F23 P8 Money Mgmt by Dawn Piper

How is a Cash Flow Statement created? How is a Personal Balance sheet created? What are the components of each?

2023-11-01 16:11:56 UTC

A Personal Balance sheet is created by determining assets and liabilities than using them to calculate Net Worth. A Cash Flow Statement is created by recording your sources of income and sources of expenses with their value then using them to calculate your net cash flow. A Cash flow statement's income portion is composed of expenses including things you purchase or pay for on a monthly basis such as rent, cable, or the bus fare to work and net pay as well as any interest that may be earned in the time period.

Section 1 - Question 4

2023-11-01 16:11:58 UTC

How are the roles of maintaining financial records and managing opportunity costs in a sound financial plan similar and different?

Managing financial records and managing opportunity costs are similar because they are both processes that need to be carefully carried out and well thought out. However, they are different because managing financial records is establishing a safe place for your documents but managing opportunity costs is weighing the pros and cons of one financial choice over another.

- Kaitlyn and Jaimee

How are Personal Balance sheets and Cash Flow statements similar? How are they different? What role does each play in the development of a Personal Finance plan?

2023-11-01 16:12:29 UTC

Personal Balance sheets and Cash Flow statements are similar because they both give important information about your financials. However they are different because a Personal Balance sheet displays info about what you have while a Cash Flow statement displays information about what you earn and spend in a given time period. They both play a big role in creating a good Personal Financial plan because they give info about your spending habits to stay in a good financial situation.

Section 1 Question 3: What is an effective system for maintaining personal financial documents?

2023-11-01 16:13:01 UTC

There are many different options when it comes to storing your financial records/documents. You can keep them in a safe deposit box or a file cabinet that has a lock on it. When putting it in a file cabinet, a way to keep it organized is to do alphabetical order. Another option is to keep it in a home computer as long as it has a protected password.

Section 3 Question 1

2023-11-01 16:13:09 UTC

What are the steps for developing a personal budget?
- Set your financial goals
- Estimate your income
- Budget for unexpected expenses
- Budget for fixed expenses
- Budget for variable expenses
- Record what you spend
- Review spending and saving patterns

Section 3 Question 2

2023-11-01 16:13:42 UTC

Describe what items are included in a personal budget

Some things that are included in a personal budget are your income, savings, expenses, etc.

What is a personal balance sheet?

2023-11-01 16:14:02 UTC

A a personal balance sheet is a financial statement that shows what you own and what you owe.

Section 2 Question 2: What is a Cash Flow Statement?

2023-11-01 16:14:19 UTC

A cash flow statement is a summary of all of your cash inflow and cash outflow over a specific period of time. The cash flow statement will give specific, significant information and feedback on where your money came from, as well as where you spent your money.

Section 3 Question 3: What are the advantages of increasing your savings?

2023-11-01 16:15:27 UTC

Increasing your savings allows you to pay for unexpected expenses, like a medical emergency, or unexpected repairs. Savings also let you buy luxury items, like a new TV or phone. Increasing savings will also help you pay off long term liabilities like Student loans or mortgages. Overall increasing your savings will help you achieve your financial goals, and provide a safety net for any unexpected expenses.

Section 1 Question 1: How are opportunity costs, or trade-offs and money management related

2023-11-01 16:15:51 UTC

An example of opportunity costs would be buying a laptop instead of a clothing. Therefore money management and opportunity costs are related as opportunity cost is money management although the term money management is much more broad whereas opportunity costs usually refers to a specific transaction.

Cash Flow

2023-11-01 16:16:13 UTC

The movement of cash in and out of your wallet and/or your bank account is called as cash flow

Real Estate

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Land and any structures that are on it (ex. house)

Net Worth

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The difference between the amount you own and the debts you owe.

Liabilities

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debts that you owe, can be split into current (less than a year) and long term (over a year)

Take home pay

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also known as net pay; amount of income left after taxes and deductions are subtracted from your gross pay

Wealth

vivianwest — 2023-11-01 16:16:45 UTC

is property that has a money value or an exchange value

Why is it important to keep and maintain financial records and documents?

2023-11-01 16:17:02 UTC

It's important to keep and maintain financial records and documents because it will ensure that you can get a good idea of how you are doing financially. This will also help to make sure your bill payments are on time, required tax reports are completed, and you are prepared for any large financial decisions.

Personal financial statement

2023-11-01 16:17:07 UTC

gives information about your current financial position and presents a summary of income and spending.

Insolvency

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The inability to pay debts when they are due

Market Value

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The price at which the property would sell for

Liquid assets

vivianwest — 2023-11-01 16:17:25 UTC

are cash and items that can be quickly converted to cash

Money Management

2023-11-01 16:17:31 UTC

The day-to-day financial activities necessary to get the most from you money.

Assets

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Any item of value that you own (cash, real estate, personal possessions, investments).

Discretionary Income

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The money you have left after paying for your essentials.

Income

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Cash inflow, or the money you receive is called your income

Budget

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A plan for spending and investing your money to meet your wants and needs

Explain why it is sometimes difficult for people to increase their savings. How will increasing the amount you put in savings affect your budget?

2023-11-01 16:18:35 UTC

Section 3- Question 4: People spend money on things that they don't need which makes them lose money. Increasing the amount you put in savings will help you have a smaller budget since you are saving money.

Surplus

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if your net flow is positive you have a surplus of extra money that you can spend or save

Deficit

2023-11-01 16:19:16 UTC

meaning your cash flow is negative and you spent more than you received

Personal balance sheet

2023-11-01 16:19:20 UTC

also known as a net worth statment, it is a financial statement that shows what you own and what you owe.

Budget Varience

2023-11-01 16:19:46 UTC

The difference between the budget amount and the actual amount spent

safe-deposit box

2023-11-01 16:19:49 UTC

a small secure, or safe, storage compartment that you can rent in a bank usually for $100 or less. They are kept in a special vault in the bank.