Personal Finance Chapter 1 & 2

personal financial management is important because… it makes personal financial goals easier to achieve.
financial planning can help us to… spend wisely.
the last step in the financial planning process periodically develop and implement budgets to monitor and control progress toward goals.
the quality of life standard of living
primary determinant of quality of life motivation
average propensity to consume refers to the… percentage of income spent for current consumption.
when setting financial goals, one should typically start by setting… long-term goals
what goal is most useful for developing a financial plan? make a $12,000 down payment on an automobile in 4 years.
as income rises, the average propensity to consume… decreases
the amount of money we set aside for future consumption will be determined by… how much we currently earn and spend
money is a medium of exchange
family financial goals should be realistically attainable
utility the satisfaction you receive from purchasing something
the main reason to do personal financial planning is to maximize overall utility
the most important financial planning for young people concerns career
martha is 80 and has a very high net worth. her most important financial concern is probably her… estate
sam and lele are in their late 20s with 3 young children. their most important financial planning concerns would probably include all of the following except… retirement and estate planning
employee benefits may include all of the above
tax planning is most commonly done to minimize taxes
estate planning involves considering how you wealth can be most effectively passed on to heirs.
the three key groups in the economic environment are government, consumers, and business
government places controls on the personal financial environment by use of taxation and regulation
businesses provide goods and services
inflation refers to rising prices
your income is directly related to all of these
typically people with the lowest incomes tend to be very young or very old
financial goals should be specific, attainable, and prioritized
retirement planning should begin none of these
the financial goal most people think is least important leaving a lard estate
a strong economy leads to higher employment
the financial crisis of 2008 and 2009 is best characterized as a… recession
the main purpose of a budget is to monitor and control financial outcomes
budgets are forward looking
wouldn’t be listed as a liability on balance sheet savings accounts
wouldn’t be a long-term financial goal paying your phone bill
net worth is measured by assets minus liabilities
balance sheet liabilities should be recorded at their current outstanding balance
another term sometimes used instead of net worth equity
balance sheet equation total assets – total liabilities = net worth
mandy and jeff have a net worth $25,000 and total assets of $140,000. if their revolving credit and unpaid bills total $2,200, what are their total liabilities? $115,000
you’re solvent if you’re total assets exceed total liabilities
the income and expenditures statement examines your financial… performance
the income statement is specific to… a specific period of time
the income statement includes… income, expenditures, surplus or deficit
you are more likely to achieve your goals when… goals are reassessed and revised peridically
you would not include … on an income and expenditures statement the value of your stock portfolio
the most common budgeting period is a… month
a cash budget should help you to… do all of these
when a cash surplus exists on your income and expenditure statements, you can… do any of the above
if your … , your net worth on the balance sheet would have increased from one period to the next assets increased and liabilities remain constant
if your total assets equal $50,000 and your total liabilities equal $15,000; your debt ratio is… above 50%
in order to minimize the difficulty associated with meeting monthly loan payments, the debt service ratio should be… above 20%
when estimating income, you should… use gross income
to determine how effectively the budget is working, you can use… income and expenditure records
net worth is highest at about what age? 65
NOT among the four categories accounting for almost three-quarters of consumers spending utilities

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