Personal Finance Definitions Flashcards

Personal Finances

• Involves managing financial needs and goals for the future.

Consumer

• A person who buys and uses goods or services.

Interest (Saving)

• Earnings from lending your money to someone else.

Interest (Borrowing)

• Cost associated with using borrowed money.

Principal

• Initial amount of savings or the original sum borrowed.

Rule of 72

• A formula to estimate years needed to double an investment by dividing 72 by the annual interest rate.

Investing

• Committing money to ventures with potential for earning higher returns.

Saving

• Allocating a portion of current income for future use.

Savings

• Funds remaining after all expenses have been paid.

Compound Interest

• Interest earned on both original principal and previously accrued interest.

Budget

• A structured financial plan for managing income and expenses over a specific period.

Opportunity Cost

• The value of the next best alternative foregone when making a decision.

Expense

• Any spending incurred to purchase goods or services.

Fixed Expenses

• Regular costs that remain constant each month, such as rent.

Income

• Money received or earned from various sources, including wages and gifts.

Variable Expenses

• Costs that fluctuate each month, such as entertainment or repairs.

Credit

• The ability to acquire goods or services with a promise to pay later.

Credit Report

• Document summarizing personal credit history and financial transactions.

Debt

• Amounts owed to creditors or lenders.

Risk Management

• Process of anticipating and reducing financial loss.

Fraud

• Deceptive practices intended to manipulate someone into relinquishing value.

Identity Theft

• Crime involving unauthorized use of someone else's personal information.

Installment Loan

• Borrowed funds paid back over time through fixed payments.

Insurance

• Financial protection against various kinds of risks and losses.

PYF (Pay Yourself First)

• A strategy of prioritizing savings before covering other expenses.

PSA (Public Service Announcement)

• Campaign aimed at delivering important messages for public benefit, typically through media.

Five Elements of Good Financial Planning

• Earn: Focus on generating income.
• Save: Prioritize setting aside savings.
• Spend Wisely: Make informed purchasing decisions.
• Credit: Use cautiously to avoid debt pitfalls.
• Protect: Safeguard financial resources.

Doubling Investment at Various Interest Rates

• 6% interest rate: Approximately 12 years to double.
• 3% interest rate: Approximately 24 years to double.
• 4% interest rate: Approximately 18 years to double.

Test your knowledge of essential personal finance terms with these flashcards. Learn key concepts like personal finance management, consumers, and interest types. Perfect for anyone looking to improve their financial literacy.