Economics & Personal Finance DLE 2025 Final Exam Study Guide

Flashcards for Economics & Personal Finance DLE 2025 Final Exam Study Guide

Personal Financial Planning

Arranging to spend, save, and invest money to live comfortably, have financial security, and achieve goals

Goals

Things you want to accomplish, such as getting a college education, buying a car, or starting a business

Values

Beliefs and principles you consider important, correct, and desirable

Need

Something you must have to survive (food, shelter, clothing)

Want

Something you desire or would like to have or do

Opportunity Cost

What is given up when making one choice instead of another

Liquidity

The ability to easily convert financial assets into cash without loss in value

Short-term Goals

One year or less

Intermediate Goals

Two to five years

Long-term Goals

More than five years

Service

A task that a person or a machine performs for you

Good

A physical item that is produced and can be weighed or measured

Consumable Good

Purchases that you make often and use up quickly

Durable Good

Expensive items that last three years or more when used on a regular basis

SMART Goals

Specific, Measurable, Achievable, Realistic, Time-based

Economics

The study of the decisions that go into making, distributing, and using goods and services; the study of the allocation of scarce resources

Safe-deposit Box

A small, secure storage compartment that you can rent in a bank

Personal Financial Statement

A document that provides information about an individual’s current financial position and presents a summary of income and spending

Personal Balance Sheet

Also called a net worth statement; a financial statement that lists items of value owned, debts owed, and a person’s net worth

Net Worth

The difference between the amount that you own and the debts that you owe

Asset

Any item of value that an individual or company owns, such as cash, property, personal possessions, and investments

Wealth

An abundance of valuable material possessions or resources

Liquid Assets

Cash and items that can be quickly converted into cash

Real Estate (Property)

Land and any structures that are on it that a person or family owns

Supply

The amount of goods and services available for sale

Demand

The amount of goods and services people are willing and able to buy

Federal Reserve System

The central banking organization of the United States

Inflation

The rise in the level of prices for goods and services

Interest

The price that is paid for the use of another’s money

Insolvency

A financial state that occurs if liabilities are greater than assets

Deficit

More is being spent (outflow) than is being earned (inflow)

Net (Take-home) Pay

The amount of income left after taxes and other deductions are taken out of your gross (total) pay

Discretionary Income

The money left over after paying for the essentials (i.e., rent, food, clothing)

Budget

A plan for using money to meet wants and needs

Bank Statement

A list of all transactions for a bank account, according to the bank

Check

A document used to make a payment to an individual or business

Checkbook Register

A list of all transactions for a bank account, according to the individual account holder

Deposit Slip

A document used to put money into an account

Bank Reconciliation

A report that accounts for the differences between the bank statement and a checkbook balance

Direct Deposit

An automatic deposit of net pay to an employee’s designated bank account

Compound Interest

Interest is earned on both the original amount you deposited and any previously earned interest

Annual Percentage Rate (APR)

The cost of credit on a yearly basis, expressed as a percentage; the annualized interest rate on a credit account

The 5 C's of Credit

Character (credit history), Capacity (debt-to-income ratio), Capital (amount of money an applicant has), Collateral (an asset that can back or act as security), Conditions (purpose of the loan, amount of the loan, prevailing interest rates)

Credit Rating/Score

A measure of a person’s ability and willingness to make credit payments on time

Security Deposit

An amount of money paid to the owner of the property by a tenant to guard against any financial loss or damage that the tenant might cause

Renters Insurance

A type of insurance that covers the loss of a tenant’s personal property as a result of damage or theft, or medical/legal expenses caused by accidental injuries suffered on your premises

Down Payment

A portion of the total cost that is required at the time of purchase

Real Estate Agent

A person who arranges the sale and purchase of homes and other property

Common Stock

A unit of ownership of a company; entitles the stockholder to voting privileges and may pay dividends from company profits

Preferred Stock

A type of stock that gives the owner the advantage of receiving cash dividends before common stockholders; if a company fails, preferred stockholders receive any leftover assets first

Bond

The written pledge of a corporation, government, or municipality to repay a specific sum of money with interest

Mutual Fund

An investment in which investors pool their money to buy stocks, bonds, and other securities selected by professional managers

Diversification

The process of spreading your assets among several different types of investments to reduce risk

Insurance

Protection against possible financial loss through a contract called a policy; the insurance company agrees to take on the risk of the policyholder in exchange for a premium (a fee paid for insurance coverage)

Deductible

The set amount that the policyholder must pay per loss on an insurance policy

Risk Avoidance

Avoiding situations involving a particular risk altogether

Risk Reduction

Reducing the likelihood of harm

Risk Assumption

Taking on responsibility for the negative results of a risk

Risk Shifting

Transferring risk to an insurance company for a premium

Liability

Legal responsibility for the financial cost of another person’s losses or injuries

Collision Insurance

Damage to the vehicle of the insured person, regardless of who is at fault

Peril

Anything that may cause a loss

Hazard

Anything that increases the likelihood of loss

Negligence

The failure to take ordinary or reasonable care to prevent accidents from happening

A good budget is…

carefully planned, practical, flexible, written and easily understood

Common banking fees

out-of-network ATM fee, overdraft fee, minimum balance fee, maintenance fee

Savings vs Checking

Savings

• Higher interest rates

• Limited access

• Used for an emergency fund or to save for a goal

Checking

• ATM withdrawals, writing checks

• Debit card takes funds directly from account

• Easy transfers to pay bills or shop