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Personal Financial Planning Flashcards

Personal Financial Planning Flashcards
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Positive Cash Flow
Individuals who have this type of cash flow have more cash inflow than cash outflow.
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Negative Cash Flow
You have this kind of cash flow if your cash outflow is greater than your cash inflow amount.
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Optimal Level for a Debt-to-Income Ratio
An amount less than 50% is ideal for this ratio.
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Net Worth
A term that represents an individual's assets after asset-related liabilities are subtracted.
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Liquidity
We use this term to refer to the process of turning some kind of object into cash.
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Asset
This represents any object you own that possesses a monetary value. Examples can include objects you inherited, cash and more.
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Formula for calculating equity
Market value of the product - amount you owe on the product = equity
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Financial Planning
You complete this kind of planning when you looks ahead at potential future expenses and incomes and then make plans to meet your financial goals.
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Interest
This cost is associated with credit. You pay this on any credit balances that you run from month to month.
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The best way to approach financial planning
You will be best served if you approach this process as proactively as possible.
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Options for utilizing funds left over once monthly expenses are paid

Invest the funds

Set up a savings account

Create a retirement account

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Gross Income
The amount of money a person receives before any taxes are removed. For example, if you work 10 hours at $10 an hour, this would be $100.
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Net Income
This represents the amount of money you earn over a specific amount of time after taxes have been taken out.
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Currency
This is the medium we use for exchange. It's represented by cash, though examples can also include electronic transfers as well as debit or credit cards.
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Cash
We use this term when referring to the physical coins or bills that we exchange as payment for services or goods.
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30 cards in set

Flashcard Content Overview

You can access this set of flashcards when you're ready to focus on microeconomics and macroeconomics. You can review currency, cash, assets, gross income, net income and the best ways to use discretionary income. Positive and negative cash flow will be covered, along with retirement options. You'll also be able to consider the steps for completing a budget and the future value of money.

Front
Back
Cash
We use this term when referring to the physical coins or bills that we exchange as payment for services or goods.
Currency
This is the medium we use for exchange. It's represented by cash, though examples can also include electronic transfers as well as debit or credit cards.
Net Income
This represents the amount of money you earn over a specific amount of time after taxes have been taken out.
Gross Income
The amount of money a person receives before any taxes are removed. For example, if you work 10 hours at $10 an hour, this would be $100.
Options for utilizing funds left over once monthly expenses are paid

Invest the funds

Set up a savings account

Create a retirement account

The best way to approach financial planning
You will be best served if you approach this process as proactively as possible.
Interest
This cost is associated with credit. You pay this on any credit balances that you run from month to month.
Financial Planning
You complete this kind of planning when you looks ahead at potential future expenses and incomes and then make plans to meet your financial goals.
Formula for calculating equity
Market value of the product - amount you owe on the product = equity
Asset
This represents any object you own that possesses a monetary value. Examples can include objects you inherited, cash and more.
Liquidity
We use this term to refer to the process of turning some kind of object into cash.
Net Worth
A term that represents an individual's assets after asset-related liabilities are subtracted.
Optimal Level for a Debt-to-Income Ratio
An amount less than 50% is ideal for this ratio.
Negative Cash Flow
You have this kind of cash flow if your cash outflow is greater than your cash inflow amount.
Positive Cash Flow
Individuals who have this type of cash flow have more cash inflow than cash outflow.
Opportunity Cost
This cost refers to the potential gains you have to give up when you choose to pursue a specific opportunity.
Income Statement
A financial document that will show your expenses and income.
Pension
This retirement product is used by companies to provide benefits for employees after they retire. To fund this product, money is deducted from an employee's wages while they are employed.
401K
A retirement plan that allows employees to decide how much money they want to deposit. Benefits will be based on how much money the employee contributes.
Discretionary Income
The amount of a person's income that remains after all expenses have been paid. It can be saved or used for non-recurring expenses.
Financial Advisor
Individuals in this career can help people analyze their monthly expenses and develop financial plans.
Steps for using a budget

Set up the budget

Carry out a comparison analysis

Assess possible variances

Adjust the budget for the next month

Factors that determine the time value of money

The length of time between the present and when money will be received

The interest rate

Present Value of Money
This concept can be used to determine how much a future amount of money would be worth at the present time.
Microeconomics
This refers to the study of how economic decisions are made by businesses and consumers.
Macroeconomics
A branch of economics that aims to study the economy as a whole.
Fiscal Policy
These policies deal with decisions that government makes about taxes and spending.
Monetary Policy
A financial policy that deals specifically with the connection between the money supply and interest rates.
Effect on prices when there is high demand and low supply
The law of supply and demand tells us that in this situation, prices will increase.
Effect on prices when there is low demand and high supply
Examining the law of supply and demand will indicate that in this situation, prices will decrease.

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