| Term | Definition |
|---|
| personal financial planning | spending, saving and investing your money in order to achieve financial security |
| values | beliefs you consider important |
| goals | things you want to accomplish |
| opportunity cost | what you give up when you make one choice instead of another |
| liquidity | the ability to easily convert your financial resources to cash |
| short-term goals | goals reached in 1 year or less |
| intermediate goals | goals reached in 1-5 years |
| long-term goals | goals reached in 5 years or more |
| guidelines for setting goals | must be realistic; must be specific; must have a clear time frame; must guide your actions |
| supply | amount of goods and services available for sale |
| demand | amount of goods and services people are willing to buy |
| how does the relationship between supply and demand impact prices | when demand is high and supply is low, prices go up; when supply is high and demand is low, prices go down |
| assets | any item of value you own |
| liabilities | debts you owe |
| net worth | assets-liabilities |
| insolvency | occurs when liabilities are greater than assets |
| income | money you receive |
| expenses | money you spend |
| net cash flow | income-expenses |
| deficit | occurs when expenses are greater than income |
| savings | safe storage of funds for future use |
| FDIC | established in 1933 after depression; created to restore faith in the US banking system; insures deposits in federally chartered banks up to $250,000 per account |
| credit | an arrangement to receive cash, goods, or services now and pay for them in the future |
| advantages of credit | allows you to enjoy goods and services now when funds are low |
| disadvantages of credit | credit costs money |
| closed end credit (installment debt) | one time loan; paid back over a specific period of time; paid back in equal installments |
| open end credit (revolving debt) | renewable loan; no payback time period; payment amount can vary |
| tenant | a person who pays for the right to live in a residence owned by someone else |
| landlord | the person who owns the property you rent |
| advantages of renting | mobility: if you need to move for any reason, you can as long as you give proper notice |
| disadvantages of renting | few financial benefits: no tax deductions, no increase in property value because you don't own the property |
| security deposit | money that the tenant pays the landlord in order to protect against any financial loss the tenant might cause |
| advantages of owning | stability: sense of permanence |
| disadvantages of owning | limited mobility: can't move quickly |
| income stocks | pays higher than average dividends compared to other stock issues |
| cyclical stocks | market value that tends to reflect the states of the economy |
| defensive stocks | remains stable during declines in economy |
| small cap stocks | issued by a company with a capitalization of $150 million or less |
| bull market | occurs when investors are optimistic about the economy and buy stocks; values of stock increase |
| bear market | occurs when investors are pessimistic about the economy and sell stocks; values of stock decrease |
| current yield | annual dividend/current market value |
| earnings per share | net earnings/common stock outstanding |
| price earnings ratio | market price per share/earnings per share |
| types of taxes | property tax; sales tax |
| insurance | protection against possible financial loss |
| coverage | protection provided by terms of an insurance policy |
| premium | fee that a policyholder pays the insurance company in exchange for the company taking on the policyholder's risk |
| risk | a change of loss or injury |
Combine with other sets
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