UNIT 2: VOCABULARYMoney Management

BUDGETHaving a plan for the money a family earns so that all the expenses are paid, including savings and debt repayment.

My mom and I created a budget, that has me saving 25% of my paycheck every two weeks. This way I will have money saved for college.

RISK Exposure to the

chance of injury or loss; a hazard or dangerous chance:

By wearing a helmet when riding your bike, you lower risk of having a head injury if you have an accident.

INSURANCE Insurance protects a person against loss

or harm arising in specified instances, such as fire, accident, death, disablement, or the like, in consideration of a payment proportionate to the risk involved.

So if you have home insurance- and there is a fire or a tornado you shouldn’t be left homeless with no belongings – your insurance would help cover your loss.

Health Insurance- helps a person pay for major illnesses or injury

Car Insurance – which is required in Missouri for any driver, helps protect your car. Thank goodness, I had car

insurance because I hit another car in the parking lot at school.

FIXED EXPENSES:  EXPENSES THAT OCCUR REGULARLY SUCH AS RENT, MORTGAGE, OR CAR PAYMENT.

Moneisha has very high fixed expenses because she has a very expensive home and car.

VARIABLE/FLEXIBLE EXPENSES: CAN CHANGE DEPENDING ON YOUR USE OF PRODUCTS OR SERVICES. GROCERIES, AUTOMOBILE, EVEN WATER ARE ALL EXAMPLES OF VARIABLE EXPENSES BECAUSE YOU USAGE IS WHAT DETERMINES THE EXPENSE.

Matt was examining his household budget and could not figure out why his variable expenses had increased so much. Then he realized that his son was going through the groceries like crazy and he was buying a lot more food each month.

PROBABILITY: A STRONG LIKELIHOOD OR CHANCE OF SOMETHING HAPPENING.

The probability of losing weight drastically increases if I start exercising and cut back on eating junk food.

ECONOMY: THE MANAGEMENT OF THE RESOURCES OF A COMMUNITY, COUNTRY, ETC., ESPECIALLY WITH A VIEW TO ITS PRODUCTIVITY.

The U.S economy is showing improvement because there are fewer unemployed people.

The dollar menu at McDonalds makes good economic sense because I spend less money to eat.

Flying economy class instead of first class means I spend less money to travel.

ASSETS: A USEFUL OR VALUABLE QUALITY, PERSON, OR THING; AN ADVANTAGE OR RESOURCE. (LUCY PROVED HERSELF AS AN ASSET TO THE COMPANY BECAUSE SHE IS VERY CREATIVE. A VALUABLE ITEM THAT IS OWNED. (I OWN MY CAR, SO IT IS AN ASSET.)

Items you own – or that you owe LESS than they are worth would be an asset. For example: My car is worth $10,000 and I only owe $3500 so this makes it an asset. Because if I had to sell it I would be able to have money

A few of my assets include my home, car, and computer.

SOLVENT: WHEN YOUR ASSETS ARE GREATER THAN YOUR DEBTS.

Because I am financially solvent, my credit score is very high and I can easily get approved for a loan to buy a new car.

INSOLVENT: WHEN YOUR DEBTS ARE GREATER THAN YOUR ASSETS.

There might be some charities to help insolvent people to pay their debts.

DISCRETIONARY INCOME: MONEY YOU HAVE AFTER PAYING ALL YOUR BILLS AND OBLIGATIONS ARE PAID.

Jacob uses his discretionary income to go to the movies, eat out, and get new video games.

DISPOSABLE INCOME: THE PART OF A PERSON'S INCOME (PAY CHECK)  REMAINING AFTER DEDUCTING PERSONAL INCOME TAXES OR MANDATORY DEDUCTIONS – LIKE HEALTH INSURANCE. 

Disposable income is what Lorenzo had left from his pay check to use to pay all his household and personal bills.