Test Bank For Personal Financial Planning 14th Edition By
Randy Billingsley; Lawrence J. Gitman; Michael D. Joehnk
Main Goals of personal finance planning - ANSWER: - the process of managing your
money to achieve personal economic satisfaction
- Increase effectiveness in obtaining, using, and protecting financial resources
- Increase control of one's financial affairs
- Improve personal relationships
- Gain a sense of freedom from financial worries
What is a financial plan? - ANSWER: An action plan that identifies ways to achieve
financial goals
Time value of money - ANSWER: - Every financial decision involves giving up
something to obtain something else
Personal opportunity costs - ANSWER: Time
Health
Leisure
Steps in the planning process - ANSWER: o Determine current financial situation
o Develop your financial goals
o Identify alternative courses of action
o Evaluate alternatives
Consider: - ANSWER: • Life situation
• Personal values
• Economic factors
Asess: - ANSWER: - Risk
- Time value of money
- Opportunity cost
Create and implement your ________ - ANSWER: financial action plan
_______ and revise the financial plan - ANSWER: Review
Sources for financial planning - ANSWER: o Books
o Magazines
o Etc
Steps in career planning - ANSWER: o Asses and research personal goals, abilities and
career fields
, o Research the employment market and identify specific employment opportunities
o Develop a resume and cover letter; apply for available positions
o Interview for available positions; asses your interview performance
o Evaluate financial and other factors of positions you are offered
o Plan and implement a program for career development
Tax deferred employee benefits - ANSWER: o Taxed at some future time
o IRA (tax deductible now, taxable later)
Calculate net worth - ANSWER: Assets - liabilities = Net worth
Define insolvent - ANSWER: o Can't pay bills
o Net worth negative
Gross salary: what's taken? - ANSWER: o Net salary = gross take-home pay
o Social Security
o Medicare
o Income Tax
Why do we have taxes? - ANSWER: For the government to use for government
funded programs
What types of taxes are there? - ANSWER: o Property
o Income
o Estate
o Inheritance
o Sales
o Excise
Marginal tax rate - ANSWER: Highest bracket that is paid
Itemized deductions - ANSWER: o Charitable contributions
o Mortgage interest
o Property taxes
o Some medical expenses- Medical equipment
Emergency fund - ANSWER: 3 - 6 months
Calculate return on investment - ANSWER: Current return / face value
- Capital gain for difference
Greatest return on investments - ANSWER: o Highest grow rate: stocks
o COMMON STOCKS
Least liquid investment - ANSWER: o Real estate
o 2-3% return/growth per year
Randy Billingsley; Lawrence J. Gitman; Michael D. Joehnk
Main Goals of personal finance planning - ANSWER: - the process of managing your
money to achieve personal economic satisfaction
- Increase effectiveness in obtaining, using, and protecting financial resources
- Increase control of one's financial affairs
- Improve personal relationships
- Gain a sense of freedom from financial worries
What is a financial plan? - ANSWER: An action plan that identifies ways to achieve
financial goals
Time value of money - ANSWER: - Every financial decision involves giving up
something to obtain something else
Personal opportunity costs - ANSWER: Time
Health
Leisure
Steps in the planning process - ANSWER: o Determine current financial situation
o Develop your financial goals
o Identify alternative courses of action
o Evaluate alternatives
Consider: - ANSWER: • Life situation
• Personal values
• Economic factors
Asess: - ANSWER: - Risk
- Time value of money
- Opportunity cost
Create and implement your ________ - ANSWER: financial action plan
_______ and revise the financial plan - ANSWER: Review
Sources for financial planning - ANSWER: o Books
o Magazines
o Etc
Steps in career planning - ANSWER: o Asses and research personal goals, abilities and
career fields
, o Research the employment market and identify specific employment opportunities
o Develop a resume and cover letter; apply for available positions
o Interview for available positions; asses your interview performance
o Evaluate financial and other factors of positions you are offered
o Plan and implement a program for career development
Tax deferred employee benefits - ANSWER: o Taxed at some future time
o IRA (tax deductible now, taxable later)
Calculate net worth - ANSWER: Assets - liabilities = Net worth
Define insolvent - ANSWER: o Can't pay bills
o Net worth negative
Gross salary: what's taken? - ANSWER: o Net salary = gross take-home pay
o Social Security
o Medicare
o Income Tax
Why do we have taxes? - ANSWER: For the government to use for government
funded programs
What types of taxes are there? - ANSWER: o Property
o Income
o Estate
o Inheritance
o Sales
o Excise
Marginal tax rate - ANSWER: Highest bracket that is paid
Itemized deductions - ANSWER: o Charitable contributions
o Mortgage interest
o Property taxes
o Some medical expenses- Medical equipment
Emergency fund - ANSWER: 3 - 6 months
Calculate return on investment - ANSWER: Current return / face value
- Capital gain for difference
Greatest return on investments - ANSWER: o Highest grow rate: stocks
o COMMON STOCKS
Least liquid investment - ANSWER: o Real estate
o 2-3% return/growth per year
