personal finance budget

  1. Opportunity Cost- the trade-off of loss of potential gain from the other alternatives when one alternative is chosen
  2. Money Management- planning on how to get the most from your money
  3. Budget- an estimate of income and expenses for a period of time
  4. Income- money you make
  5. Expenses- money you spend
  6. Cash Flow- Money coming in vs money going out (Income-expenses=net cash flow)
  7. Liquid Assets- items of value that can be quickly converted to cash (cash, checking acct, savings acct)
  8. Net Worth-   Assets- liabilities= net worth
  9. Current Liabilities- short-term bills have to be paid within one year
    1. Long-Term Liabilities- debts that do no thave to be fully repaid for at least one year
    2. Net Pay/Income- Net pay is what you take home from your paycheck after taxes
    3. 50/30/20- 50 percent to expenses, 30 percent to wants and 20 percent to savings
    4. Envelope Budgeting- putting actual cash into envelopes for expenses
    5. Why do we budget for unexpected expenses first before other types of expenses? - because then you will have an emergency form in case something major happens. 
    6. What is PYF? What percent should you ?  - at least 10% and it is when you put money into savings before other bills
    7. Why is it important to establish an Emergency Fund? How many months worth of money should be in your emergency fund? - Because life has unexpected expenses, 3-6 months
    8. What is a fixed expense?  What are some bills that could be considered fixed expenses? - fixed expense is something that you pay once a month and the price will not change, such as rent or car payment
    9. What is a variable expense?  What are some bills that could be considered variable expenses? - something that you pay once a month but change based off your usage, gas, electric, water
    10. What is a periodic expense?  What are some bills that could be considered periodic expenses? - something that you pay periodically throughout the year, insurance, medical bills
    11. Two characteristics of a good budget include: - carefully planned, practical, flexible and easily accesible
    12. Define assets.  Give some examples. - items that you own (liquid, real estate, personal possessions, and investments)
    13. Define liabilities.  Give some examples. - debts that you owe (electric bill, mortgage)
    14. What is the difference between current and long-term liabilities? - current are short term bills that have to be paid within a year (electric bill), long terms are debts that do not have to be fully repaid for at least a year (student loan)
    15. What is the formula for Net Worth? - Assets-liabilities=net worth
    16. Distinguish between income and expenses.  How do these relate to cash flow statements? - Income is how much money you are making and expenses are your fixed, flexible, and variable spending. Income-expenses=net cash flow      positive amount=surplus    negative amount=deficit
    17. What are some sources of income? your job, gifts, allowance
    18. If you spent more than you made in a month, you have a _____deficit_____.  If you made more than you spent in a month, you have a _______________surplus__________.
    19. Generally, If you have a surplus cash flow, your Net Worth _________increases______.  If you have a deficit, your Net Worth ______________decreases__________.
    20. As an adult, our biggest monthly expense is usually- rent/mortgage
    21. Define discretionary income. money left over after paying for essentials