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72 Cards in this Set
- Front
- Back
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Step 1 procedure for Financial Planning
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1. Determine your current financial situation
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Step 2 Procedure For Financial Planning
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2. Develop your financial goals
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Step 3 (Procedure For Financial Planning)
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3. Identify alternative courses of action
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Step 4 (Procedure For Financial Planning)
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4. Evaluate your alternatives
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Step 5 (Procedure For Financial Planning)
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5. Create and implement your financial action plan
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Step 6 (Procedure For Financial Planning)
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Review and revise your plan
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What is this called?
Determine your current financial situation. Develop your financial goals. Identify alternative courses of action. Evaluate your alternatives. Create and implement your financial action plan. Review and revise your plan. |
Six-Step Procedure for Financial Planning
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What are some economic conditions that affect financial planning
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Consumer Prices
Consumer Spending Interest Rates |
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What are some personal opportunity costs that affect your financial spending?
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Time, Health, Leisure, Personal Resources
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What three amounts are required to calculate the time value of money?
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Principal
Interest Rates Time |
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Computing Simple Interest Formula
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(Amount in savings) x (annual interest rate) x (time period) = (interest)
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A set of federal laws that allow you to either restructure your debts or remove certain debts
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Bankruptcy
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The overuse and misuse of credit may cause a situation in which a persons debts far exceed the resources available to pay those debts.. this must be done
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Declare Bankruptcy
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What main components does a balance sheet include?
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Assets (Liquid, Real Estate, & Investment)
Liabilities (Current & Longterm) Networth (assets-liabilities) |
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How do you calculate networth?
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Assets- Liabilities
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What are assets?
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Cash and other tangible property with a monetary value
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Give 3 examples of assets
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1. Liquid Assets (Cash, savings accounts)
2. Real Estate 3. Personal Possessions 4. Investment Assets |
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What are liabilities?
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Amounts owed to others but do not include items not due yet, such as next months rent. A debt you owe now.
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What are the two liabilities categories?
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1. Current Liabilities
2. Long-term Liabilities |
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Give 3 Examples of liabilities
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1. Medical Bills
2. Charge Account on Credit Card 3. Car Payment 4. Mortgage 5. Student Loans |
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What main components does a Cash Flow Statement include?
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Income (Cash Inflow)
a. Salary b. Interest Earned c. Investment Earnings Cash Outflows (Fixed Expenses) a. Rent b. Loan Payment c. Cable d. Cell Phone e. Insurance Surplus a. +Extra savings b. +Emergency Funds Total Surplus=(x) |
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The Inflows of cash for an individual or a household
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Income
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What makes up income?
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1. Wages, salaries
2. Self-employment income 3. Savings and investments 4. Gifts, grants, scholarships 5. Government payments (Social Security, Unemployment) 6. Pension and retirement programs 7. Alimony and Child Support Payments |
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What is the difference between a fixed expense and a variable expense?
Give examples of both. |
Fixed expense are payments that do not vary from month to month
(Rent, Mortgage, Cable, Loan Payments) Variable expense are flexible payments that vary from month to month. (Food, Clothing, Recreation, Gifts) |
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Difference between short & long term goals
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Short Term Goals: Will be achieved within the next year or so
Long Term Goals: More than 5 years off |
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Your spending plan
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Budget
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A measure of how far a set of numbers is spread out
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Variance
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The amount by which actual spending is less than planned spending
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Surplus
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The amount by which a sum falls short of some reference amount
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Defecit
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What are the 3 types of checks?
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1. Certified Check
2. Cashiers Check 3. Travelers Check |
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3 Types of endorsements for making deposits
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1. Blank Endorsement (Just your signature)
2. Restrictive Endorsement (for deposit only) followed by signature 3. Special Endorsement (pay to the order of) followed by their name and your signature |
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What are the 6 steps to writing a check?
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1. Record the date
2. Write the name 3. Record the amount 4. Write the amount in words 5. Sign the check 6. Note the reason for payment |
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Accounting for differences between the bank statement and your checkbook balance
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Bank Reconciliation
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What do you subtract and add to your records to adjust a bank reconciliation?
