Personal Finance Basics
What is personal finance?
to spending, saving, and investing money
What is to determine your financial situation?
This step involves creating a list of savings, income, and debts
What is a budget?
A plan for using your income to meet your wants and needs
What is gross pay?
The total amount of money earned before deductions
What is opportunity cost?
Also known as a trade-off
What is personal financial planning?
personal financial planning helps you achieve financial security and the life you want.
What is to develop your financial goals?
This step is deciding what you want to accomplish
What is estimate your income?
This step is estimating how much money you will earn
What are deductions?
Amounts taken out of your paycheck
What is inflation risk?
Prices rise and your money buys less
What are goals?
specific things you want to achieve like buying a car
What is to identify possible courses of action?
This step means looking at all options before deciding
What are fixed expenses?
These are expenses that stay the same each month
What is net pay?
Money you receive after deductions
What is interest rate risk?
Interest rates change affecting savings or loans
What is your financial situation?
your savings, income, and debts
What is to evaluate your alternatives?
This step includes using the internet, magazines, and newspapers for research
What are variable expenses?
These are expenses that change and can be controlled
What is budget variance?
This is the difference between the budgeted spending and the actual spending
What is income risk?
Loss of income due to job or health changes
What is diversification?
A way to minimize risk by spreading your assets
What is to implement a financial plan?
This step involves taking action like cutting spending
What is review spending?
This involves reviewing your spendings each month to consider making changes.
What is a deficit?
when spending is greater than income
What is liquidity risk?
The ability to convert assets into cash quickly without losing value