Planning and Budgeting - Planning/Budgeting...

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Planning/Budgeting Planning/Budgeting Personal budget : A careful record of all the money you earn and spend Includes Income : money you earn Expenses : the money you spend (or save) Balance: amount of money left over after expenses are subtracted Surplus- more income than expenses Deficit- more expenses than income (negative balance) Credit : borrowed money to pay for a good or a service Credit terms: Lender : person who loans money Borrower : receives borrowed money Interest : the cost for use of the money Annual percentage rate (APR): annual cost of credit expressed as a percentage of amount borrowed. Credit rating : an evaluation of the likelihood that a borrower will be unable to pay back a loan (default)
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Based on job, previous credit experiences, financial situation,
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Unformatted text preview: etc. – Collateral : property (i.e. a house or a car) that a borrower pledges as security for a loan. • If the borrower can’t repay the loan, the lender can seize the collateral • Sources of Credit: – Banks – Credit Unions – Finance Companies – Retail stores • Credit Cards – Allows consumer to charge for goods/services (up to a preset monthly limit) – Fees for late payments, interest charges, etc. • Anyone over 18 can get a credit card • Benefit: – Not having to wait to save the full value – Making monthly payments can teach discipline • Drawbacks: – Many people buy more on credit than they can afford – Bankruptcy : the inability to pay debts • Remains on credit rating for 7-10 years...
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