1.1 Personal Finance

• Budgeting involves creating a plan for how to spend and save money.
• The components of personal finance work together to help individuals achieve financial stability and growth.


  True
• Wages are hourly payments for work.


  True
• What type of expense includes groceries and eating out?

  Food
• Reducing unnecessary expenses is a way to balance your budget.


  True
• Budgeting involves creating a plan to spend and save money
• A salary is a regular payment from employment
• If you have a deficit in your budget, you should adjust your spending
• What does a Certificate of Deposit (CD) offer in exchange for keeping money deposited for a fixed term?

  Higher interest rate
• Credit cards and loans are essential tools in personal finance for borrowing money
• The interest rate on loans is typically lower and fixed for the loan term
• Dollar-Cost Averaging involves investing a fixed amount regularly to average out purchase prices.

  True
• Budgeting involves creating a plan to spend and save money.


  True
• What does personal finance refer to?

  Money management and decisions
• Borrowing involves taking out loans or using credit to finance purchases.
• A salary is a regular payment from employment.
• Utilities include gas, electricity, and water bills.

  True
• What should you compare in step 3 of creating a budget?

  Income and expenses
• What is personal finance defined as?

  Management of money
• What are income and expenses in personal finance?

  Money received and spent
• Steps to create a personal budget

  1️⃣ Calculate monthly income

  2️⃣ Categorize and track expenses

  3️⃣ Compare income to expenses

  4️⃣ Adjust spending
• A basic savings account earns interest
• What are three factors to consider when choosing a savings option?

  Financial goals, risk tolerance, time horizon
• What is a primary risk of using credit cards?

  Accumulating debt
• Diversification involves spreading investments across different asset classes to reduce risk
• Order the following investment strategies based on their primary objective:

  1️⃣ Dollar-Cost Averaging (investing a fixed amount regularly)

  2️⃣ Diversification (spreading investments to reduce risk)

  3️⃣ Growth Investing (investing in high-growth companies)

  4️⃣ Value Investing (buying undervalued stocks)
• What does investing involve?

  Generating returns with money
• What is the difference between income and expenses?

  Income is received, expenses are spent
• Rent is a common expense for housing.
• Steps to create a personal budget:

  1️⃣ Calculate monthly income

  2️⃣ Categorize and track expenses

  3️⃣ Compare income to expenses

  4️⃣ Adjust spending
• A surplus in a budget means income exceeds expenses.
• Match the component of personal finance with its description:

  Budgeting ↔️ Plan to spend and save

  Saving ↔️ Setting aside for emergencies

  Investing ↔️ Using money to generate returns

  Financial Planning ↔️ Strategies for long-term goals
• What is the purpose of creating a personal budget?

  Manage income and expenses
• Match the savings option with its description:

  Savings Account ↔️ Basic account with interest

  Certificate of Deposit ↔️ Higher interest for fixed term
• An Individual Retirement Account (IRA) is a tax-advantaged account used to save for retirement
• Using credit cards can help build credit history.


  True
• What are four common investment strategies?

  Diversification, Dollar-Cost Averaging, Value Investing, Growth Investing
• Growth Investing focuses on companies expected to increase their earnings
• Financial planning involves developing strategies to achieve long-term financial goals
• Saving involves setting aside money for future needs or emergencies.

  True