Personal Finances

Money

• Serves as a medium of exchange.

• It is a standard of value for goods and services, and it is a store of value.

• Currency, coins and cheques make up money.

Commodity money

Shells, Beads, Tobacco, coins

Barter (trade)

The direct exchange of goods and services without using money.

Double coincidence of wants

Where two parties each hold an item the other wants, so they exchange these items directly without monetary medium.

Characteristics of money

• Divisible (into different denominations)- money can be divided into smaller units of value

• Portable- individuals can carry money

• Durable- made of material that can last long, withstand pressure

• Reconisble- should be able to identify from knowledge of appearance or characteristics thats it’s money

• Scarce- the government/the reserve bank will never print too much money, so that people value money

Goods

things that are tangible (we can touch, feel and see) or material things

Services

intangible things or doing work for someone or non-material things.

Surplus

having an excess of something

Reserve bank of australia

our central bank, the government's bank

Inflation

the rate of increase in prices over time.

Exchange rate

the price of one currency expressed in terms of another currency.

Needs

Something that you must have in order to live eg food, water, shelter, clothing.

Wants

Something you wish to have.

Opportunity cost

your next best alternative, not all of your other alternatives.

Economy

the condition of a country or region in terms of the production and consumption of goods and services

the supply of money

Supply

the total amount of a good or service available for consumption

Demand

the desire consumers have for a good or service

Wage

earned on an hourly basis and paid daily or weekly

Salary

earned on a yearly basis and paid fortnightly or monthly

Income

Sum of all money earned such as wages and salary

Expenses/expenditure

costs incurred

Fixed expenses

costs that are the same amount each month, such as rent, insurance

Flexible / Variable expenses

costs that are easily changed, reduced or eliminated, such as entertainment, travel, food

Deficit

when total expenses are greater than total income

Budget

financial plan that allocates future income towards expenses, savings, and debt repayment.

Debt

a sum of money that is owed or due