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Personal Finance

the process of planning your spending, financing, and investing to optimize your financial situation

Personal financial plan

a plan that specifies your financial goals and describes the spending, financing, and investing plans that are intended to achieve those goals

opportunity cost

What you give up as a result of a decision

Budget Planning

the process of forecasting future expenses and savings


access to funds to cover any short-term cash deficiencies

money management

decisions regarding how much money to retain in a liquid form and how to allocate the funds among short-term investment instruments

credit management

decisions regarding how much credit to obtain to support your spending and which sources of credit to use

insurance planning

determining the types and amount of insurance needed to protect your assets

Estate planning

determining how your wealth will be distributed before or upon your death

Retirement Planning

determining how much money you should set aside each year for retirement and how you should invest those funds

Personal Cash Flow Statement

a financial statement that measures a person's cash inflows and outflows

Factors affecting cash flows

Stage in your career path, type of job, family status and age, etc

How to forecast your cash flows

Creating a budget

Personal balance sheet

a financial statement that lists items of value owned, debts owed, and a person's net worth

net worth

the difference between assets and liabilities (what you have vs what you owe)


debts that you owe


assets such as stocks, bonds, mutual funds, and real estate that are acquired in order to earn a return rather than provide a service

household assets

items normally owned by a household, such as a home, car, and furniture

liquid assets

financial assets that can be easily sold without a loss in value