Personal Finance Definitions Flashcards
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Questions and Answers

What are personal finances?

The practice of determining and managing a person's financial needs and goals for the future.

What is a consumer?

A person who purchases and uses goods and/or services.

What is interest in savings?

Income earned from allowing someone else to use your money.

What is interest in borrowing?

<p>Payment for the use of money.</p> Signup and view all the answers

What is principal in finance?

<p>An initial amount of savings or an original amount borrowed.</p> Signup and view all the answers

What is the Rule of 72?

<p>To find the number of years required to double your investment at a given interest rate, divide 72 by the compound return.</p> Signup and view all the answers

What does investing mean?

<p>Putting money into a venture that offers the possibility of earning more money.</p> Signup and view all the answers

What does saving entail?

<p>Setting aside a portion of current income for future use.</p> Signup and view all the answers

What are savings?

<p>The money left over after expenses have been paid.</p> Signup and view all the answers

What is compound interest?

<p>The interest a person earns on today's money that will compound to the amount that will earn interest later.</p> Signup and view all the answers

What is a budget?

<p>A spending plan for managing money during a given period of time.</p> Signup and view all the answers

What is opportunity cost?

<p>The next best alternative given up when a choice is made.</p> Signup and view all the answers

What is an expense?

<p>Money spent to buy or do something.</p> Signup and view all the answers

What are fixed expenses?

<p>Expenses that do not change from month to month.</p> Signup and view all the answers

What is income?

<p>Any money earned or received (wages or gifts).</p> Signup and view all the answers

What are variable expenses?

<p>Expenses that vary from month to month.</p> Signup and view all the answers

What is credit?

<p>The ability to buy goods or services now but pay later.</p> Signup and view all the answers

What is a credit report?

<p>A record of your personal financial transactions.</p> Signup and view all the answers

What is debt?

<p>Money owed to someone else.</p> Signup and view all the answers

What is risk management?

<p>Predicting and minimizing the chance of financial loss.</p> Signup and view all the answers

What is fraud?

<p>Intentional deception to influence someone to part with something of value.</p> Signup and view all the answers

What is identity theft?

<p>A crime that occurs when someone uses another person's personal information without permission.</p> Signup and view all the answers

What is an installment loan?

<p>Borrowed money that is repaid in equal payments.</p> Signup and view all the answers

What is insurance?

<p>A means of guaranteeing financial protection against various risks.</p> Signup and view all the answers

What does PYF stand for?

<p>Pay Yourself First.</p> Signup and view all the answers

What does PSA stand for?

<p>Public Service Announcement.</p> Signup and view all the answers

The five elements of good financial planning include: Earn ______, Save ______, Spend ______, Use ______ cautiously, Protect your finances!

<p>money, money, wisely, credit</p> Signup and view all the answers

How many years will it take to double your money invested at a 6% interest rate?

<p>12 years</p> Signup and view all the answers

How many years will it take to double your money invested at a 3% interest rate?

<p>24 years</p> Signup and view all the answers

How many years will it take to double your money invested at a 4% interest rate?

<p>18 years</p> Signup and view all the answers

Study Notes

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.

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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.

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