Financial Stewardship Quiz One Study Guide (Olson)

Dayton - God's responsibilities with money

1. God owns all your possessions

2. God is in control

- He allows difficult circumstances in order to: accomplish His intentions, develop our character, and disciple us

Dayton - Our responsibilities with money (Be faithful...)

1. Be faithful with what you have

2. Be faithful with 100%

3. Be faithful with the little things

4. Be faithful with other people's stuff

Dayton - 8 steps to becoming a faithful steward

1. Be completely honest

2. Work hard

3. Give generously

4. Spend wisely

5. Save regularly

6. Avoid debt

7. Steadily invest

8. Train children

Rewards of sound financial planning

1. Improving your standard of living

2. Spending your money wisely

3. Accumulating wealth

4. Care for family (having children, aging parents)

5. Retirement funded

6. Greater Flexibility

Impact of inflation

1. Annual raises

- Must match or exceed inflation rate

- Real salary may decline

2. High rates of inflation

- Cost of Borrowing

- Effects on Stocks and Bonds

- Retirement Plans

PFIN - Six step financial planning process

1. Define financial goals

2. Develop financial plans and strategies to achieve goals

3. Implement financial plans and strategies

4. Periodically develop and implement budgets to monitor and control progress toward goals

5. Use financial statements to evaluate results of plans and budgets, taking corrective action as required

6. Redefine goals and revise plans and strategies as personal circumstances change.

Dayton - Your Money Map destinations #1

Learn God's Way of Handling Money

- Save $1000 for Emergencies

- Start Using Budget (spending plan)

- Begin Giving

Destination #2

Increase Emergency Savings to One Month's Income

- Pay off Credit Cards

Destination #3

Increase Emergency Savings to 3 Month's Income

- Pay off All Consumer Debt

Destination #4

Save for Major Purchases

- Save for True Financial Freedom

- Save for Children's Education and Save for Business

Destination #5

Purchase Affordable Home

- Start Prepaying Home Mortgage

- Begin Investing

Destination #6

Home Mortgage Paid Off

- Children's Education Funded

Destination #7

Retirement Funded

- True Financial Freedom

- Pass on Legacy of Financial Faithfulness

Dave Ramsey's 7 Baby Steps

1. $1,000 in an emergency fund

2. Pay off debt (use debt snowball)

3. 3 to 6 months of expenses in savings

4. Invest 15% into tax-favored accounts

5. Fund college for your children

6. Paying of your home early

7. Build wealth and give a bunch away

What Are the Types of Financial Goals?

Short-Term Financial Goals

- Set each year and cover a 12-month period

Intermediate Goals

- Bridge the gap between short and long-term goals

Long-Term Goals

- Indicates wants and desires for a period covering about 6 years out to the next 30 or 40 years

What affects financial goals?

1. Money and Relationships

2. Personality Type - DISC, Myers-Briggs

3. Spending Patterns - Nerd/Free Spirit

4. Psychology of Money - Needs vs. Wants

5. Difficult Circumstances

6. Trusting in God's Provision

What should you keep in mind when setting financial goals?

The goal should be specific, have a time frame (short, intermedieate or long), and a priority

Dayton - advantages of giving (increase...)

1. Increase in intimacy

2. Increase in heaven

3. Increase on Earth

Defining contentment and signs of discontentment

Contentment is making the best of everything

Signs of discontentment:

- Attempting to get rich quick

- Trying to appear wealthy

- Allowing jealousy and envy to creep into your mindset

God's role in our work

1. God uses work to develop our character

2. God gives job skills - Exodus 36:1

3. God controls promotion and success - Psalm 75:6-7

4. God gives direction on work and rest - Exodus 34:21

5. We work for the Lord - Colossians 3:23-24

6. We must work together - 1 Corinthians 3:4-9

Objective of tax planning

Maximize the amount of money that one can keep by legally minimizing the amount one pays

Gross income

total of taxpayer's income subject to federal taxes that includes

- Active income

- Portfolio income

- Passive income

Adjusted gross income

amount of income that remains after subtracting all allowable adjustments to income from gross income.

