FIN 101 First 3 Weeks of Notes
FIN 101 First 3 Weeks of Notes FIN 101
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This 3 page Bundle was uploaded by Nichole Notetaker on Monday February 1, 2016. The Bundle belongs to FIN 101 at Ball State University taught by Daniel Haffner Boylan in Fall 2016. Since its upload, it has received 38 views. For similar materials see Personal Finance for Fiscal Wellness in Business at Ball State University.
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Date Created: 02/01/16
1/13/16 Chapter 1 What is Financial Planning? ● Financial Planning: the process to accomplish goals ● It’s not about getting rich, it’s about enriching your life ● Life is risky, and people want stability ● Plans have to be flexible ● Money can minimize pain Test Question Q: Strategies for making good financial choices include all of the following except: A: Overspending 1/20/16 Fashion Week ● Being rich is about having options, not money Chapter 2 Budgeting ● We budget because we have goals ● 6 out of 10 American families have no budget in place 3 Financial Statements ● Income Statement ● Balance Sheet ● Cash Flow Statement Income Statement ● It is comprised of revenue (money earned) & expenses (money spent) ● Income = Value X Time X Scalability ● Surplus: positive Net income ● Deficit: negative Net income ● Spending Plan: needs to account for auto payments, insurance, rent/mortgage, food, entertainment, etc. ● “My Money” vs. “Our Money” = combining bank accounts after marriage vs. keeping separate accounts Balance Sheet ● Comprised of assets (what you own) & liabilities (what you owe others) ● Balance sheets show Owner’s Equity, or Net Worth; they are made of everything you’ve accumulated over the course of your life Test Questions Q: Balance sheet liabilities should be recorded at their: A: Current Outstanding Balance Q: How should a home be represented on a balance sheet if it was bought in 1990 for $100,000, but its current value is $175,000 and the owner owes $55,000? A: $175,000 in assets and $55,000 in liabilities Savings Plans ● Envelope: control spending by putting money for specific things in separate envelopes ● Allowance: everyone has an allowance; this can minimize fighting ● Calendar: this helps you keep track on how much you spend and when ● 90% Rule: automatically save 10% of what you make Test Questions Q: What is included in a budget? A: Cash Inflow, Cash Outflow, & Identifying Surplus/Shortfalls *Quicken is the most common personal finance software* 1/27/16 Chapter 3 Choosing a Bank ● Cash Management Types of Federal Institutions 1. Federally Chartered Banks 2. State Chartered Banks 3. Credit Unions not banks, but a union of credit 4. Mutual Banks like credit unions, shareholders are the depositors 5. Online Institutions 6. Brokerage Firms Test Question Q: Consider all of the following when opening a checking account except: A: Friendly Tellers Assets ● Liquid assets: cash, or anything that can be quickly turned into cash examples: a short term investment, or a car actively for sale ● NonLiquid asset: anything it is difficult to turn into cash examples: a house, or a retirement fund Types of Accounts ● Savings Account ● Checking Account ● NOW (Negotiable Order of Withdrawal) ● Money Market Deposit Account ● Money Market Mutual Funds ● Asset Management (someone else manages the account) ● Certificate of Deposit (high interest rate, but the money is locked away) Checks ● ALWAYS WRITE CHECKS IN INK ● Fill out the date, name of the recipient, and amount due ● Use the memo line to ensure your money goes to the right place Banking Fees ● Overdraft Protection: Don’t intentionally overdraft, if you do it 3 times in amounts of $5,000 or more, it is considered fraud and you can be arrested ● Transaction Fee ● Account Maintenance Methods of Calculating the Time Value of Money ● Present Value of a Dollar (PV) ● Present Value of an Annuity (PVA) ● Future Value of a Dollar (FV) ● Future Value of an Annuity (FVA) 4 Ways to Solve these Problems on a Test ● Formula difficult to memorize ● Calculator not allowed in testing areas ● Tables cumbersome ● Common Sense : PV is always less that FV because of interest
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