| A | B |
|---|
| budget | a forecast of future cash inflows and outflows |
| forecast error | the difference between what you forecast to happen and what actually happens |
| personal balance sheet | a financial statement that tells your financial position at a specific point in time |
| market value | what something would be worth if you sold it today |
| investment | something you acquire with the ultimate goal of making money |
| bonds | certificates that function like IOUs--promises to repay a certain amount of money at some future time |
| stocks | certificates that represent fractional (part) ownership of a firm |
| mutual funds | professionally managed investments that allow investors to pool their money in order to invest in a larger variety of financial assets such as stocks and bonds from many different companies |
| real estate | homes, rental property, farms and other land |
| Section 529 plan | a college savings plan for children. It helpls investors avoid some taxes on the earnings and withdrawals from the plans |
| liabilities | the amount of debt a person owes |
| current liabilities | debts that must be paid off within one year |
| long-term liabilities | debts that will take longer than one year to pay off |
| net worth | value of your total assets minus the sum of your total liabilities |
| liquid assets | financial assets that are either cash or can be quickly converted to cash without significant loss of value |
| assets | items of value that a person owns |
| household assets | assets typically owned by a household--cars, houses and furniture |
| cash inflows | salary, hourly wages, scholarship, allowance, savings |
| cash outflows | car payments (car note), insurance premiums, rent, utilities |
| Kelley Blue Book | a guide to car market values |
| personal cash flow statement | a record of your incoming and outgoing money |
| principal | the initial amount you owe in a liability such as a home mortgage |
| wealth | measured by your net worth |
| debt-to-asset ratio | total liabilities (what you owe) divided by your total assets (what you own including savings)--example you have $13,900 in assets and $5,500 in liabilities -- $5,500/$13,900 = 39.5% |
| money management | making decisions about how much cash or liquid assets to keep in reserve (safe) and how much to invest (in stocks) |
