Chapter 3.

1 Concept Check

1. Summarize the content in Figure 3-1, the overview of effective financial planning.
The content in figure 3-1 illustrates one couple's overall financial plan. The content in 3-1
provides excellent managerial efforts to help push towards financial success.
2. What is the biggest financial worry of most individuals, and what can they do about
it? The biggest financial worry of most individuals is how to pay for unexpected
emergency expenses. People can set up an emergency fund in order to have extra funds to
spend on emergency expenses that may occur.
3. Summarize how financial goals follow from one’s values. Financial goals follow from
one’s values because of what is most important to them in their spending and saving.
Whether this be saving for college, planning a vacation, or owning a home, these values
dictate how money is saved and spent in a financial plan.
4. Pick two wealth-building principles for life and explain what they mean to you. Two
wealth-building principles for life are to spend less than you earn and live everyday
knowing that your financial future is under control. These principles are meaningful to
me because I am a spender and if I continue to spend my as I get it, I could go into debt.
To live everyday knowing your financial success is under control is meaningful to me
because as of right now I do not have a paying job which makes me worry about how
much I will have to spend in college and after. I just need to remember that after college I
will find a good job where I can get an income and be successful.

Chapter 3.2 Concept Check

1. Define the balance sheet and give two examples of how to increase one’s net worth.
A balance sheet describes an individual’s or family’s financial condition on a specific
date by sowing assets, liabilities, and net worth. To increase net worth one can by
increasing assets, decreasing liabilities, or both.
2. Define the cash-flow statement and explain what it does. A cash-flow statement
summarizes the total amounts that have been received and spent over a period of time.
Cash-flow statements show whether or not you were able to live within your income
during a time period, while also reflecting the flow of funds in and out.
3. How should assets and liabilities be valued for the balance sheet, and why? Assets
and liabilities should equal each other when added up.
4. Distinguish between fixed and variable expenses, and give two examples of each.
Fixed expenses are expenses that are often paid in the same amount that recur at fixed
intervals. Variable expenses are expenses over which you have substantial control. Two
examples of fixed expenses are insurance and telephone payments. And two examples of
variable expenses are clothing and accessories, and credit card payments.
5. Which two financial ratios for evaluating financial progress do you like, and why?
The two financial ratios I like are debt-to-income ratio and investment assets-to-total
 asset ratio because I feel they can be applied to my life right now and can help me with
my finances at the moment.

Chapter 3.3 Concept Check

1. List some advantages of keeping good financial records. Some advantages of keeping
good financial records are they help you save money as well as make money, allow you
review the results of financial transactions, and help you take advantage of available tax
deductions when filing for income taxes.
2. Name three financial records that might best be kept in a safe-deposit box or in an
envelope at a safe place like at work. Three financial records that might best be kept in
a safe-deposit or in a safe place at work are financial plans, employer retirement plan
correspondence, and credit reports and scores.

Chapter 3.4 Concept Check

1. Identify two money topics you think might be valuable to discuss with a partner.
Two money topics I think are valuable to discuss with a partner are creating a budget and
setting up an emergency fund and talking with your partner regularly about financial
matters.
2. Identify two money topics that you think might present some challenges when
discussing them with a partner. Two money topics I think might present some
challenges when discussing them with a partner are telling money secrets and checking
each other's credit score and credit history.