1.

List the most common consumer debt

The most common forms of consumer debt are;
 credit card debt
 payday loans
 mobile telephone debt
 mortgages on residential and investment properties
 personal loans to purchase:
  motor vehicles
  travel
  domestic white goods
 store credit  student loans including the Higher Education Contribution Scheme, which
are often at higher interest rates than long-term secured loans, such as mortgages. Long-
term consumer debt is often considered fiscally suboptimal.
2. what are Long-term consumer debt
Long-term debt is debt that matures in more than one year. Long-term debt can be viewed
from two perspectives: financial statement reporting by the issuer and financial investing.
In financial statement reporting, companies must record long-term debt issuance and all of
its associated payment obligations on its financial statements. On the flip side, investing in
long-term debt includes putting money into debt investments with maturities of more than
one year.
Long-term debt is debt that matures in more than one year. Entities choose to issue long-
term debt with various considerations, primarily focusing on the timeframe for repayment
and interest to be paid. Investors invest in long-term debt for the benefits of interest
payments and consider the time to maturity a liquidity risk. Overall, the lifetime
obligations and valuations of long-term debt will be heavily dependent on market rate
changes and whether or not a long-term debt issuance has fixed or floating rate interest
terms.
3. What is the relationship between saving and investment?
The words “saving” and “investing” are sometimes used interchangeably, but when it
comes right down to it, we should be engaged in both to secure our financial future.

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 A shared characteristic of both saving and investing is the utmost importance that they
play in our lives. If you are not doing either, the time to get started is now. This may
require changes in spending, tracking, and in the utilization of your income, but it can and
should be built into your plan. A general rule of thumb is saving should be short-term
while investing should be long-term. Keeping that in mind, let’s review the differences.
Also, keep in mind for both saving and investing that when risk goes down, liquidity goes
up and vice versa.
Saving money typically means it is available when we need it and it has a low risk of losing
value.
Investing typically carries a long-term horizon, such as our children’s college fund or
retirement.
4. Explain the term high risk relates with saving and investment

A high-risk investment is one for which there is either a large percentage chance of loss of
capital or under-performance or a relatively high chance of a devastating loss. The first of
these is intuitive, if subjective: If you were told there’s a 50/50 chance that your
investment will earn your expected return, you may find that quite risky. If you were told
that there is a 95% percent chance that the investment will not earn your expected return,
almost everybody will agree that that is risky.
High-risk investments often advertised as high-return investments should always be
treated with caution. They’re only suitable for experienced investors who understand the
risks and are prepared to lose all of the money invested.
5. Explain the team inflation

Inflation is a rise in prices, which can be translated as the decline of purchasing power over
time. The rate at which purchasing power drops can be reflected in the average price
increase of a basket of selected goods and services over some period of time. The rise in
prices, which is often expressed as a percentage, means that a unit of currency effectively
buys less than it did in prior periods. Inflation can be contrasted with deflation, which
occurs when prices decline and purchasing power increases.

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 Inflation is the rate at which prices for goods and services rise. It is sometimes classified
into three types: demand-pull inflation, cost-push inflation, and built-in inflation. The most
commonly used inflation indexes are the Consumer Price Index and the Wholesale Price
Index. Inflation can be viewed positively or negatively depending on the individual
viewpoint and rate of change. Those with tangible assets, like property or stocked
commodities, may like to see some inflation as that raises the value of their assets.

6. Explain the term real value and purchasing power

Real value is nominal value adjusted for inflation. The real value is obtained by removing
the effect of price level changes from the nominal value of time-series data, so as to obtain a
truer picture of economic trends. Purchasing power is the value of a currency expressed
in terms of the number of goods or services that one unit of money can buy. It can weaken
over time due to inflation. That's because rising prices effectively decrease the number of
goods or services you can buy. Purchasing power is also known as a currency's buying
power.

7. what does mean the lower the risk investment

By nature, with low-risk investing, there is less at stake either in terms of the amount of
invested or the significance of the investment to the portfolio. There is also less to gain
either in terms of the potential return or the potential benefits bigger term.

Low-risk investing not only means protecting against the chance of any loss, but it also
means making sure that none of the potential losses will be devastating.

If investors accept the notion that investment risk is defined by a loss of capital and/or
under-performance relative to expectations, it makes defining low-risk and high-risk
investments substantially easier.

8. what are the method of saving

Saving is income not spent, or deferred consumption. Methods of saving include putting
money aside in, for example, a deposit account, a pension account, an investment fund, or
as cash. Saving also involves reducing expenditures, such as recurring costs. In terms of
personal finance, saving generally specifies low-risk preservation of money, as in a deposit

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 account, versus investment, wherein risk is a lot higher; in economics more broadly, it
refers to any income not used for immediate consumption. Saving does not automatically
include interest
9. Explain the term cost of living and inflation
Cost of living is a calculation of the financial cost of maintaining a standard of living in
relation to available disposable income. Inflation occurs when there is a persistent and
upward movement in the price of goods and commodities. As such, the relationship
between cost of living and inflation is the manner in which increases in the price of goods
and commodities affect a previously established table of the cost of living in a particular
area or country under consideration.
Inflation measures the increase in the price of goods and services. Or, the decrease in the
buying power of the dollar. Whereas, Cost-of-living measures the change, up or down, of
the basic necessities of life, like food, housing, and healthcare. Housing prices are affected
by many factors but one of the biggest of them is the cost of borrowing.
10. What do you mean by higher inflation means
High inflation, therefore, is when prices for goods and items is unusually high. Shoppers
can therefore get less for their money when purchasing. Although a little inflation can be
positive, it can also damage individual finances, depending on the circumstances.
High inflation called Hyperinflation is a term to describe rapid, excessive, and out-of-
control general price increases in an economy. While inflation is a measure of the pace of
rising prices for goods and services, hyperinflation is rapidly rising inflation, typically
measuring more than 50% per month.
As a result, the rate of inflation increases. Inflation is a sustained rise in overall price levels.
Moderate inflation is associated with economic growth, while high inflation can signal an
overheated economy. If economic growth accelerates very rapidly, demand grows even
faster and producers raise prices continually.
11. The different between income and expenditure
Income
Income is the income proceeds generated by a non-trading foundation in a monetary year.
Income is money a business makes by selling merchandise, providing services or both. Add

