Personal Finance - Chapters 1&2

Four Basic Parts of a Budget

• Income, Giving, Saving, and Spending

• Income, Investing, Saving, and Spending

• Income, Giving, Saving, and Investing

• Income, Giving, Spending, and Borrowing

Net Income

• what a person earns before any deductions

• what a person earns after payroll taxes and other deductions are taken out; often referred to as take-home pay

• the total revenue generated by a business

• the amount of money spent on living expenses

The 5th Foundation of Personal Finance

• Save for retirement

• Build wealth and give

• Invest in stocks

• Pay off debt

Gross Income

• the amount you earn after taxes and other payroll deductions

• the total revenue generated by a business

• the amount you earn before taxes and other payroll deductions

• the net income after all expenses are deducted

Debt

• money owed to another person or company

• a type of investment

• a financial asset

• a government grant

Interest Rate

• the percentage of principal charged by the lender for use of its money

• the total amount of money borrowed

• the fee paid to a financial advisor

• the rate at which a bank lends money to other banks

The 2nd Foundation of Personal Finance

• Get out and stay out of debt

• Invest in the stock market

• Save for retirement

• Buy a new car

Consumer

• a person or organization that uses a product or service

• a type of product that is sold to businesses

• a service that is provided to customers

• a marketing strategy to attract buyers

Variable Expense

• expense that remains constant every month

• expense that varies in dollar amount from month to month but that you can expect to have every month

• expense that is only incurred once a year

• expense that is not predictable and can vary greatly

Income

• money received for work, as a gift, or through investments

• a type of tax paid on earnings

• a loan taken from a bank

• the total value of assets owned