Everyday Economics and Finances Chapter 1 PDF

Preview

Summary

Chapter 1 Summary...

Description

Everyday Economics and Finances Chapter 1 Summary When planning for your financial goals, it is important to use the S.M.A.R.T method. The first step is to be specific, so that you know what your goals are and can create a plan designed to achieve those objectives. The next step is to be measurable by a specific amount. The third step is to be action-oriented. By being action-oriented, you provide a basis for the personal activities you will undertake. The fourth step is being realistic, which involves setting goals based on your income and life situation. Lastly, time-based indicates a time frame for achieving the goals.The time value of money, more commonly referred to as interest, is the cost of money that is borrowed or lent. The time value of money has two major components: present value and future value. Present value or discounting is the current value of a future sum based on a certain interest rate and period of time. Future value computations or compounding, yield the amount to which a current sum will increase based on a certain interest rate and period of time. In future value problems, you are given an amount to save or invest and you calculate the amount that will be available at some future date. With present value problems, you are given the amount that will be available at some future date and you calculate the current value of that amount. Both value computations are based on basic interest rate calculations....