Adjustments to Gross Income

- Allowable deductions from gross income

Educator expenses (limited), higher education tuition costs (limited), IRA contributions (limited), self-employment taxes paid, self-employment health insurance payments

Take home pay

- Employer withholds a portion of income every pay period and sends it to the IRS to be credited to the tax account.

- Employer withholds funds for federal income taxes and for FICA (social security) taxes

- Other payroll deductions

Life & health insurance, saving plans, retirement programs, professional or union dues, and charitable contribution

What are the stages in the buisness cycle?

Expansion, Peak, Contraction, Trough

What determines your personal income?

Age, marital status, where you live, occupation,

Personal Financial Statements

Balance sheets and income and expense statements that serve as essential planning tools for developing and monitoring personal financial plans.

Balance Sheet

a financial statement that describes assets you hold, debts you owe, and your financial position at a given point in time

Income and Expense statement

measures financial performance over time

Budget

a detailed financial report that looks forward, based on expected income and expenses

Fair Market Value

the actual value of an asset, or the price for which it can reasonably be expected to sell in the open market

liquid assets

cash and items that can be quickly converted to cash with no loss in value

investments

assets such as stocks, bonds, mutual funds, and real estate that are acquired in order to earn a return rather than provide a service

real property

land and anything attached to it

What are the benefits to budgeting?

-maintain neccesary info to monitor and control finances

-decide how to allowcate income to reach financial goals

-implement a system of dsiciplined spending

-reduce needless spending

-achieve long term financial goals

Debt Service Ratio

total monthly loan payments divided by pretax monthly gross, provides a measure of the ability to promptly pay debts

What are the steps to writing a budget?

1. Forecast income for the year

2. Forecast expenses

3. Make sure that income equals or exceeds forecasted expenses

How can you deal with a monthly budget deficit?

-Shift expenses from months with deficits to months with budget surplus (or transfer income if possible)

-use investements, savings, or borrowing to cover temporary deficits

How can you reduce an annual budget deficit?

-liquidate savings and investments or borrow enough to meet the total budget shortfall for the year

-cut low priority expenses

-increase income

Checking Accounts

Demand deposit, where the account holder must be allowed to withdrawl whenever they demand

Savings accounts

timed accounts with funds that can't be withdrawn until the specified time after deposit (inorder to recieve interest)

Negotiable Order of Withdrawal (NOW)

checking account paying interest that typically requires minimum balance

Money Market Deposit Accounts (MMDAs)

a federally insured savings account, offered by banks and other depository institutions, that competes with money market mutual funds

Money Market Mutual Funds (MMMF)

a mutual fund that pools the funds of many small investors and purchases high-return, short-term marketable securities

Asset Management Accounts (AMA)

Comprehensive financial services packages offered by a brokerage firm, which can include a checking account, credit and debit cards, MMMF, loans, automatic payment of fixed payments such as mortgages, brokerage services (buying and selling stocks or bonds), and a system for the direct payment of interest, dividends, and proceeds from security sales into the MMMF.

What are the types of accounts?

-checking accounts

-saving accounts

-Negotiable order of withdrawal accounts (NOW)

-Money Market Deposit Accounts (MMDAs)

-Money Market Mutual Funds (MMMF)

-Asset Management Accounts (AMA)

What is the FDIC?

Federal Deposit Insurance Corporation: A federal guarantee of savings bank deposits initially of up to $2500, raised to $5000 in 1934, and frequently thereafter; continues today with a limit of $100,000

How do you maintain your checking account?

-Always write checks in ink

-Include the name, date, and ammount

-Sign the check with your legal signature

-Note the checks purpose

-Always recconcie your account (double check that your monthly report is accurate)