Personal Finance Definitions

Personal Finances
The practice of determining AND managing a person’s financial needs and goals for the future.
Consumer
A person who purchases AND uses goods and lor services. YOU!
Interest (Saving)
Income earned from allowing someone else to use your money.
Interest (Borrowing)
Payment for the use of money (cost of using the money).
Principal
an initial amount of savings OR an original amount $$ borrowed.
Rule of 72
n order to find the NUMBER OF YEARS required to double your investment (money) at a given interest rate, you divide the compound return (% interest rate) into 72.
Investing
Putting money into a venture that offers the POSSIBILITY of earnIng more money.
Saving
Setting as idea portion of current income for future use.
Savings
The money left over after expenses have been paid.
Compound Interest
The interest a person earns on today’s money that will compound (add) to the amount of money that will earn interest LATER.
Budget
A spending plan for managing money during a given period of time.
Opportunity Cost
The NEXT BEST alternative given up when a choice is
made.
Expense
Money spent to buy or do something.
Fixed Expenses
Expense that DO NOT change from month to month … IE- Rent.
Income
Any money earned or received (wages or gifts).
variable expenses
Expenses that DO VARY from month to month. IE movies, car repairs, doctor bills, etc …
credit
The ability to buy goods or services now BUT pay later.
credit report
A record of your personal financial transactions (YOUR credit
history or report card).
debt
money owed to someone else.
risk management
Predicting and minimizing the chance of financial loss.
fraud
Intentional deception to influence someone to part with something of
value.
identity theft
A crime that occurs when someone uses ANOTHER
PERSONS name, Social Security number, credit card number or other personal
informa tion WITHOUT permission.
installment loan
Borrowed money that is repaid in equal payments.
insurance
A means of guaranteeing financial protection against various risks
PYF
Pay Yourself First – Setting aside money for saving prior to paying monthly expenses.
PSA
Public Service Announcement -An advertisement sent through
mass media with a message for the common good. Often done via radio, television, billboards or other electronic and print media.
Five Elements of Good Financial Planning
1. _________ money
2. __________ money
3. __________ money ___________
4. Use _________ CAUTIOUSLY!!
5. __________ your finances!

1. Earn
2. Save
3. Spend, Wisely
4. Credit
5. Protect
How many years will it take to double your money invested at a 6% interest rate?
72/6 = 12
How many years will it take to double your money invested at a 3% interest rate?
72/3 = 24
How many years will it take to double your money invested at a 4% rate?
72/4 = 18