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Foundations in Personal Finance Ch. 1 Intro to Personal Fin.
| Question | Answer |
| Explain why high school students should learn about personal finance. | Learning to manage money at a young age can eliminate financial mistakes and promote huge financial benefits for the future. |
| When it comes to personal finance, the math is easy. What's challenging is managing your | behavior |
| Why was the use of credit uncommon prior to 1917? | Laws prevented lenders from charging high interest rates, borrowing money was not socially acceptable, lending money was not profitable. |
| During the Great Depression, New Deal policymakers came up with mortgage (home loans) and consumer lending policies that convinced commercial banks that | consumer credit could be profitable. |
| A debt evidenced by a "note," which specifies the principal amount, interest rate, and date of repayment | loan |
| A period of temporary economic decline during which trade and industrial activity are reduced; generally identified by a fall in gross domestic product (GDP) | recession |
| A person or business that offers loans at extremely high interest rates | loan shark |
| All of the decisions and activities of an individual or family regarding their money, including spending, saving, budgeting | personal finance |
| A system by which goods and services are produced and distributed | economy |
| Personal financial success is primarily the result of | managing your money behavior |
| Explain why income alone does not determine wealth. | The amount of money a person makes does not dictate his or her spending and saving behavior. |
| Name some consequences of spending more money than you make | Stress, a cycle of debt, missed opportunities to save and invest |
| A person or organization that uses a product or service | consumer |
| A fee paid by a borrower to the lender for the use of borrowed money | interest |
| The knowledge and skillset necessary to be an informed consumer and manage finances effectively | financial literacy |
| An obligation of repayment owed by one party to a second party | debt |
| The granting of a loan and the creation of debt; any form of deferred payment | credit |
| The widespread financial insecurity of Americans is primarily because | the saving rate of Americans is low and many borrow in order to spend more than they earn |
| When it comes to managing money, success is about ___% knowledge and ___% behavior. | 20, 80 |
Popular Finance sets
Consumer rights and responsibilities
Lifestyles and Stages of Life
shopping options and practices
Researching Job/Career Options
Protecting Your Financial Security
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FAQs
#1 Don't Spend More Than You Make
When your bank balance is looking healthy after payday, it's easy to overspend and not be as careful. However, there are several issues at play that result in people relying on borrowing money, racking up debt and living way beyond their means.
What are the 5 basics of personal finance? ›
Personal finance deals with an individual or household's income, spending, and savings. The five fundamental focus areas of personal finance are income, spending, savings, investing, and protection. Understanding a country's tax system can help individuals save a lot of money. This requires proper tax planning.
What does it mean when the amount of your liabilities is larger than the value of your assets? ›
If your assets are more than your liabilities, you have a "positive" net worth. If your liabilities are greater than your assets, you have a "negative" net worth.
What are the 5 P's of finance? ›
The 5P's represent - People, Philosophy, Product, Process, Performance. In finance, the 5P's served as a rule-of-thumb guide for our evaluation of whether to invest in a particular fund - hedge funds or private equity funds in my context.
What is the 1234 financial rule? ›
One simple rule of thumb I tend to adopt is going by the 4-3-2-1 ratios to budgeting. This ratio allocates 40% of your income towards expenses, 30% towards housing, 20% towards savings and investments and 10% towards insurance.
What is the 80-10-10 rule? ›
When following the 10-10-80 rule, you take your income and divide it into three parts: 10% goes into your savings, and the other 10% is given away, either as charitable donations or to help others. The remaining 80% is yours to live on, and you can spend it on bills, groceries, Netflix subscriptions, etc.
What is the 50-30-20 rule? ›
The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings. The savings category also includes money you will need to realize your future goals. Let's take a closer look at each category.
What are the 5 C's of personal finance? ›
The 5 C's of credit are character, capacity, capital, collateral and conditions. When you apply for a loan, mortgage or credit card, the lender will want to know you can pay back the money as agreed. Lenders will look at your creditworthiness, or how you've managed debt and whether you can take on more.
Can finance be self-taught? ›
There are multiple ways you can learn about finance, including online courses, in-person classes, reading financial publications, self-teaching from finance books, and joining a network of financial professionals.
What is the 10 20 rule personal finance? ›
It says your total debt shouldn't equal more than 20% of your annual income, and that your monthly debt payments shouldn't be more than 10% of your monthly income. While the 20/10 rule can be a useful way to make conscious decisions about borrowing, it's not necessarily a useful approach to debt for everyone.
Listening to podcasts and reading books about specific areas of finance that interest you help break down more complex financial topics and speed up the learning process. There are also many paid and free courses out there that offer courses in different areas of finance and investing.
What's better to be an asset or liability? ›
Liabilities. Assets add value to your company and increase your company's equity, while liabilities decrease your company's value and equity. The more your assets outweigh your liabilities, the stronger the financial health of your business.
Is it OK to have more liabilities than assets? ›
Asset deficiency is a situation where a company's liabilities exceed its assets. Asset deficiency is a sign of financial distress and indicates that a company may default on its obligations to creditors and may be headed for bankruptcy.
What are the two main types of personal financial statements? ›
Two types of personal financial statements are the personal cash flow statement and the personal balance sheet.
What is the rule number 1 in finance? ›
1: Never lose money. Rule No. 2: Never forget Rule No. 1."
What is the first rule of finance? ›
Warren Buffett once said, “The first rule of an investment is don't lose [money]. And the second rule of an investment is don't forget the first rule. And that's all the rules there are.”
What is the principle 1 of finance? ›
Principle 1: A budget must be established to provide a tool to: project resources necessary to achieve a unit's goals and objectives, measure current financial performance, discover significant transaction errors, and.
What are my 2 golden rules of personal finance? ›
Pay yourself first (i.e. as soon as you get paid, transfer a little bit of money - it could be $20 - to your savings account before spending anything) Create a budget.
