consumer ec chapter 1

consumer
a person or organization that uses a product or service
credit
the granting of a loan and the creation of debt; any form of deferred payment
debt
an obligation of repayment owed by one party (the debtor/borrower) to a second party (the creditor/lender); in most cases this includes repayment of the original loan amount plus interest
economy
a system by which goods and services are produced and distributed
financial literacy
the knowledge and skill set necessary to be am informed consumer and manage finances effectively
interest
a fee paid by a borrower to the lender for the use of borrowed money; typically interest is calculated as a percentage of the principal (original loan amount)
loan
a debt evidenced by a “note,” which specifies the principal amount, interest rate, and date of repayment
personal finance
all of the decisions and activities of an individual or family regarding. their money, including spending, saving, budgeting, etc.
what are the 3 steps to becoming money smart
1. you need to be comfortable with basic math
2. you must start learning the language of money
3. you need to learn how to manage your behavior with money
what are the 3 levels of financial well being
1. survival: ‘paycheck to paycheck’ lifestyle
2. comfort: having a small monthly surplus that you use to save and invest
3. secure: money works for you
what percentages make up personal finance
80% behavior
20% knowledge
describe some of the mistakes americans often make when it comes to money
using debt as a tool, not having an emergency fund, no budget, no early plan for retirement
explain why understanding your money personality is important when it comes to developing a money plan thats right for you
you then know your strengths and weaknesses so you can work on your weaknesses
explain how marketing can affect your decisions when it comes to spending money
they tell you things like ‘buy now pay later’, which sounds good to people who do not understand finances
does managing your money mean that you cant have fun with your money
no, it just means you need to learn to live within your own means/budget; don’t spend what you don’t have