Finance Chapter 3

the steps in preparing a practical budget in order Set financial goals, Estimate your income, budget for unexpected expenses, Budget for fixed expenses, budget for variable expenses, Record what you spend, review spending or saving patterns,
Consumer price index a measure of the changes in prices for commonly purchased goods and services in the United States.
Personal financial statement a document that provides information about an individual’s current financial position and presents a summary of income and spending.
Net worth the difference between the amount that you own and the debts that you owe.
liquid assets cash and items that can be quickly converted to cash
liabilities Debts that you owe
cash flow The money that actually goes into and out of your wallet and bank accounts.
budget Plan for using money to meet wants and needs.
budget variance the difference between the budgeted amount and the actual amount that you spend.
insolvency financial state that occurs if liabilities are greater than assets.
money management Planning how to get the most from your money.
safe deposit box A small, secure compartment that you can rent in a bank, usually for $100 a year or less.
Personal balance sheet a financial statement that lists items of value owned, debts owed, and a person’s net worth.
assets any items of value that an individual or company owns, including cash, property, personal possessions, and investments
Wealth an abundance of valuable material possessions or resources.
real estate land and any structures that are on it, such as a house or any other building that a person or family owns.
market value The price at which property would sell.
income The money that you receive
Discretionary income the money left over after paying for the essentials, such as food, clothing, shelter, transportation, and medication.
Take home pay the amount of income left after taxes and other deductions are taken out of your gross pay.
surplus extra money that can be spent or saved, depending on a person’s financial goals and values.
Deficit the financial situation that occurs when more money is spent than is earned or received.

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