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Personal Finance Introduction

Terms in this set (41)

Why should students learn about personal finance?
Learning to manage money at this stage can eliminate financial mistakes and promote huge financial benefits for the future.
Key components of financial planning are...
1. Write out a detailed plan for accomplishing your goals.
2. Replace money myths with money truths.
3. Regularly monitor and reassess your financial plan
How are Americans being outsmarted by banks and other lenders?
Credit is marketed so well that we desire to have it while completely dismissing the fact that interest rates and fees continue to destroy out financial well-being.
Personal financial success is primarily the result of:
managing your money behavior
Why does income alone not determine wealth?
How much money a person makes does not dictate his or her spending and saving behavior
What is a consequence of spending more than you make?
1. missed opportunity to save and invest
2. a cycle of debt
3. stress
The credit industry has not changed much since 1917.
False
When it comes to managing money, success is about ________% knowledge and ____________% behavior.
20, 80
The widespread financial insecurity of Americans is primarily because:
The saving rate of Americans is low and many borrow in order to spend more than they earn
The factors of becoming money smart are:
1. having knowledge of basic math
2. learning the language of money
3. managing your behavior with money
How can you benefit from understanding your own money personality?
1. recognizing who you are allows you the opportunity to grow and learn
2. once you know your money personality, you can develop a financial plan that works for you
Why was the use of credit uncommon prior to 1917?
1. Laws prevented lenders from charging high interest rates
2. Borrowing money was generally not socially acceptable
3. Lending money to other was not profitable
When it comes to personal finance, the math is easy. What's challenging is managing your ___________.
Behavior
Why is credit marketed heavily to consumers in the United States?
1. The credit industry has become extremely profitable.
2. There is strong consumer demand for big-ticket items.
3. Since 1920, credit laws in the United States have been relaxed in an attempt to create a mainstream alternative to loan sharks for the working class.
During the Great Depression, New Deal policymakers came up with mortgage (home loans) and consumer lending policies that convinced commercial banks that:
Consumer credit could be profitable
True financial security is achieved when your money begins to generate an income -- your money start working for you.
True
Since you are a teenager, what you do now with money will have little effect on your financial future.
False
Most Americans today are wealthy and will have financial security when they retire.
False
Most Americans avoid the use of credit when it comes to buying big-ticket items like a car or furniture for their home.
False
Learning the language of money is not that important because you will be able to depend on financial planners to manage your money.
False
Having debt keeps you from building wealth.
True
The credit system today is structured to accommodate a state of uncertain employment and income instability, utilizing high interest rates and fees to turn huge profits.
True
Expensive houses and new cars are a true indication of wealth.
False
When developing a personal financial plan, one of the first things you should do is assess your current financial situation. This includes your income, assets, and liabilities.
True
Everyone should have the same financial plan. A budget that works for one person should be sufficient for everyone.
False
A person or business that offers loans at extremely high interest rates
loan shark
a person or organization that uses a product or service
consumer
an obligation of repayment owed by one party to a second party
debt
the granting of a loan and the creation of debt; any form of deferred payment
credit
the knowledge and skillset necessary to be an informed consumer and manage finances effectively
financial literacy
a fee paid by a borrower to the lender for the use of borrowed money
interest
a system by which goods and services are produced and distributed
economy
a debt evidenced by a "note," which specifies the principal amount, interest rate, and date of repayment
loan
All of the decisions and activities of an individual or family regarding their money, including spending, saving, budgeting, etc.
personal finance
All the property you own of value, plus any cash or investments you have
assets
Any debts you have outstanding
liabilities
the protection or promotion of the interests of consumers
consumerism
A type of credit; also known as installment credit
revolving credit
Created to restore public trust in banks and encourage stability in the financial system through the promotion of sound banking practices and insuring deposits up to $250,000 per institution as long as the bank is a member
FDIC
Things you would like to accomplish between now and one year from now
short-term goals
Things you would like to accomplish in five years or more
long-term goals
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