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 to that any activity – temporary or permanent – the company undertakes to generate
revenue and bring in money.
Income could come from steady activities like a store or factory selling goods, or a hotel or
advertising agency offering services. It could also come from one-off items like the sale of
real estate no longer needed by a company or the sale of securities owned by a company.
Income is typically spelled out in detail on a financial statement called the income
statement. This will often distinguish between operating revenues from core business
activities, non-operating revenues from things like interest and rents on extra office space
in a company's building, and gains from one-time sales of various assets other than
ordinary sale goods. If you're tracking a business's performance or considering an
investment, you might want to distinguish between these to understand what's a one-off
source of income versus steady sources of funds.
Expenditure
On the other hand, expenditure can be defined as the amount spent for the long-term on an
asset, which gives a long-term benefit like building, furniture, plant, etc
In the case of expenditure, the benefits are achieved over the long-term period, which is
usually more than one year. The use of term expenditure relates to the purchase of fixed
assets.
There are two types of expenditure in accounting books: capital expenditure and Revenue
expenditure. Capital expenditure is the one that is done to purchase or increase the value
of fixed assets. Revenue expenditure is the expenditure whose benefit will be received
after the whole accounting year. Revenue expenditures include the cost of goods sold or
repairs and maintenance expenses. For example, purchasing buildings, land, and plants are
capital expenditure.
12. Explain the term personal saving goal
Money that an individual has put away for non-immediate use. For example, one may
utilize personal savings to save funds for an expensive purchase, such as a house or a car.
In general, it is recommended for one to maintain personal savings to cover three to six
months of living expenses.
Long-Term Financial Goals. The biggest long-term financial goal for most people is saving
enough money to retire. The common rule of thumb that you should save 10% to 15% of
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 every paycheck in a tax-advantaged retirement account like a 401(k) or 403(b), if you have
access to one, or a traditional IRA or Roth IRA.
By setting goals, you can break down the process of saving to make it easier and more
convenient. By setting goals, you are giving yourself time to save. Many people are still
very impulsive with their money and as a result, they rarely have the cash on hand needed
for the things they truly want. Personal goals are short- or long-term goals that can apply
to your work, family life or lifestyle. They are meant to motivate you to achieve what you
want in life.
13. What are contact information and personal to open account
You will need a government-issued ID and some basic information, and you might have to
deposit 50 Birr or so to get started.
You can open a bank account at a branch, if the bank offers brick-and-mortar
locations. The information you'll be asked to provide will be much the same whether
you’re opening a checking account, a savings account or both.
Here’s a list of what you’ll need to open your new bank account:
 Valid, government-issued photo ID, such as a driver’s license or a passport. Non-
drivers can get a state ID card at the Department of Motor Vehicles office.
 Other basic information, such as your birthdate, Social Security number or
Taxpayer Identification Number, or phone number.
 An initial deposit is required by some banks, too. Skip ahead to learn more about
account funding.
Depending on your circumstances, you might need a few other items, too:
 Identification details for other applicants, if you’re opening a joint account: Because
the account will be owned by multiple people, the bank will want all owners’
identification and personal information.
 A co-owner if you’re not yet 18. Ask a parent or legal guardian to sign legal
documents with the bank.
14. Explain the financial product options available to maximize earnings on savings
Boosting your savings rate is partially about budgeting, but spending less is more a
behavioral problem than it is a math problem.

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Some of the tips below are tricks or hacks to help you spend less while achieving a similar
quality of life. Some are about reducing wasted money, others about automating savings,
and others about raising your income. All require a heightened sense of priority toward
accumulating wealth.
Remember, as you set about raising your savings rate, that it’s more about adopting a
mindset than it is about any one tactic or action. If keeping up with the Joneses is a priority
for you, don’t expect to ever save much money, because there’s always someone with a
ritzier lifestyle you compare yourself to.
Start internalizing a desire to build real wealth. It takes patience, time, and discipline, none
of which is sexy. But there’s no more effective way to build long-term wealth than by
investing every possible cent in high-ROI investments and letting the returns compound.
 Set a Target Savings Rate Before Setting Your Budget
 Automate Your Savings
 Pay Off High-Interest Debt
 House Hack to Reduce or Eliminate Your Housing Payment
 Get Rid of a Car
 Cook (Almost) Every Meal at Home
 Cancel All Non-Essential Subscriptions
 Switch to a “Generic” Phone Plan
 Get a Raise
 Capitalize on Matching Contributions

Final Word; Maximizing your savings rate isn’t fast, and it isn’t sexy. It’s the opposite of a
get-rich-quick scheme. But it’s the most reliable way to build wealth. Cut your spending –
dramatically. Raise your income as much as you possibly can. Pay off your high-interest
debts. Automate your savings and investments, and reinvest dividends to maximize
compounding. Forget about stock tips and get-rich-quick tactics. Focus on the
fundamentals, and you will become wealthy. It takes money to make money, after all, and
the first place to start sourcing that money is your own savings.

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