Adult life cycle
The stages in the family situation and financial needs of an adult
bankruptcy
A set of federal laws allowing you to either restructure your debts or remove certain debts
economics
the study of how wealth is created and distributed
financial plan
A formalized report that summarizes your current financial situation, analyzes you financial needs, and recommends future financial activities
values
ideas and principles that a person considers correct, desirable, and important
personal financial planning
the process of managing your money to achieve personal economic satisfaction
future value
the amount to which current savings will increase based on a certain interest rate and a certain time period; also referred to as compounding
present value
the current value for a future amount vased on a certain interest rate and a certain time period; also referred to as discounting
inflation
A rise in the general level of prices
opportunity cost
What a person gives up by making a choice
time value of money
increase in an amount of money as a result of interest earned
Assets
Cash and other property with a monetary value
balance sheet
A financial statement that reports what an individual or a family owns and owes; also called a net worth statement or statement of financial position
budget
A specific plan for spending income; also called a spending plan
budget variance
The difference between the amount budgeted and the actual amount received of spent
cash flow
the actual inflow and outflow of cash during a given time period
cash flow statement
A financial statement that summarizes cash receipts and payments for a given period; also called a personal income and expenditure statement
current liabilities
debts that mush be paid within a short time, usually less that a year
deficit
The amount by which actual spending exceeds
discretionary income
Money left over after paying for housing food, and other necessities
income
inflows of cash to an individual or a household
insolvency
The inability to pay debts when they are due because liabilities far exceed the value of assets
liabilities
Amounts owed to others
liquid assests
cash and items of values that can easily be converted to cash
long-term liabilities
Debts that are not required to be paid in full until more that a year from now
money management
day-to-day financial activities necessary to manage current personal economic resources while working toward long-term financial security
net worth
the difference between total assets and total liabilities
safe deposit box
A private storage area at a financial instituation with maximum security for valuables
surplus
the amount by which actual spending is less than planned spending
take-home pay
Earnings after deductions for taxes and other items; also called disposable income
excise tax
A tax imposed on specific goods and services, such as gasoline, cigarettes, alcoholic beverages, tires, and air travel
estate tax
A tax imposed on the value of a person's property at the time of death
Inheritance tax
a tax levied on the value of property bequeathed by a deceased person
Taxable income
the net amount of income, after allowable deductions, on which income tax is computed
earned income
money received for personal effort, such as wages, salary, commission, fees, tips, or bonuses
investment income
money received in the form of dividends, interest, or ret from investmentsl also called portfolio income
passive income
income resulting from business activities in which you do not actively participate
exculusion
an amount not included in gross income
tax-exempt income
income that is not subject to tax
tax-deffered income
income that will be taxed at a lated date
Adjusted gross income (AGI)
gross income reduced by certain adjustments such as contributions to an individual retirement account (IRA) and alimony payments
tax deductions
An amount subtracted from adjusted gross income to arrive at taxable income
standard deduction
a set amount on which no taxes are paid
Itemized deductions
expenses that can be deducted from adjusted gross income, such as medical expenses, real estate property taxes, home mortgages interest, charitable contributions, casualty losses, and certain work-related expenses
exemption
a deduction from adjusted gross income for yourself, your spouse and qualified dependents
marginal tax rates
the rate used to calculate tax on the last (and next) dollar of taxable income
average tax rate
total tax due divided by taxable income
tax credit
an amount subtracted directly from the amount of taxes owed
tax audit
a detailed examination of your tax return by the internal revenue service
tax avoidance
the use of legitimate methods to reduce one's taxes
tax evasion
the use of illegal actions to reduce one's taxes
capital gains
profits from the sale of a capital asset such as stocks, bonds, or real estate.