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75 Cards in this Set
- Front
- Back
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Why plan your spending and saving?
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-helps to see if you have extra cash or not enough each month
-helps reduce stress -helps you see if money comes in and goes out -helps you get prepared for occasional or seasonal expenses |
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Which expenses should be considered on a sliding scale?
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variable
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Which expenses are the ones that cause people to go into debt?
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flexible expenses
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When setting aside for an emergency, how much should be set aside?
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1 to 3 months of major expenses
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What types of questions should be asked when writing a plan/creating a plan in the planning cycle?
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How will we position ourselves to reach the desired rate of return?
What habits do we need to enforce to accomplish goals? |
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What types of questions should be asked when gathering information in the planning cycle?
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How much do we need to save? What rate of return do we need to achieve to reach the goal?
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What is Timely when referring to the SMART goals?
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what date or when will this happen?
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What is the process of review and revise when budgeting?
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-Add up all amount in flexible expense columns
-Add up fixed expenses -Add fixed and flexible amounts -Subtract the total expenses from income |
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What is the planning cycle?
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Set goals
Gather information Write a plan Work the plan Change the plan (Start again) |
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What is the most common flexible expense paid each month?
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Credit card bills
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What is the first step of the planning cycle?
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setting goals
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What is Specific when describing the SMART goals?
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What exactly do you want?
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What is Realistic when referring to SMART goals?
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Make it relevant to you; what is the dollar amount?
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What is one recommendation when doing the planning cycle?
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you have to WANT to do it
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What is Measurable when referring to the SMART goals?
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How will you know it has been accomplished? Are you staying on track?
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What is considered as income?
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-Salary or wages
-Cash assistance -Benefits -Assets you can sell if money is needed for debt or emergencies |
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What is an example of a fixed expense?
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Rent
Cell phone To some extent groceries |
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What is Adaptable when referring to the SMART goals?
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Life changes, how consistent can you keep at the goal? Will the goal change with life?
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What does SMART stand for?
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Specific
Measurable Attainable Realistic Timely |
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What does it mean to 'Work the Plan' in the planning cycle?
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We have to implement the plan and stick to it until circumstances change
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What does it mean to 'Gather Information' for the second part of the planning cycle?
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Analyze what it would take to meet these goals
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What does it mean to 'Change the Plan' in the planning cycle?
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Be able to modify the plan as we reach those goals or something change in the original plan
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What are the financial planning steps?
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1. Write SMART goals
2. Identify income amount for the month 3. Find bills and dues dates 4. Track expenses for a month 5. Write plan in money calendar 6. Stay on track with the UF Money Management Calendar 7. Plan time to review and make changes for next month |
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What are some suggestions when organizing your calendar?
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Prioritize large fixed expenses
Integrate utility due dates Add pay days |
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The goals that are set in the planning cycle have to be...
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SMART
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Suggestions to increase income
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Get a second job
Turn hobbies into income Relative or friend watches kids |
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Suggestions to decrease expenses
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Reduce or eliminate spending on wants
Modify or reduce flexible expenses (carpool, limit eating out, grocery shopping, electric and water) |
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Questions that should be asked to check for spending leaks
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Do you compare prices?
Do you use coupons? Do you think ahead about you needs? Do you take care of what you own and get full life from purchases? |
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Luxury expenses
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The items you purchase that you need to plan for but do not necessarily need to spend money on; should be budgeted as whatever is left after all other expenses are taken care of
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Knowing how to plan, making work and execution is key to...
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attaining your desired outcome
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How to identify yearly totals of occasional expenses
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Divide by 12 to get the monthly amount to save each month
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How should you start and emergency fund?
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Automatically taking out money from your paycheck to another account
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Flexible expense
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Expenses that you have more control over and may change month to month
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Fixed expenses
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-Things you have to pay for before optimal things like going out on the weekends
-Tend to be both fixed in timing and relatively stable in terms of the amount of the expenses |
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Discretionary expenses
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Expenses you may choose to spend on recreational but are personal to you; may not be a fixed amount; you choose what it is, may be a want or need
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Avoid using ______ as much as possible (not referring to student loans)
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credit
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A budget represents
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An estimate of what you think you need to spend
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A budget looks like a
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cash flow statement, but may be very detailed for expense
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____ _____ ______ through proper budgeting.
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Pay yourself first
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Why do you need records?
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-They serve as a reference point, from which you can map a plan to your financial goals
-They provide evidence of progress -They help various financial services providers ascertain the value of various assets and debts |
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What are good records to keep?
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-Credit report
-Prepared financial statements -Personal financial statements |
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What are examples of personal financial statements?
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-Personal balance sheet
-Personal cash flow statement -Budget |
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What is a budget used to figure out?
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Expected income after withholding
Expenses |
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Personal balance sheet
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a summary of your assets, your liabilities, and your net worth
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Asset
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what you own
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Liability
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what you owe
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Net worth
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assets minus liabilities
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A balance sheet reflects
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your financial position at a specific point in time
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Balance sheet
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the statement one can use to measure what is owned and what is owed is referred to as a balance sheet
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What are some examples of liabilities?
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credit cards
student loans mortgages |
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Liquid assets/Cash assets
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assets that are easily converted to cash
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Tangible or physical assets
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items normally owned by a household, such as a home, care and furniture
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Investment assests
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financial assets that we will not be using in the short term but are goals including education, a wedding, a car, a home, retirement
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What are some examples of investments?
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Retirement accounts
Brokerage accounts Bank accounts Mutual funds |
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Current liabilities
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debts that are currently due
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Intermediate-term liabilities
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debts that will be paid off between a few months and a few years
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Long-term liabilities
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debts that will be paid off in greater than one year's time
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compound interest
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Earning additional interest on interest
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cash flow statement
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a financial statement that outlines and records the movement of cash and cash equivalents entering and leaving a company
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Balance Sheets
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a statement of the financial position of a business on a specified date.
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Interest rates influence
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-Reward for saving and investing
-Opportunity cost of decisions we make -Cost of borrowing for purchases, and consumption -Growth of small and large businesses |
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What rates matter?
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-rate of return on savings accounts
-rate of return on different investments -rate at which consumers borrow for things like school, cars, homes, dinner, gas, etc -rate at which the Federal Government borrows money -rate at which banks borrow money from Agencies |
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Simple interest
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Interest is equal to the principle X rate X time
I = PRT |
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Compound interest
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Interest is earned on earn interest; not calculated on principle alone but on the effect of principle + earned interest earning interest
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Rule of 72
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can be used to determine the length of time it will take for an investment to double
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Rule of 72 formula
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years to double = 72 / interest rate
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Time value of money
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increases in an amount of money as a result of interest earned
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compounding
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adds in the effect of compound interest
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Discounting
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removes the effect of compound interest
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N =
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periods (years)
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I =
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Interest
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Future value of a lump sum
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PV (1+r)^n
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Present value of a lump sum
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FV/(1+r)^n
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Future value of an Annuity
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Payment * [(1+r)^n - 1]/r
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Present value of an Annuity
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Payment * [1-1/(1+)^n]/r
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