econ personal finance notes

Personal Finance

all the financial decisions an individual or family must make in order to earn, budget, save, spend, and give money over time

credit

the granting of a loan and the creation of debt; any form of deferred payment

interest rate

the percentage of principal charged by the lender for use of its money​​​​​​​

loan shark

person or entity that charges borrowers interest rates above an established legal rate​​​​​​​

interest

the additional cost a lender charges for borrowing their money

consumer

a person or organization that uses a product or service

debt

money owed to another person or company

Paycheck to Paycheck

an expression used to describe a person or household whose monthly income is devoted to expenses and has little to no savings

Financial plan

a plan of action that allows a person to meet not only their immediate needs but also their long-term goals

net worth

the amount by which the value of a person’s assets exceeds or falls behind the value of their liabilities

asset

anything that is owned by an individual, including money in the bank or investments

liability

financial debts or obligations

positive net worth

the dollar value of a person’s assets is greater than the dollar value of their liabilities

negative net worth

the dollar value of a person’s liabilities is larger than the value of their assets

net income

what a person earns after payroll taxes and other deductions are taken out; often referred to as take-home pay

expense

the cost of goods or services; money paid out

financial literacy

the knowledge and skill base necessary for people to be informed consumers and manage their finances effectively