Chapter 1 Quiz (Family Consumer Science)

What is Dave Ramsey’s Seven Baby Steps

1. Save $1,000 for your emergency fund

2. Pay off debt (except the house) using the debt snowball

3. Save 3-6 months of expenses in a fully funded emergency fund

4. Invest 15% of your household income in retirement

5. Save for your children’s college fund

6. Pay off your home early

7. Build wealth and give

Personal Finance

the process of planning your spending, financing, and investing to optimize your financial situation

Financial Goals

the big-picture objectives you set for how you’ll save and spend money

Liquidity

access to funds to cover any short-term cash deficiencies

Opportunity Costs

represent the potential benefits that an individual, investor, or business misses out on when chossing one alternative over another

Cash Inflows

all sources of money entering a business or personal account

Cash Outflows

all the money leaving a business or personal account

Budget

an estimate of income for a set period time

Net Worth

the value of what you own minus the value of what you owe

Assets

what you own

Liabilities

what you owe

Sinking Fund

money you set aside each month for specific savings goals

Diversified Portfolio

investment strat that involves spreading your investments across a variety of asset classes, industries, and geographies to reduce risk

Pre-tax Deductions

taken from an employee’s paycheck before any taxes are withheld

College Planning

requires self-reflection and consideration of both your budget and the pros and cons of different types of institutions

Career Planning

mapping the key steps of your professional future

Developing your Financial Plan

1. budgeting and tax paying

2. managing your liquidity

3. financing your large purchases

4. protecting your assets and income

5. investing your money

6. planning your retirement and estate