Dave Ramsey Chapter 1 Intro to Personal Finance with Complete Solutions

Dave Ramsey Chapter 1 Intro to Personal Finance with Complete Solutions Consumer A person or organization that uses a product or service Credit The granting of a loan and the creation of debt; any form of deferred payment Debt An obligation of repayment owed by the debtor/borrower to the creditor/lender-this includes repayment of the original loan amount plus interest Economy A system by which goods and services are produced and distributed Financial literacy The knowledge and skillset necessary to be an informed consumer and manage finances effectively Interest A fee paid by a borrower to the lender for the use of borrowed money Loan A debt evidenced by a "note" which specifies the principal amount, interest rate and date of repayment Personal finance All decisions and activities regarding your money-spending, saving, budgeting 80/20 Rule Personal finance is 80% behavior and 20% knowledge. Key Components of Financial Planning 1.Have a detailed plan ce money myths with money truths 3. regularly monitor and update your financial plan How Americans are outsmarted by banks Credit is marketed as what we want, and ignores the real cost of interest rates and fees Personal Finance Success Result of managing your money behavior Income does not determine wealth How much we make does not determine how much we spend and save Consequences of spending more than we make 1. Missed opportunity to save and invest 2. cycle of debt s When Americans first started borrowing money after World War II Consumer Debt skyrocketed after 1970