Introduction to Personal Finance Study Guide

Fill-in the missing words for the Five Foundations:

  1. Save $500 in an Emergency Fund
  2. Get Out of debt
  3. Pay cash for Your Car
  4. Pay Cash for your College
  5. Build Wealth and Give
  6. \

Fill-in the Blank. Use the following terms with the definitions listed.

Economy B. Credit C. Financial Literacy D. Personal Finance E. DebtF. Loan G. Interest H. Consumer

  1. -Debt - an obligation of repayment to another party
  2. -Interest- a fee paid to borrow money
  3. -Loan- debt used to buy a car or pay for college
  4. -consumer - a person or organization who buys/uses services
  5. -Economy-a system by which goods and services are produced and distributed
  6. -Personal Financial - all of the decisions and activities of an individual family regarding their money, including spending, saving, and budgeting.
  7. -Financial Literacy - knowledge and skill-set necessary to manage finances effectively.
  8. -Credit- allowing someone to buy now and pay later

Answer the following questions:

What percent of money success is behavior? 80%

What percent of money success is knowledge? 20%

What percent of Americans are living paycheck to paycheck? 70%

 Understanding the -language- of money is the key to success.

%%True%% or False. A budget is specific to each individual.

What is the most challenging concept when it comes to personal finance? Managing behavior

How do credit card companies make money? Interest they charge on an unpaid balance.What is the main cause of divorce? Money problems

What is the main cause of kids dropping out of college? Money debt

 List the four elements of a financial plan:

  1. Knowing your financial condition
  2. Financial goals
  3. Financial plan
  4. Execute financial plans

 Describe the three levels of financial well-being:

  • Survival This is when you are living paycheck to paycheck, no money left to save or invest.
  • Comfort This when you finally have money to spend on wants instead of needs and perfect time to save money for the future.
  • Secure There is money that is saved, and even money to invest.

What word would best describe the financial condition of most people in America? Explain. The financial condition of most people in America is survival mode(paycheck to paycheck). The reason for this is because there isn’t much knowledge within the United States of how to avoid debt, and how to take on different approaches to credit cards, debit cards, and loans. There is also little knowledge of how to build up a credit score to lower your tax rate.