Money Management
Planning how to get the most from your money.
Safe-Deposit Box
A small, secure storage compartment that you can rent in a bank, usually for $100 a year or less.
Benefits of Organizing Your Financial Documents
1-Makes it easier to pan and measure progress, 2-Handle routine money matters, 3-know how much money is available, and 4-Make effective decisions.
Storage locations for Financial Documents
1-Home Files [frequently accessed, relatively easy to replace], 2-Safe Deposit Box [important and hard to replace documents and items], 3 Computer [financial record storage, access account information online, etc.]
Personal Financial Statement
A document that provides information about an individual's current financial position and presents a summary of income and spending.
Personal Balance Sheet
Also called Net Worth Statement. A financial statement that lists items of value owned, debts owed, and a person's net worth.
Assets
Any items of value that an individual or company owns, including cash, property, personal possessions and investments. Includes liquid assets, real estate, personal possessions and investment assets.
Liquid assets
Cash and items that can be quickly converted in cash.
Real estate
Land and any structures on it such as a house or other building that a person owns.
Market Value
Also referred to as "Fair Market Value". The price at which property would sell.
Investment Assets
Retirement accounts and securities such as stocks and bonds.
Liabilities
The debts that you owe.
Current Liabilities
Short term debts that have to be paid within one year. Ie, medical bills, cash loans, and taxes.
Long Term Liabilities
Long term debts that do not have to be fully repair for at least one year. Ie, car loans, student loans and mortgage loans.
Insolvency
A financial state that occurs if liabilities are greater than assets. [You owe more than you own.]
Cash Flow
The money that actually goes into and out of your wallet and bank accounts.
Income
The money you receive, also know as cash inflow.
Steps to Create a Personal Balance Sheet
1-Determine Your Assets, 2-Determine Your Liabilities, 3-Calculate Net Worth, 4-Evaluate Financial Situation.
Steps to Create a Cash Flow Statement
1-Record Your Income, 2-Record Your Expenses, 3-Determine Your Net Cash Flow, 4-Evaluate your Financial Position
Take Home Pay
Also known as "net pay". The amount of income left after taxes and other deductions are taken out of your gross pay.
Discretionary Income
The money left over after paying for the essentials such as food, clothing, shelter, transportation and medication.
Surplus
Positive cash flow. Extra money that can be spent or saved depending on a person's financial goals and values.
Deficit
Negative cash flow. A financial situation that occurs when more money is spent that is earned or received.
Budget
A plan for using moey to meet wants and needs.
Steps to Create a Practical Budget
1-Set Your Financial Goals, 2-Estimate Your Income, 3-Budget for Unexpected Expenses, 4-Budget for Fixed Expenses, 5-Budget for Variable Expenses, Step 6-Record What You Spend, and 7-Review Spending and Saving Patterns.
Fixed Expenses
Expenses that do not change month to month.
Variable Expenses
Expenses that vary month to month.
Budget Variance
The difference between the budgeted amount and the actual amount that you spend.
Characteristics of a Good Budget
1-Carefully planned, 2-Practical, 3-Flexible and 4-Written and easily accessible.
Ways to Increase Your Savings
1-Pay Yourself First, 2-Payroll Savings, 3-Spending Less to Save
Net Worth
The difference between the amount that you own and the debts that you owe.
Wealth
An abundance of valuable material possessions or resources.