finance01 midterm 01

Question Answer
Stewardship An ethic that embodies the responsible planning and management of resouces
Ownership The right to possess or own something
Agency The ability to choose
Accountability The obligation to account for one's actions or to accept responsibility
Tithing The act of paying a tithe, which is a portion (in the LDS church, a tenth) of a person's income to support religious institutions.
Fast Offerings The term used in the LDS church to denote money or usable commodities donated to the church, which are then available to provide financial help for those in need
Budget A plan for how you are going to spend the money that is available to you.
Financial Reserve Cash or other liquid assets held to cover 3-6 months of emergency expenses
Speculation Any investment that promises a greater than market rate return
Time Value of Money (TMV) How the Value of money changes over time due to inflation and interest
TMV Time Value of Money
Inflation Decrease in the purchasing power of money
Interest Remuneration for investing or loaning money
Compound Interest Interest earned on interest
Albert Einstein says….the Eighth wonder Compound Interest
Investment A current commitment of your money in the expectation of reaping future returns
Present Value (PV) Current Value of money
PV Present Value
Principal The original amount of money borrowed or invested(generally synonymous with present value)
Interest Rate (I) The rate you will receive for investing at a specified compounding period for a specified period of time (generally expressed in percent per year)
I Interest Rate
Nominal Return The return on an investment before the impacts of inflation and taxes are taken into account
After-Tax Return The return on an investment after the impact of federal, state, and local taxes a has been taken into account
Real Return The rate of return on an investment after the impacts of taxes and inflation are taken into account
Compounding Periods (N) The frequency with which interest is applied to an investment
N Compounding Periods
Payment (PMT) A periodic amount invested or received during the life of the investment (e.g., monthly payment, annual disbursement, dividend, ect.).
PMT Payment
Future Value (FV) The monetary value of an investment at some point in the future
FV Future Value
Lump Sum One payment at a specific time
Annuity The disbursement of money on a periodic basis- a series of equal payments which are made at a specific time
Purchasing Power The value of monetary funds based on the amount of goods or services that one unit of money can buy.
Opportunity Cost The potential loss or gain that occurs when one financial option is chosen over another.
SMART principle S Specific
SMART principleM Measureable
SMART principleA Attainable
SMART principleR Relevant
SMART prinicipleT Time-Bound
Income and Expense Statement A record of family's past cash inflows and outflows over a specified period of time
Cash inflow Family Income
SMART PRINCIPLE… Family Goals should be
Fixed expenses expenditures that your family has little direct control over and that do not often change from month to month
Variable Expnses Expenditures that your family controls and that may vary from month to month
Net Worth Statement A snapshot of your family's total assets minus your total liabilities on a particular day.
Liabilities Synonymous with debt, calculated by adding up the outstanding balances on any current and long-term family debts.
Assets The monetary value of what your family owns that could be turned into cash
Current Market Value The price at which your family's asset could be sold in present market environment
Budget A spending plan in which family income is allocated to specific categories of expenditures
Miscellaneous One of your budget's most important, but often neglected, categories; a generous catch all category for those unexpected expenses which find the holes in your budget.
Mad Money A certain amount of funds allocated to each spouse, for which they are not responsible to the other spouse.
Halt Principle Avoid making purchases or financial decisions when you are….hungry, angry, lonely, tired
Halt PrincipleH Hungry
Halt PrincipleA Angry
Halt PrincipleL Lonely
Halt PrincipleT Tired
3 Things that Dr. Hill Wants everyone to knowlife is hard…. But you can do Hard things!
3 things that Dr. Hill Wants everyone to knowWith the help of the Lord you can do anything he wants you to do!even balance a budget or invest in a mutual fund. Life is hard…but you can do hard things!
3 things that Dr. Hill Wants everyone to knowWhen Life doesn't go as planned, Don't get frustrated make the best of it.
Most of the time life doesn't go as planned- especially in financial matters- and if we don't make the best of our lives we'll spend a lot of time feeling frustrated. When Life doesn't go as planned….don't get frustrated make the best of it.
3 things that Dr. Hill Wants everyone to knowTTT Things Take time
3 things that Dr. Hill Wants everyone to knowThe vest financial plan is "the get rich slowly"plan TTT- Things take Time
The primary purpose of SFL260 Magnify your __financial Stewardship__ and use__ prudent financial Management__ so you can more fully bless yourself, your family, and others.
The Primary Purpose of SLF260 IS NOT…. to teach you how to become rich or accumulate wealth.
Eternal Perspective All material resources are owned by God and we are stewards over those resources so that we may bless his children
Materialistic Perspective The world's perspective….any perspective that takes God out of the equation
The Four Whys… 1. Spiritual2. Temporal3. Individual 4. Family
The Four Whys…to Bring me to Christ Spiritual
The Four Whys…To help me become a wise steward Temporal
The Four Whys… accomplish my divine mission Individual
The Four Whys…To return with your family back to Heavenly Fathers presence. Family
The Four Whats…."O" Ownership(Gods gift to you)
The Four whatsS Stewardship(Gods gift to you)
The Four WhatsA Agency(Gods gift to you)
The Four WhatsA Accountability (Your gift to God)
The Eight Hows…1 Pay the Lord First in Tithing, Fast offerings, and other Contributions
The Eight Hows…2. Create use and Update a budget
The Eight Hows…3. Minimize and eventually eliminate debt
The Eight Hows…4. Prepare for emergencies and build a reserve
The Eight Hows…5. Invest early, consistently, and wisely
The Eight Hows…6. Protect yourself and your family through adequate insurance
The Eight Hows…7. Share Finances as equal partners in your mariage
The Eight Hows…8. Teach your children and family about finances
What is the differnce between a Roth vs. A Traditional IRA A ROTH is a Employer Matching retirement plan….meaning your employer will contribute as much money as you contribute.
When should you have a Roth vs. a traditional IRA When you have an employer that is willing to put money into your retirement fund.
What was the annual inflation rate in the United States in 2014 1.6 %
Know the Formula for interest earned and interest paid I=P x R x TInterest Earned or Interest PaidPrincipleRateTime
Know the Meaning of Opportunity Cost!!!!!!!!!!!! The potential or gain that occurs when one financial is chosen over another
Is an income and expense statement the same as a budget NO
What is the difference between an income and expense statement and a budget and Income and Expense Statement is a record of the PAST!!
Formula for calculating net worth (very simple formula) Family Net Worth= Family Assets – Family Liabilities
What category that is often overlooked in a budget Miscellaneous
Characteristic of a SMART GOAL S=SpecificM=MeasureableA=AttainableR=RelevantT=Time-bound

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