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36 terms

Econ Unit 1

STUDY
PLAY
personal finance
financial issues that affect an individual
personal financial planning
the process of planning every aspect of your personal finances
liquid assets
things you might have that can be rapidly converted to cash without a risk of significant loss
opportunity cost
the opportunity to spend or save your money
assets
anything we own
liabilities
anything we owe, our debt
income
the money coming through wages earned, allowance, or other sources
equity
ownership
liquidity
refers to how much readily available cash you have on hand for immediate wants and needs
money management
involves making decisions about how much cash or liquid assets to keep in reserve and how much to invest in less liquid assets
credit management
involves making decisions about getting credit and using credit
finance
the remaining amount
cash inflow
money received from a different source
cash outflow
money that you may spend
short-term goals
goals you plan to accomplish within the next year
middle-term goals
goals you aim to meet within the next 1-5 years
long-term goals
goals that will take more than 5 years to accomplish
expense
anything on which we sped money
fixed expense
remain the same from period to period
variable expense
expenses that change from one period to the next
risk
likelihood of loss
forecast error
the difference between what you forecast to happen and what actually happens
market value
something is what it would be worth if you sold it today
investment
something you acquire with the ultimate goal of making money
bonds
certificates that function like IOUs--promises to repay a certain amount of money at some future time
stocks
certificated that represent fractional ownership of a firm
mutual funds
created so investors can pool their money in order to invest in a larger variety of financial assets (stocks and bonds)
real estate
includes homes, rental property, farms, and other land
current liabilities
debts that must be paid off within 1 year
long-term liabilities
debts that will take longer than 1 year to pay off
net worth
the difference between your assets and your liabilities
budget
a forecast of future cash inflows and outflows
forecast error
the difference between what you forecast to happen and what actually happens
personal balance sheet
tells us our financial position at one point in time
household assets
include assets typically owned by a house hold; ex: cars and furniture
market value
what something would be worth if you sold it today