Money Management Skills Flashcards

Money Management Skills Flashcards
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How to set up a financial goal
You can set these goals by deciding how long it will take you to accomplish a goal. Then you plan how to achieve your goal.
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Correlation between liabilities and assets on a balance sheet
While indirect, it is usually true that if you lower your liabilities on this sheet then your assets will increase.
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Liabilities
We use this term when referring to any individual's financial obligations or debt. Examples can include credit card payments or loan balances.
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Advantages of a High Net Worth
Individuals who have this are typically offered lower interest rates. They also have increased flexibility with spending.
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Negative Net Worth
You would have this if your liabilities outweighed your assets on a balance sheet. This situation is usually not ideal, but is considered acceptable if the liabilities are from student loans.
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Balance Sheet
This financial document records information about a company's assets and liabilities in a specific moment. If a company sells assets to pay a bill the balance sheet would need to be changed.
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Personal Cash Flow Statement
A financial statement that can be used to monitor changes in the cash you possess over a period of time.
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Uses of a Personal Statement of Cash Flow
This statement can show you if you have more incoming or outgoing cash. If you realize your expenses are too high, you can then lower your expenses to save money.
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Difficulties associated with tracking outgoing cash on a personal cash flow statement

Difficulties tracking small daily expenditures

Issues monitoring credit card transactions that may be unbilled

Problems realizing when you spend money because of alternative payment methods

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Personal Cash Inflow
This amount represents the actual money you receive. Examples can include your paycheck, refund checks from taxes or even cash gifts for birthdays.
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How to schedule for cash flow statements
It's a good idea to complete these statements on a monthly basis because most expenses are billed every month.
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Inflation and household spending
Inflation can be caused by spending, which raises costs for households. If this occurs, the government may raise taxes to limit spending in order to lower costs again.
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Inflation
This occurs when services or goods increase in price by a significant amount.
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Tight Monetary Policy
A monetary policy that reflects the fact that when interest rates are high consumers tend to borrow less money from banks and make fewer purchases.
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Loose Monetary Policy
This monetary policy asserts that consumers are more likely to take out loans and make purchases when interest rates are low.
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How the amount of money held by banks affects interest rates
These rates change based on how much money a bank has. When the bank has a lot of money, these rates are low; if the bank has little money, the rates are high.
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Interest
When talking about loans, this term refers to the cost you have to pay in order to borrow money.
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34 cards in set

Flashcard Content Overview

These flashcards can help you review aspects of personal finance, personal cash flow statements and personal balance sheets. You can focus on how to set financial goals, household budgets and options for conserving energy. Furthermore, you'll find cards in this set that deal with the personal effects of bankruptcy as well as different bankruptcy options.

Front
Back
Interest
When talking about loans, this term refers to the cost you have to pay in order to borrow money.
How the amount of money held by banks affects interest rates
These rates change based on how much money a bank has. When the bank has a lot of money, these rates are low; if the bank has little money, the rates are high.
Loose Monetary Policy
This monetary policy asserts that consumers are more likely to take out loans and make purchases when interest rates are low.
Tight Monetary Policy
A monetary policy that reflects the fact that when interest rates are high consumers tend to borrow less money from banks and make fewer purchases.
Inflation
This occurs when services or goods increase in price by a significant amount.
Inflation and household spending
Inflation can be caused by spending, which raises costs for households. If this occurs, the government may raise taxes to limit spending in order to lower costs again.
How to schedule for cash flow statements
It's a good idea to complete these statements on a monthly basis because most expenses are billed every month.
Personal Cash Inflow
This amount represents the actual money you receive. Examples can include your paycheck, refund checks from taxes or even cash gifts for birthdays.
Difficulties associated with tracking outgoing cash on a personal cash flow statement

Difficulties tracking small daily expenditures

Issues monitoring credit card transactions that may be unbilled

Problems realizing when you spend money because of alternative payment methods

Uses of a Personal Statement of Cash Flow
This statement can show you if you have more incoming or outgoing cash. If you realize your expenses are too high, you can then lower your expenses to save money.
Personal Cash Flow Statement
A financial statement that can be used to monitor changes in the cash you possess over a period of time.
Balance Sheet
This financial document records information about a company's assets and liabilities in a specific moment. If a company sells assets to pay a bill the balance sheet would need to be changed.
Negative Net Worth
You would have this if your liabilities outweighed your assets on a balance sheet. This situation is usually not ideal, but is considered acceptable if the liabilities are from student loans.
Advantages of a High Net Worth
Individuals who have this are typically offered lower interest rates. They also have increased flexibility with spending.
Liabilities
We use this term when referring to any individual's financial obligations or debt. Examples can include credit card payments or loan balances.
Correlation between liabilities and assets on a balance sheet
While indirect, it is usually true that if you lower your liabilities on this sheet then your assets will increase.
How to set up a financial goal
You can set these goals by deciding how long it will take you to accomplish a goal. Then you plan how to achieve your goal.
How to handle high interest debt
Often the best way to deal with this kind of debt is to attempt to pay it off as soon as possible, instead of trying to save any additional funds you receive.
Energy Conservation
Individuals who try to save energy (and therefore money) in this way will attempt to cut back their energy usage.
Energy Efficiency
You save energy (and money) using this method by purchasing more efficient products or considering new solutions.
Home Energy Audit
Performing this kind of audit will examine how a home consumes energy. It looks at heating and cooling systems, as well as a home's insulation.
Amount of personal income that should be put into savings
10-20% of personal income
Examples of Variable Household Expenses

Food costs

Phone bills

Utilities (like electricity)

Gas

Examples of Fixed Household Expenses

Rent

Credit card bills

Loan payments

Insurance

Planned Purchasing
You engage in this kind of purchasing when you research large expenditures before completing them and cut out excessive buying practices.
Membership Fees
These fees may be hidden in online purchases.
Chapter 11 Bankruptcy
Businesses are allowed to use this bankruptcy option.
Chapter 13 Bankruptcy
You can use this type of bankruptcy if your debt is below a certain level and you plan to repay it. It allows you to consolidate and repay debt over a period of 3-5 years.
Chapter 7 Bankruptcy
This type of bankruptcy allows individuals to get rid of their debts if they can prove that their income level is insufficient to cover their liabilities.
Bankruptcy
This represents a way for individuals and businesses to settle debts. Federal law governs this process.
Priority Debts in Chapter 13 Bankruptcy
These are debts that an individual must pay first. Obligations for domestic, or child, support are an example, along with tax bills.
Results of completing a bankruptcy plan
Once this kind of plan is completed, an individual's debts are considered discharged.
Non-Exempt Assets in Chapter 7 Bankruptcy
These are assets that will be sold in the bankruptcy process. Examples include vacation homes, stocks and extra vehicles.
Exempt Assets in Chapter 7 Bankruptcy
Individuals don't have to sell these items during bankruptcy. They include a primary residence, one car and clothing.

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