Financial Planning Basics
Wages earned BEFORE taxes and deductions taken out
Gross Income
These are expenses beyond your regular expenses and could include: emergencies, vacations, social events, repairs, etc.
Short-term needs
Items of value that a person owns
Assets
If your fixed expenses are $700 and they go up 10%, what is the new total?
770
T or F: If you spend more than you have, your cash flow will be positive
False
Wages earned AFTER taxes and deductions
net Income
These are costs that do not change from month to month
Fixed expenses
This shows the money earned and deductions taken from your paycheck during the year
W-2
If your variable expenses for the month of December are: $375, $125, $210, and $80, what is the total.
790
When your income exceeds your expenses you have a
surplus
A set of goals for spending, saving, and investing the money you receive
financial plan
Expenses that are costly and require years of planning and saving.
Long-term needs
Money or debts you owe to others
Liabilities
If a bank offers an annual interest rate of 3%, what is the monthly interest rate?
.0025
Rent, car payment, insurance, student loan payment are all examples of this
Fixed Expenses
A spending and saving plan based on your expected income and expenses
Budget
Costs that vary in amount and type, depending on the choices you make.
Variable expenses
Shows a person's net worth based on their assets and liabilities
Net worth statement
If your monthly expenses are $1,850 and you expect them to go up by 2%, how much are they going to increase?
37
A vacation is an example of a __________ need
short-term
This is the difference when you subtract your liabilities from your assets
Net worth
These are the 4 steps in preparing a budget
1. Estimate your income
2. Estimate your expenses
3. Decide how much to save
4. Balance your budget
A list of the valuable items you own, along with their purchase prices and approximate current values
Personal property inventory
If your gross pay is $4,000 and with taxes and deductions, your take home 18% less than your gross, what is your net pay?
3280
What are 2 things that financial planning helps you do
1. prioritize your choices
2. avoid careless and wasteful spending
3. organize your financial resources
4. avoid money worries