PF Chapter 5 Test
Surplus: extra money that you can spend or save, depending on your financial goals and values
Money Management: the day-to-day financial activities necessary to get the most from your money
Liabilities: the debts that you owe
Assets: any items of value that you own, such as cash, real estate, personal possessions, and investments
Wealth: is property that has a money value or exchangeable value
Cash Flow: the movement (cash) in and out of your wallet and/or your bank account
Personal Financial Statement: gives information about your current financial position and presents a summary of income and spending
Personal Balance Sheet: a financial statement that shows what you own and what you owe
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Examples of Liabilities: student loans, credit card balances, and mortgages
Examples of Assets: your home, jewelry, and art
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How do you increase your net worth?
- Reducing your expenses
- Reducing your spending and your debts
- Increasing your savings
- Increasing your investments
Steps to develop a budget:
- Set Your Financial Goals
- Estimate Your Income
- Budget For Unexpected Expenses
- Budget for Fixed Expenses
- Budget for Variable Expenses
- Record What You Spend
- Review Spending and Saving Patterns
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Characteristics of a successful budget:
- Carefully planned and related to your goals
- Practical
- Flexible
- Easily accessible