| A | B |
|---|
| financial plan | a set of goals for spending, saving, and investing money you receive |
| disposable income | money you have to spend as you wish--after all taxes have been paid |
| budget | spending and savings plan based on your expected income and expenses |
| fixed expenses | expenses that remain constant and cannot be easily changed or removed from a budget |
| variable/flexible expenses | expenses that may change according to needs and short-term goals |
| assets | items of value that a person owns |
| liabilities | amounts of money owed to others, also known as debts |
| net worth | the difference between what is owned and what is owed |
| What are the steps in preparing a budget? | (1) Estimate your total income, (2) decide your savings, (3) Estimate your expenses, (4) Balance your budget |
| If you had to reduce your spending to balance your budget--would you reduce fixed or variahble expenses first? | variable |
| What types of records should you keep? | income and expense records, net worth statement, personal property inventory, tax records |
| What are five benefits of financial planning | (1) Determine/evaluate options for your money (2) Prioritize options to maximize your money (3) Avoid careless spending (4) Organize income sources to achieve your financial goals (5) Avoid money stress--you've got a plan |
| Total fixed expenses should not be more than | 50%-60% of take-home pay |
| personal property inventory | a list of all the values you own, the purchase price and approximate current values |
| solvent | a favorable financial positions--your assets are greater than your liabilities |
| insolvent | a poor financial position – your liabilities are greater than your assets (you owe more than you own |
| Keep tax records for | 3 years |
| The budgeting strategy whereby you dedicate 1/2 of your net income to needs and savings/wants share the other 1/2 of net income | 50/20/30 Budget |
| The budgeting strategy whereby the first "bill" you pay every month is to savings by transferring a predetermined amount to savings before paying your monthly bills | Pay Yourself First Budgeting |
| The budgeting strategy where every dollar of income is assigned to a specific expense to help anticipate upcoming expenses and avoid impulse purchases | Zero Based Budget |
| The budgeting strategy where you put specific amount of money into envelopes that represent different budget categories | Envelope System Budgeting |
