HDFS 238, Exam 1 | HDFS 238 - Personal Finance, Quizzes of Business Finance

Download HDFS 238, Exam 1 | HDFS 238 - Personal Finance and more Quizzes Business Finance in PDF only on Docsity! TERM 1 Personal Finance DEFINITION 1 The study of resources that are important for achieving financial success TERM 2 Personal Concepts involved in finance DEFINITION 2 spending saving/protecting investing TERM 3 Financial planning DEFINITION 3 The process of developing and implementing a coordinated series of financial planes to build financial success TERM 4 Important components to financial planning DEFINITION 4 Needs Wants Values (family, pets) Goals TERM 5 Bridge DEFINITION 5 Things that help you out financially such as an added bonus at work, winning the lottery TERM 6 Detour DEFINITION 6 Things that are unexpected financially such as medical expenses, paying for a broken window, fixing a car TERM 7 SMART goals DEFINITION 7 Specific --> (who, what, where, when, why how?) Measurable --> how will you know when you reach the goal? How much money will it take? Attainable --> is it possible? Why? Realistic --> relevant to my life? Timely --> When will I achieve my goal? TERM 8 What types of goals are the easiest to achieve? DEFINITION 8 Short-term TERM 9 What do financial statements measure? DEFINITION 9 Your financial health and progress TERM 10 Financial records DEFINITION 10 Documents that evidence financial transactions TERM 21 Net Income DEFINITION 21 Income AFTER taxes are taken out money available for you to spend/pay your bills TERM 22 Fixed expenses DEFINITION 22 Usually paid in the same amount each time period, often contractual Scheduled payments You have to pay these even if you lose your job: Loan payments Insurance premiums Rent payments TERM 23 Variable expenses DEFINITION 23 Controllable expenses that usually occur in the short run. The individual has considerable control.Examples: Food Entertainment Clothes Household Supplies TERM 24 Budget DEFINITION 24 Plan for how to spend your money Helps you stay on track with goals Influenced by values and goals Documents that records planned and actual income and expenditures over a period of time TERM 25 Rules for successful budgeting DEFINITION 25 Keep it simple (silly) Make it personal --> Everybody's budget is different Keep it flexible, adjust your budget Be positive TERM 26 What to do with Budgeted Money left over at end of month DEFINITION 26 Put 10% into a savings account Apply to mortgage/loan Invest in retirement Pay credit card debt TERM 27 Inflation DEFINITION 27 The steady rise in the general level of prices. It occurs when the supply of money rises faster than the supply of good and services available for purchases. Cost of inflation = 3.6%, Salary = $50,000 Your raise = $200 extra dollars If the cost is over the inflation rate, it does cost more money TERM 28 Saving DEFINITION 28 Setting aside income for future spending. Income not spent on current consumption. TERM 29 Time value of money DEFINITION 29 The longer you save/invest, the more money you will accumulate because of compound interest TERM 30 Compound Interest DEFINITION 30 More frequent compounding results in a higher yield (which means more money). S and J are 25. S invests $ 2000 a year for 10 yrs with interest rate of 9%. J waits 10 yrs, then invests $ 2000 a year for 31 years with an interest rate of 9%. Who has more money at age 65? S. TERM 31 How long will it take your money to double? DEFINITION 31 Seventy-two divided by number of years = interest rate you will need to double your money OR seventy-two divided by interest rate = number of years it will take for your money to double TERM 32 Deposit Insurance DEFINITION 32 This protects your money up to a certain amount in different bank accounts. For Single ownership, joint and retirement accounts the top amount you can receive is $250,000 TERM 33 Chex Systems DEFINITION 33 A company that keeps a list of people who have written bad checks. It affects your credit and most financial institutions won't open up an account for 5 years if your name is on the list. TERM 34 Checking Accounts DEFINITION 34 interest checking minimum balances overdraft charges, check twenty-one legislation made cashing checks a lot faster check fees TERM 35 Saving Accounts DEFINITION 35 Certificate of deposits (laddering) Readily accessible cash Temporary holding place for funds Good way to build an emergency fund Interest not very high right now TERM 46 Work Study DEFINITION 46 A federal program that reimburses employers part of the cost of paying student employees. You must fill of a FAFSA. TERM 47 Credit Crisis DEFINITION 47 Americans are over $886 billion in credit card debt TERM 48 Credit DEFINITION 48 Goods and services in exchange for the promise to repay at a later date TERM 49 Open-Ended Credit (Revolving) DEFINITION 49 Credit extended in advance Borrow up to your limit Example: credit card (unsecured) TERM 50 Secured credit DEFINITION 50 Secured by a collateral TERM 51 Closed-Ended Credit (Installment) DEFINITION 51 repay amount plus interest number of equal payments example: car loan (secure) example: student loan (unsecure) TERM 52 Unsecured credit DEFINITION 52 no collateral if delinquent, may go to court TERM 53 Secured Credit Card DEFINITION 53 You back it with your own money. Good for people with bad credit history. TERM 54 Overindebted DEFINITION 54 One is considered over indebted if the ratio is 15% or higher TERM 55 Paying the Minimum DEFINITION 55 $1,000 owed 18% interest/twelve months = 1.5% per month $1,000 x .02 =$20 $ 20-$15 = $5 (25%) $5 paid toward principle and $ 20 interest per month TERM 56 The ____ the APR the _____ the true cost of credit DEFINITION 56 lower lower TERM 57 Credit Bureaus DEFINITION 57 Repositories or libraries of data TERM 58 Utilization Ratios DEFINITION 58 You don't want to use less than 30% of your credit card limit You don't want to use over 50% of your credit card limit