Personal Finance

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1

– is the heart of financial planning to ensure your values line up where you want to be in the future.

How you spend and save

2

– helps define your financial goals and set appropriate strategies to reach them.

Personal financial planning

3

the necessities, comforts, and luxuries enjoyed or desired by an individual or family.

Standard of living

4

the percentage of each dollar of income, on average, that a person spends for current needs rather than savings.

Average propensity to consume

5

total value of all items owned by an individual such as savings accounts, stocks, bonds, home, and automobiles.

Wealth

6

are intangible paper assets such as savings accounts and securities, that are acquired for some promised future return.

Financial assets

7

physical assets such as real estate and automobiles that can be held for either consumption or investment purposes.

Tangible assets

8

cash, savings accounts, and money market funds; used to pay everyday expenses.

Liquid assets

9

stocks, bonds, and mutual funds are acquired to earn a return on our money

Investments

10

movable property such as cars, household furnishings, appliances, clothing, jewelry, home electronics, and similar items.

Personal property

11

immovable property; land and anything fixed to it like a house.

Real property

12

results that an individual wants to attain such as buying a home, building a college fund, or achieving financial independence.

Financial goals

13

the medium of exchange used as a measure of value in financial transactions

Money

14

the amount of satisfaction received from purchasing certain types or quantities of goods and services.

Utility

15

target dates in the future when certain financial objectives are expected to be completed.

Goal dates

16

6 years or more goal

Long-term goals

17

next 2-5 years goal

Intermediate-term goals

18

In the next year goal

Short-term goals

19
  • is a lifelong process that includes short and long-term goals.
  • Can improve your work situation and help you gain greater personal and professional satisfaction.

Career planning

20

– is something we owe measured by the amount of debt we incur.

Liability

21

employer allocates a certain amount of money to each employee and then lets the employee “spend” that money on the benefits that suit his/her age, marital status, number of dependent children, and level of income.

Flexible-benefit (cafeteria) plans

22
  • plays a major role in regulating the level of economic activity

Federal government

23

constrain personal financial planning

Taxation and regulation

24

- controls money supply
- used to stimulate or contract economic growth

Monetary policy

25

controls levels of taxation.

Sets levels of government spending

Fiscal policy

26
  • Stages related to employment and production levels
  • Growth measured by changes in GDP

Economic cycles

27

when real GDP increases until it hits a peak.

Expansion

28

when an expansion ends and a contraction begins.

Peak

29

when real GDP falls

Contraction

30

when a contraction ends and an expansion begins.

Trough

31
  • A state of the economy in which the general price level is increasing
  • Measured by changes by CPI
  • Affects purchasing power and interest rates
  • Affects financial plans and goals

Inflation

32

a measure of inflation based on changes in the cost of consumer goods and services.

Consumer price index (CPI)

33

- the amount of goods and services that each dollar buys at a given time.

Purchasing power