Podcast
Questions and Answers
What does a low credit score typically result in?
What does a low credit score typically result in?
- Increased opportunities for loans
- Limited access to credit (correct)
- Lower costs of credit
- Higher credit limits
Which of the following best describes fixed expenses?
Which of the following best describes fixed expenses?
- Expenses that remain constant each month (correct)
- Expenses that increase over time
- Expenses that are optional and can be reduced
- Expenses that vary from month to month
What is the purpose of an emergency fund?
What is the purpose of an emergency fund?
- To cover regular monthly expenses
- To provide financial support during unexpected events (correct)
- To help manage fixed expenses
- To invest in stocks or bonds
Why do people often donate to charities?
Why do people often donate to charities?
What is a budget intended to accomplish?
What is a budget intended to accomplish?
What does the term 'opportunity cost' refer to?
What does the term 'opportunity cost' refer to?
What does 'Caveat Emptor' mean?
What does 'Caveat Emptor' mean?
Which of the following best defines needs?
Which of the following best defines needs?
What represents a positive cash flow?
What represents a positive cash flow?
What is meant by the 'Time Value of Money'?
What is meant by the 'Time Value of Money'?
Which of the following statements about bankruptcy is true?
Which of the following statements about bankruptcy is true?
What is compound interest?
What is compound interest?
What does financial capability include?
What does financial capability include?
Flashcards
Opportunity Cost
Opportunity Cost
The value of the next best alternative you give up when making a choice.
Needs
Needs
Essential items needed for survival, like food, shelter, and clothing.
Wants
Wants
Things you desire but don't need to survive, like a new phone or a fancy car.
Caveat Emptor
Caveat Emptor
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Budget
Budget
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Cash Flow
Cash Flow
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Time Value of Money
Time Value of Money
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Compound Interest
Compound Interest
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Net Worth
Net Worth
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Emergency Fund
Emergency Fund
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Variable Expenses
Variable Expenses
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Fixed Expenses
Fixed Expenses
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Philanthropy
Philanthropy
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Study Notes
Opportunity Cost and Scarcity
- Opportunity cost: The value of what you lose when choosing between options. It's the next best alternative.
- Scarcity: A fundamental economic concept; resources are limited.
Needs vs. Wants
- Needs: Essential resources for survival – food, shelter, clothing.
- Wants: Desired items, but aren't essential.
Caveat Emptor
- Caveat emptor: Latin for "let the buyer beware." Buyers are responsible for verifying the value and quality of a product or service before purchase. Be a shrewd consumer.
- Be wary of bargains that seem too good to be true.
- Read the fine print!
Financial Risks and Management Strategies
- Bankruptcy: Occurs when someone can't pay debts. Obtaining help to alleviate debts is an option.
- Financial capability: Knowledge, skills, attitude, and motivation for sound financial management.
- Emergency fund: Money set aside for unforeseen events.
- Insurance: Reduces financial impact of negative events.
- Protect your identity.
- Manage your debt load.
- Automate positive financial behaviors (e.g., automatic bill payments).
- Credit score: A number reflecting your creditworthiness.
- High scores allow for better credit terms.
- Low scores restrict access to credit & usually result in higher interest rates.
Budgeting and Financial Planning
- Budget: A plan for spending, saving and investing money to meet financial goals (short- and long-term).
- Revising and updating budgets regularly is essential.
- Cash flow: Money moving in and out.
- Positive cash flow: Income exceeds expenses.
- Negative cash flow: Expenses exceed income.
- Fixed expenses: Consistent monthly costs (rent, cell phone).
- Variable expenses: Shifting monthly costs (food, entertainment).
- Income: Money coming in.
- Expenses: Money going out.
- Account balance: Current funds in an account, or debt.
Financial Concepts
- Time value of money: Money available right now is more valuable than the same amount in the future.
- This is based on potential investment returns/ earnings.
- Compound interest: Interest on accumulated interest, as well as the principal.
- Your interest will continually grow with compounding.
- New worth: Assets (what you own) minus liabilities (what you owe).
Lottery Winners and Bankruptcy
- Lottery winners are at higher risk of bankruptcy compared to those who don't win.Â
Important Financial Concepts
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Philanthropy: Giving back time, talent, or money to causes you care about.
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Charities: Non-profit organizations that don't pay taxes, but your donations to them could qualify for tax deductions. Factors motivating donations:
- Belief in the organization's mission (their aims & beliefs)
- Personal connection with the charity
- Potential financial benefits/tax deductions
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