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7: Financial Management

  • Page ID
    87441
    • Anonymous
    • LibreTexts
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    This chapter focuses on financing consumption using current earnings and/or credit, and financing longer-term assets with debt.

    • 7.1: Your Own Money- Cash
    • 7.2: Your Own Money- Savings
    • 7.3: Other People's Money- Credit
      Both credit and debt are forms of borrowing. Credit is distinguished from debt in both its purpose and duration or timing, although in casual conversation the words are used interchangeably. Credit is used to purchase goods and services, to finance living expenses, or to make payments more convenient by delaying them for a relatively short time. Debt, on the other hand, is used to finance the purchase of assets—such as a car or a home—rather than to delay payment of recurring expenses.
    • 7.4: Other People's Money- An Introduction to Debt
      Debt is long-term credit, or the ability to delay payment over several periods. Credit is used for short-term, recurring expenses, whereas debt is used to finance the purchase of long-term assets. Credit is a cash management tool used to create security and convenience, whereas debt is an asset management tool used to create wealth. Debt also creates risk.


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