Essential Vocabulary
Anything of value that you own, such as bank accounts, a car, or a home.
Assets
Saving 1 million to retire at age 63
Long term goal
The tool used to transfer the risk of financial loss to a third party.
Insurance
The fundamental moral principles of conduct, such as honesty, fairness, and respect
Ethics
The first step in creating a comprehensive financial plan. ( SMART ______)
What you owe to others, such as student loans, credit card debt, or a car loan
Liabilities
Saving enough to buy a car by the time you graduate high school
short term
Using money to build wealth over time through assets like stocks and bonds.
Investing
Taking accountability for the financial choices you make.
Personal Responsibility.
A savings cushion reserved to offset unexpected events, typically covering 3 to 6 months of expenses.
Emergency Fund
A financial document showing your total assets minus your total liabilities.
Net Worth Statement
Setting 10 dollars aside from your paycheck to buy a coffee tomorrow
Withdrawing yourself from active working life, which requires starting early to ensure long-term savings.
Retirement
A licensed professional who helps individuals plan and manage their financial future.
Financial Planner
What is the gold standard credential in the Financial Planning Industry? (Three Letters)
CFP
A detailed estimate of expected income and expenses over a specific period.
Budget
Taking a 10 day vacation to the Bahamas for your 50th birthday
Long term goal
Planning for the distribution of your assets upon death
Estate Planning?
What does diversification mean?
Spreading investments to reduce risk
A business financial plan typically works by outlining a variety of financial statements for a time period of _________________.
3 to 5 years
Assets that are easily converted into a fixed amount of cash, such as funds in a savings account
Monetary Assets
FRUGAL or CHEAP? Buying a broken-down "beater" car for under $1,000, skipping all routine maintenance, and driving it until it completely dies on the road
CHEAP!
A legal document that explicitly outlines a person’s final wishes regarding their assets
Will
The ethical requirement that obligates a financial professional to put their client’s best interests first.
Fiduciary Responsibility
Frugal or Cheap: Meal planning, using coupons, and buying store-brand or bulk items to cook nutritious, satisfying meals at home
FRUGAL