them

financial planner

a professional consultant who provides financial advice for a fee or commission

financial resources

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

fixed expenses

costs that do not change each month

identity theft

the use of your personal information by someone else to commit fraud or other crimes

liabilities

debts that you owe

needs

things needed for survival, such as food, clothing, and shelter

net worth

the difference between assets and liabilities

opportunity cost

the value of your next best option-what you are giving up

personal goals

things you want to achieve in your life

phishing

a scam in which an e-mail is sent from someone posing as your bank or other legitimate business asking for personal information

timeline

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

tradeoff

giving up one option in exchange for another

variable expenses

costs that can go up and down each month

variances

differences between planned amounts and actual amounts

wants

things people desire for reasons beyond survival and basic comfort

People who do not have their basic needs met are not able to provide for other needs or wants.

True

Basic needs are those needs that allow you to have a comfortable lifestyle.

False

Financial resources are unlimited and growing.

False

The amount of money a person has to spend after needs are met is called discretionary income.

True

Wealth is measured on the personal net worth statement.

True

One way to increase wealth is to spend less than you make.

True

A personal net worth statement lists income and expenses.

False

A tradeoff is the value of what you are giving up when you make a purchase.

False

Receiving a pay raise will allow you to increases your discretionary income.

True

You can build your vocabulary by reading.

True

Microsoft Word is an example of a spreadsheet program.

False

Balancing your budget is a simple six-step process.

False

Charitable giving is a mandatory fixed expense.

False

A favorable variance results from spending less than you budgeted for spending.

True

Keeping good records will help you prepare a better budget.

True

For each personal goal you should have a(n)\_________goal.

a) timeline

b) benchmark

c) financial

d) expert

C

Which of the following is not a financial record?

a) personal budget

b) checkbook

c) tax return

d) all of the above are financial records

D

A goal that you want to achieve in three to four years is a(n)

a) short-term goal

b) medium-term goal

c) long-term goal

d) timeline

B

Financial plans

a) change over time

b) do not change over time

c) require a short-term commitment

d) do not reflect your values over time

A

Which of the following financial professionals is likely to publish self-help materials?

a) financial planner

b) financial adviser

c) financial expert

d) investment adviser

C

Which of the following can help protect your computer from hackers?

a) firewall

b) passwords

c) encryption

d) all of the above

D

Which of the following is a luxury item?

a) food

b) medical care

c) more than one pair of shoes

d) sports car

D

Which for the following is not listed on a personal net worth statement?

a) income

b) assets

c) liabilities

d) net worth

A

Which of the following is a fixed expense?

a) food

b) rent

c) entertainment

d) utilities

B

Which of the following is a variable expense?

a) rent

b) food

c) insurance

d) car payment

B

Bible memory

The plans of the diligent lead to profit as surely as haste leads to poverty

Proverbs 21:5

What are needs? Give examples.

Needs are things you must have

Ex: food, clothing, shelter

What are wants? Give examples.

Wants are things people desire

Ex: new cars, vacations, luxury items

What are financial resources used for? What are financial resources?

Financial resources are used to acquire wants and needs

Earned, unearned, and variable income

What is discretionary income?

Discretionary income is the amount of money a person has after needs are met