Chapter 3 (September 9th): Planing with Personal Financial Statements (MOST IMPORTANT)

Question 1

A financial statement that measure’s a person’s income and expenses.

Answer 1

Personal Cash Flow Statement.

Question 2

Your Income minus your applicable income taxes and other payroll deductions such as CPP and EI.

Answer 2

Disposable (after-tax) income.

Question 3

Your Income minus your applicable income taxes and other payroll deductions such as CPP and EI.

Answer 3

Disposable (after-tax) income.

Question 4

A cash flow statement that is based on forecasted cash flows (income and expenses) for a future time period.

Answer 4

Budget

Question 5

A summary of your assets, your liabilities,, and your net worth.

Answer 5

Personal balance sheet.

Question 6

A summary of your assets, your liabilities,, and your net worth.

Answer 6

Personal balance sheet.

Question 7

financial assets that can be easily converted into cash without a loss in value (e.g. cash, checking account, savings account(.

Answer 7

Liquid Assets.

Question 8

items usually owned by a household.

Answer 8

car furniture

Question 9

stocks, bonds, mutual funds, and rental property are what…

Answer 9

Investments.

Question 10

certificates representing partial ownership of a firm.

Answer 10

Stocks.

Question 11

long-term debt securities issued by borrowers, usually firms and government agencies, to raise funds.

Answer 11

Bonds.

Question 12

investment companies that sell shares to individuals and invest the proceeds in an overall portfolio of investment instruments such as bonds or stocks.

Answer 12

Mutual Funds.

Question 13

principal residence and holdings in rental property and land.

Answer 13

Real Estate.

Question 14

principal residence and holdings in rental property and land.

Answer 14

Real Estate.

Question 15

personal debts that will be paid in the near future (within a year) (e.g., credit card debt).

Answer 15

Current Liabilities

Question 16

debts that will be paid over a period longer than one year (e.g., student loan, car loan, mortgage/housing loans).

Answer 16

Long-term liabilities

Question 17

debts that will be paid over a period longer than one year (e.g., student loan, car loan, mortgage/housing loans).

Answer 17

Long-term liabilities

Question 18

Net-worth =

Answer 18

Assets - Liabilities

Question 19

Net-worth =

Answer 19

Assets - Liabilities

Question 20

Current Ratio

Answer 20

Liquid Assets/Current Liabilities

Question 21

Current Ratio =

Answer 21

Liquid Assets/Current Liabilities

Question 22

Liquidity Ratio

Answer 22

Liquid Assets/Monthly Living Expenses

Question 23

Liquidity Ratio =

Answer 23

Liquid Assets/Monthly Living Expenses

Question 24

Debt-to-Assets Ratio =

Answer 24

Total Liabilities / Total Assets

Question 25

Savings Ratio =

Answer 25

Savings During Period / Disposable income during the Period.

Question 26

Short Term Goals

Answer 26

1 year or less

Question 27

Building A Strong Foundation (IMPORTANT)

Answer 27

1. Set Goals and Budget
2. Starter Emergency Fund ($1000)
3. Pay off all debt except mortgage.
4. Fully Funded Emergency Fund (3-24 months of spending)
5. Invest at least 10% of Every Paycheque on (RRSP/TFSA)

Question 28

how risky is your job, how quickly can you get a new job, and how volatile is your income are all factors of what?

Answer 28

creating an emergency fund.

Question 29

emergency fund consists of funds for;

Answer 29

1. job loss
2. major illness
3. tax problems.
   4 Unexpected repairs not covered by insurance.

Question 30

Correct Order of Budgeting:

Answer 30

1. Basic accommodation/transportation.
2. Food, utilities, clothing
3. debt/emergency fund/investing
4. nice house/nice car/life

Question 31

don’t allocate more than 15% of your budget towards

Answer 31

transportatoin.

Question 31

don’t allocate more than 15% of your budget towards

Answer 31

transportatoin.

Question 32

how much of your income do you have to save if you want to have enough for retirement.

Answer 32

10% of income…at about 20. goes up 10% every 10 years after)

Question 32

how much of your income do you have to save if you want to have enough for retirement.

Answer 32

10% of income…at about 20. goes up 10% every 10 years after)

Question 33

pay ___ first.

Answer 33

yourself.

Question 34

when you don’t make enough to pay for you needs wants, you have two choices.

Answer 34

cut expenses (not from retirement) and make more money.

Question 35

if you overspent in a certain area of budget for the month…

Answer 35

go back and to budget and adjust spending on some other area to balance costs. (ex. spent 50$ too much on movie, so you wait till next month to get that nice shirt you want to balance budgeting.)

Question 36

sinking funds

Answer 36

put money away for inevitable repairs, car, house, vacation etc.

Question 37

medium term

Answer 37

3-5 years

Question 38

long term

Answer 38

5 + years.