Finance Chapter 1-3

Front 1

Describe what personal finance is.

Back 1

Personalfinance refers to all the financialdecisions an individual or familymust make in order to earn, budget,save and spend money over time.

Front 2

Outline the components of effective financial planning.

Back 2

Saving, budgeting,retirement planning and staying outof debt are all basic money principles.

Front 3

Identify focuses of study throughout this course.

Back 3

Teaching you what to do with moneyand then show you how to do it.

Front 4

Understand the evolution of America’s dependenceon credit.

Back 4

After 1970, consumer debt skyrocketednot because people were borrowingmore, but because they continuedto borrow as their parents had donesince WWII. The difference was theydidn’t have the postwar period’s well-payingjobs.

Front 5

Observe and analyze the “normal” American familyas it relates to personal finance.

Back 5

Americans arehorrible at saving money and planningfor retirement. They are so conditionedto think debt is normal, they can’tenvision paying cash for a car oreven a dining room table! Americansoften spend more money than theymake. Most Americans don’t have anemergency fund.

Front 6

Develop communication strategies for managing moneyand discussing financial issues.

Back 6

Know the language of money; overspending, no saving, no budgeting

Front 7

Evaluate your own money personality; identify yourmoney strengths and weaknesses.

Back 7

I like to save money and spend money on just what I must get; strengths: good at saving; weaknesses: I must get what I want

Front 8

Identify the Five Foundations of personal finance.

Back 8

1. Saving an emergency fund

2. Get out of debt.

3. Pay cash for your car.

4. Always pay cash for college.

5. Build wealth and give away.

Front 9

Understand the purpose of having an emergency fund.

Back 9

Regardless of the emergency,having money set aside will ensure that those life eventsdo not devastate you financially.

Front 10

Explain the three basic reasons for saving money.

Back 10

Emergency fund, purchases, wealth building.

Front 11

Understand the importance of saving for both long-termand short-term goals.

Back 11

Saving for long-term goals is wealth building; saving for short-term goals is for purchases.

Front 12

Describe what a sinking fund is and identify purchasesfor which you would use a sinking fund.

Back 12

A sinking fund is a way to savewhen you know you have a largepurchase coming up, like a promdress or new tires for your car.

Front 13

Demonstrate how compound interest works andunderstand the impact of annual interest rate.

Back 13

Compound interest is interest paidon interest previously earned. As time passes, the amount you earnfrom interest grows.

Front 14

Describe the difference between simple andcompound interest.

Back 14

Simple interest is calculated by multiplying the principal amount by the interest rate and the number of periods in a loan. Compound interest is interest paidon interest previously earned.

Front 15

Understand the importance of beginning to save now.

Back 15

As time passes, the amount you earnfrom interest grows.

Front 16

Understand the purpose of cash flow planning.

Back 16

Money isactive. It is moving all the time. So if youdon’t make your money behave, you’ll always wonderwhere it went.

Front 17

Identify reasons some people avoid having or stickingto a budget.

Back 17

People avoid having a budget because they believethat having a budget will constrict them and keepthem from doing what they want to do. Others stick to a budget because it helps them to manage their money well.

Front 18

Identify changes in personal spending behavior thatcontribute to wealth building.

Back 18

1. Live on less than you make. Don’t spend everydollar of your paycheck.

2. Keep on learning and finding ways to growyour income.

3. Write a monthly budget that includes saving,giving and spending. Stick to it.

4. Plan your spending and avoid impulseor unnecessary purchases.

5. Stay out of debt.

6. Pay yourself first. This means assigning aportion of your income to saving and investingevery month.

7. Use gifts and “extra” income wisely. You mightbe tempted to just blow money you receiveas a gift. It’s okay to use some of that moneyto treat yourself to a “want.” But it’s wise touse a portion of it toward a money goal (likegetting out of debt, saving for a car, saving forcollege, etc.).

Front 19

Explain the difference between a cash flow statementand a budget.

Back 19

A cash flow statement: A summary thatshows total income and spending for agiven time period. A budget is a written cash flow plan.

Front 20

Develop a filing system for keeping financial records,both paper and electronic.

Back 20

Use carbon checks and look online statement to keep track of your transactions

Front 21

Describe record-keeping features that financialinstitutions provide for online account management.

Back 21

Use carbon checks and look online statement to keep track of your transactions. Maintain both paper and electronic files for reference.

Front 22

Describe how to use different payment methods andbanking features.

Back 22

1. Checks: Most stores will want somebasic information if you are using acheck, such as your address and phonenumber, and most will require you toshow a photo ID.

2. Online bill pay: Afterlogging into your bank’s online site,you can specify whom you want to payand how much. Your bank will eithermake an electronic transfer or mail acheck to satisfy the payment.

3. Debit card purchases: Money is withdrawn from yourchecking account for the purchase.

4. Account transfer: Account transfers allow you to movemoney between your accounts.

5. ATM: The ATM allows you to make withdrawals,deposits or transfers without enteringyour bank.

6. Mobile banking: Mobile banking takes a lot of thefeatures of online banking and bringsthem to your cell or smartphone. Theymay also offer additional features liketext alerts and text banking.

Front 23

Define zero-based budget.

Back 23

Zero-based budget is a cash flow planthat assigns an expense to every dollarof your income, wherein the total incomeminus the total expenses equals zero.

Front 24

Develop a plan for spending and saving that has bothlong-term and short-term components.

Back 24

1. Add Up Your Monthly Income

2. Estimate Your Spending (long-term: emergency fund, college, car & repairs, computer; short-term: food, clothing, transportation, reaction, personal)

3. Total Each Category

4. Get to Zero

Front 25

Analyze how changes in circumstances can affect apersonal budget.

Back 25

If there is a concert you want to go, you would have to spend more money this month. If you want both new jeans and a concert, you should choose between the two to save money, or take out your savings to balance the purchases.