chapter 1- money managment

personal financial planning
is arranging to spend save and invest money to live comfortably have financial security and achieve goals
goals
are things you want to accomplish
values
are the beliefs and principles you consider important
opportunity costs
is what is given up when making one choice instead of another (trade-off)
liquidity
is the ability to easily convert financial assets into cash without loss in value
service
a task that a person/machine performs for you
goods
a physical item that is produced and can be weighed/measured
economics
is the study of the decisions that go into making distributing and using goods/services
economy
consists of the ways in which people make distribute and use their goods/services
supply
is the amount of goods and services available for sale
demand
is the amount of goods and services people are willing to buy
federal reserve system
is the central banking organisation of the united stated
inflation
rise in price
consumer
is a person who purchases/uses a good/service
interest
is the price that is paid for the use of anothers money
time value of money
which is the increase of an amount of money due to earned interest/dividends
principle
is the original amount of money on deposit
future value
is the amount your original deposit will be worth in the future based on earning a specific interest rate over a specific amount of time
annuity
a series of equal regular deposits
present value
is the amount of money you would need to deposit now in order to have a desired amount in the future
personal finance
spending or saving your money
what are the eight strategies you can use to reach your financial goals?
1-obtain
2-plan
3-spend
4-save
5-borrow
6-invest
7-manager risk
8-retire
what are the six steps in the financial planning process?
1- determine your current financial situation
2-develop your financial goals
3-identify alternative course of action
4-evaluate your alternatives
5-create and use your financial plan
6-review and revise your plan
what are the four guidelines for setting financial goals?
-your financial goals should be realistic
-your financial goals should be specific
-your financial goals should have a clear time frame
-your financial goals should help you decide what type of action to take
what are the five potential risk?
inflation
interest rate
personal
income
liquidity
what economic factors and conditions might influence a persons financial definition?
market forces
financial institutions
global influences
economic conditions
what are two advantages of having a personal financial plan?
you can save money and know where your money is going
what are the two main reasons that people invest?
to make money and to be apart of something
what are the three types of financial goals?
short term
intermediate
long term
short term
1 year or less
intermediate
2-5 years
long term
5 or more years