Copyright Goodheart-Willcox Co., Inc. 58 Review and Assessment Chapter Summary Section 2.1 Personal Financial Landscape • Creating a financial plan helps a person manage his or her personal finances and learn to become economically self sufficient. A budget can be used to analyze income and expenses and to create a plan for achieving financial goals. Financial security requires financial literacy and life- long financial planning. • Personal financial statements show information about the financial status of an individual. Two types of personal financial statements are a cash flow statement and net worth statement. A cash flow statement reflects actual cash inflow and outflow for a budgeting period. A net worth statement shows a person’s current financial. • Setting up an organized system for financial and legal documents, called recordkeeping, is an important part of effectively managing personal finances. Knowing what to keep and where to file important documents can help a person manage financial affairs. • Money management software can help organize daily finances and keep track of income, spending, saving, debts, investments, and other financial data. Section 2.2 Young Adult and Family Finances • As an adult, your money management activities will expand to include keeping track of income and expenses, paying bills, saving, investing, and paying taxes. • Age and stage in the family life cycle are important factors affecting family financial decisions. Variations in the family life cycle include singles, childless couples, single parent families, and divorced or separated adults. An individual’s goals and needs will change with each stage. • A person or family can often avoid financial trouble by living within their means, keeping debt under control, getting a good education and job training, and having an emergency fund. Review Your Knowledge 1. Identify steps to develop a budget based on personal financial goals. 2. Explain the differences between fixed expenses and variable expenses and provide an example of each. 3. Explain how to create a cash flow statement. 4. Explain how to create a net worth statement. 5. Discuss the benefits of creating a good recordkeeping system for financial documents. 6. How can money management software assist an individual in financial planning? 7. Identify examples of financial tasks that young adults must address. 8. List an example of a variation in the family life cycle. 9. Analyze how the family life cycle influences financial decisions. 10. List ways to avoid financial problems. Apply Your Knowledge 1. Financial resources must be managed to meet financial goals. Describe how an individual or family could evaluate and analyze their needs for personal and family financial planning and its importance. Write a paragraph describing