Ch. 10-12 Personal Finance Flashcards
Adult Life Cycle
The stages in the family situation and financial needs of an adult.
Economics
The study of how wealth is created and distributed.
Financial Plan
A formalized report that summarizes your current financial situation, analyzes your financial needs, and recommends future financial activities.
Inflation
A rise in the general level of prices.
Life Cycle Approach
The idea that the average person goes through four basic stages in personal financial management.
Liquidity
(1) The ability to readily convert financial resources into cash without a loss in value; (2) the ability to buy or sell an investment quickly without substantially affecting the investment’s value.
Opportunity Cost
What a person gives up by making a choice.
Personal Financial Planning
The process of managing your money to achieve personal economic satisfaction.
Time Value of Money
Increases in an amount of money as a result of interest earned.
Budget Variance
The difference between the amount budgeted and the actual amount received or spent.
Discretionary Income
Money left over after paying for housing, food, and other necessities.
Insolvency
The inability to pay debts when they are due because liabilities far exceed the value of assets.
Money Management
Day-to-day financial activities necessary to manage current personal economic resources while working toward long-term financial security.
Corporate Bond
A corporation’s written pledge to repay a specified amount of money, along with interest.
Diversification
(1) The process of spreading assets among several types of investments to lessen risk; (2) investment technique that involves combining many assets in a portfolio to reduce its risk.
