Personal Finance

personal financial planning is… the process of managing your money to achieve personal economic satisfaction
a financial plan is… a formal report that analyzes current financial decisions
financial activities for a young, single person will be… different from those for an older couple with no dependent children at home
inflation is most harmful to people with… fixed income
as borrowing by consumers and businesses increases, interest rates are likely to rise
planned spending through budgeting is part of the… planning component of financial planning activities
purchasing an appliance is an example of… a durable product goal
opportunity costs refer to… what a person gives up by making a choice
financial plan a formalized report that summarizes your current financial situation, analyzes your financial needs, and recommends future financial activities
increased control of financial affairs an advantage of effective personal financial planning
adult life cycle the stages in the family situation and financial needs of an adult
consumer price index the average change in prices of goods and services of urban consumers
the borrowing component in a financial plan relates to… maintaining control over credit buying habits
the problem of bankruptcy is associated with overuse and misuse of credit in the… borrowing component of financial planning
the savings component of financial planning focuses on long term security and includes… a regular savings plan for emergencies
many Americans have money problems because… poor planning and weak money management habits
food and clothing are… consumable product goals
durable product goals… relate to infrequently purchased, expensive items
opportunity cost the trade off decision
the time value of money refers to… increases in an amount of money as a result of interest earned
compounding future value computations
discounting present value computations
first step in the financial planning process… determine your current financial situation
evaluating risk every decision involves uncertainty
interest rate risk changes in the cost of money
income risk loss of a job or encountering an illness
personal risk the tangible and intangible factors that create less than desirable situations
liquidity risk the difficulty of converting savings and investments into cash
changes in personal, social, and economic factors may require you to… review and revise your financial plan more frequently
using the services of financial institutions or financial specialists to seek relevant information is done in the… evaluate your alternative step
SMART SpecificMeasurableAttainableRealisticTime bound

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