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Personal finance > Chapter 1 > Flashcards

Chapter 1 Flashcards

1
Q

Avoiding financial planning just creates more _________ problems

A

Financial

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2
Q

Personal financial planning is an __________ process it changes as your financial situation and position in life change

A

Ongoing

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3
Q

Importance of personal financial planning

A
  1. Manage the unplanned
  2. Accumulate wealth for special expenses
  3. Save for retirement
  4. Cover your assests
  5. Invest intelligently
  6. Minimize your payments to taxes
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4
Q

The personal financial planning process includes what?

A
  1. Evaluating your financial health
  2. Define your financial goals
  3. Develop a plan of action
  4. Implement your plan
  5. Review your progress, reevaluate, and revise your plan
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5
Q

What is involved in evaluating your financial health?

A
  1. Examine your current finanaical situation (how much money you/spend, etc)
  2. Record your finances & spending
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6
Q

What involved in defining your financial goals?

A
  1. Write down your goals
  2. Attach a financial cost to each one
  3. When will you need to achieve your goal?
  4. Analyze & revise your goals
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7
Q

What is involve in developing a plan of action?

A
  1. Flexibility
  2. Liquidity
  3. Protection
  4. Minimizing taxes
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8
Q

What is involved in implementing your plan?

A
  1. Stick to your plan
  2. Use your financial plan as ur guide to achieve ur goals
  3. Keep goals in mind & work towards them
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9
Q

What is involved in review, reevalualte, and revise?

A
  1. Review progress
  2. Reevalaute & revise for changes in your life
  3. Be prepared to formulate a different plan to meet your goals
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10
Q

How long is a short term goal?

A

Within 1 year

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11
Q

How long is a intermediate goal

A

1-10 yrs

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12
Q

How long is long term goal

A

10+ yrs

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13
Q

What are some ex. short term goals?

A

Accumulate emergency fund equal to 3 months’ living expenses

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14
Q

What are the stages in an individual’s financial life cycle?

A
  1. Stage 1 - Early years - A time of wealth accumulation (before 54)
  2. Stage 2- The Golden Years- Approaching Retirement (55-64)
  3. The retirement years (After 65)
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15
Q

What determines your income?

A
  1. Skill
  2. Education
  3. Martial status
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16
Q

What are the 10 basic principles on which personal financial planning is built?

A
  1. The best protection is knowledge
  2. Nothing happens without a plan
  3. The time value of Money
  4. Taxes affect personal finance decisions
  5. Stuff happens or the importance of liquidity
  6. Waste not, want no-Smart spending matters
  7. Protect yourself against major catastrophes
  8. Risk & return go hand in hand
  9. Mind games, your financial personality & your money
  10. Just do it

Personal finance (4 decks)

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