important budgeting terms(2)
TRANSCRIPT
Know the Lingo
Fixed Expenses: Bills paid every month that remain constant. Example: Mortgage, rent, car payment, school loan. These expenses are essential and unlikely to fluctuate.
Variable Expenses: Bills that you may or may not have every month and their value fluctuates, such as clothing, entertainment, gifts, eating out. You can control these expenses.
Fixed Variable Expenses: Bills you will have every month, though the cost may fluctuate slightly from month to month such as electricity and gas. You can effect these expenses slightly.
ASSETS
Things you own that have value .
LIABILITIES
Things that cost you money or that you owe money on.
SOLVENT
You have more assets than debt. After all the debts have been paid
there is still something of value left.
INSOLVENT
You have more debt than assets. After all the assets are gone and
you are still OWE money.
FAVORABLE CREDIT SITUATION Solvent: Assets are
greater than liabilities.
(Strive for this.)
UNFAVORABLE CREDIT SITUATION Insolvent: Liabilities are
greater than assets.
(Don’t let this happen.)
Disposable Income: Net income (the money left after all deductions have been taken.)
Discretionary Income: Money left over after all bills have been paid.
Cash Management: How you handle money coming and money going out.
PYF- Pay yourself first. Be a disciplined saver. Savings should be a part of the budget.
▪Cost/Benefit Analysis: Weigh the cost of the product vs. the benefit it will provide.
Review the terms from this PowerPoint.
Fixed ExpensesVariable Expenses
Fixed Variable ExpensesAssets
LiabilitiesSolvent
InsolventPYF