Finance Chapter 1 Review

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 (creditor/lender)
economy
a system by which goods and services are produced and distributed
financial literacy
the knowledge and skillset necessary to be an informed consumer and manage finances effectively
interest
a fee paid by a borrower to the lender for the use of borrowed money
loan
a debt evidenced by a “note,” which specifies the principal amount, interest rate and date of payment
personal finance
all of the decisions and activities of an individual or family regarding their money, including spending, saving, budgeting, etc.
the 4 money personalities
frustration, role models, pragmatic, and money isn’t everthing
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 (this is the most hardest)
the 3 levels of financial well-being
1. survival
2. comfort
3. secure
the 7 key components of financial planning
1. access your financial situation
2. set money goals
3. detailed plan
4. execute your plan
5. know your money personality
6. regularly monitor and reassess your financial plan
7. replace money myths with truths
learning the language of money is not that important because you will be able to depend on financial planners to manage your money
false
which of the following is NOT a reason credit is marketed so heavily to consumers in the United States
the use of credit is not socially accepted
during the great depression, new deal policy makers came up with mortgage (home loans) and consumer lending policies that convinced commercial banks that:
consumer credit could be profitable
when it comes to managing money, success is __% behavior, and __% head knowledge
80, 20
describe the mistakes americans often make when it comes to money
getting loans, buying things they can’t afford, and going into debt
explain why understanding your money personality is important when it comes to developing a money plan that’s right for you
savers will have less work to do and won’t need as much discipline as spenders, who will step away from their bad spending habits
does the history of credit and consumerism segment make you view the use of credit differently than you did before
yes, because now I know that I should only buy something if I have the money for it and absolutely need it
explain how marketing can affect your decisions when it comes to spending money
it can encourage us to buy now and pay later which is not good
does managing your money well mean that you can’t have fun with your money
no, you can always budget some money for fun activities