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Bank Statement
Add: Outstanding Checks Add: Deposits in transit Subtract: The total Checkbook Subtract: total of fees or other charges listed in bank statement Subtract: ATM withdrawals, debit card payments, and other automatic payments Add: Interest Earned Add: Direct Deposit |
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Offers a full range of financial services, including checking, savings, and lending, along with many other services.
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Commercial Bank
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Specializes in savings accounts and loans for mortgages.
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Savings and Loan Associations
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Owned by depositors and, like the traditional savings and loan association, specializes in savings accounts and mortgage loans.
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Mutual savings bank
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A user-owned, nonprofit, cooperative financial institution. Usually there is a a common bond such as work, church, or community affiliation.
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Credit Union
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What are some risks associated with money?
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The cost or trade-off of a decision cannot always be measured in dollars.
Uncertainty is part of every decision. The economy changes all the time |
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What are some risks associated with interest?
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Future value can change
Annual interest rates can change Investments may fail Stocks may fall |
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Refers to the ability to readily convert financial resources into cash without a loss in value
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Liquidity
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Used to refer to certain payment systems used to transfer money where a payment is initiated by the payer not the payee.
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Direct Deposit
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It provides deposit insurance, which guarantees the safety of deposits in member banks
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FDIC
Federal Deposit Insurance Corporation |
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What is another name for checking accounts?
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Demand Deposits
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Opportunity cost refers to what?
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What you give up by making a choice
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Programs that allow workers to base their job benefits on a credit system and personal needs
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Cafeteria style employee benefits
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The point at which retirement payments made by the organization on your behalf belong to you even if you no longer work for the organization
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Vesting
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Covers all aspects of career planning and job search and provides detailed information on jobs in various career clusters
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Occupational Outlook Handbook
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Various non-wage compensations provided to employees in addition to their normal wages or salaries
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Fringe Benefits
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Four Types of Taxes
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1. Taxes on purchases
2. Taxes on property 3. Taxes on wealth 4. Taxes on earnings |
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When computing your tax liability your total income is affected by...
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Exclusions
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Amounts not included in gross incomes
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Exclusions
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Gross income after certain reductions have been made
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Adjusted gross income
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A deduction for yourself, your spouse and qualified dependents (this amount increases each year)
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Exemption
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Is responsible for collecting taxes and the interpretation and enforcement of the Internal Revenue Code
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IRS
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Income that will be taxed at a later date
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Tax deferred income
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Investments that provide immediate tax benefits and a reasonable expectation of a future financial return
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Tax shelter
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A set amount on which no taxes are paid
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Standard Deduction
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Expenses a taxpayer are allowed to deduct from adjusted gross income
(examples) |
Itemized Deduction
-Medical & Dental -State & Local income tax -Interest (mortgage, home equity loan, & investment interest) -Contributions -Job Related Expenses |
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Receipts and gains from all sources less cost of goods sold.
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Gross Income
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Five filing status categories
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1. Single
2. Married, filing joint return 3. Married filing separate returns 4. Head of Household 5. Qualifying widow or widower |
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Geographic buying power formula
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(Index #)(Salary)/index #
=$ buying power |
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What does pay yourself first mean?
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Concept of saving for the future by putting money aside before paying regular monthly bills..
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A tax deferred retired plan used by working people
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IRA (Individual Retirement Arrangements)
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Tax equivalent employee benefits formula
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Value of the benefit/ (1-Tax Rate)
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Calculations determine the specific monetary value of employee benefits and the cost of the benefits if you had to pay for them
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Market Value
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The study of how wealth is created and distributed
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Economics
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The increases in an amount of money as a result of interest earned
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Time Value of Money
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Amount you actually borrow
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Principal
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The activities that give you satisfaction
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Interest(s)
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A commitment to a profession that requires continued learning and offers a clear path for occupational growth
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Career
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An employment position obtained mainly to earn money
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Job
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