ALL: Personal Finance

Default

...

Speculative Grade (junk) bonds

...

NEVER do these things

1. Invest in stocks that don't match your investment philosophy 2. Fail to use fundamental analysis when making stock investments 3. Buy stocks on margin or sell stock short

11 Signs of Over indebtedness

1. Not knowing how much you owe 2. Running out of money 3. paying only the minimum amount due 4. exceeding debt limits and credit limits 5. requesting new credit cards and increases in credit limits 6. using cash advances to pay other credit cards 7. paying late or skipping credit payments 8. refinancing 9. using debt-consolidation loans 10. experiencing garnishment 11. Experiencing repossession (object taken by financial institution) or foreclosure (object taken through legal process)

CASH-VALUE LIFE INSURANCE

368

When to sell?

415 During significant adverse change: is the adverse change temporary or permanent? Why? Price has gone up: overvalued poor performance: undue anxiety No longer fits your needs

mentor

An experienced person, often a senior coworker, who offers friendly career-related advice, guidance, and coaching to a less-experienced person.

credit score

An indication of a person's creditworthiness or how likely the individual will be able to repay any credit extended in a timely manner.

Flexible spending account (FSA)

Employee benefit for employees who pay for child care or provide care for a parent is a salary reduction plan. Allows an employee to fund qualified expenses on a pretax basis through salary reduction for medical and dental expenses

default

Failure of a borrower to make a scheduled interest or principal payment. All borrowers want to avoid this.

earnest money

Funds given to the seller as a deposit to hold the property until a purchase contract can be finalized.

final expense needs

Funeral, burial, or cremation of the deceased. Travel, lodging, food, and cost of settling the estate 362-3

single-family dwelling

Housing unit that is detached from other units.

defined-contribution retirement plan

IRS-approved retirement plan sponsored by employers that allows employees to make pretax contributions that lower their tax liability

credit card liability

If card stolen and reported within 2 days, you are not responsible for fraudulent use. After 2 days, your max liability is $50.

How marginal tax rate affects tax return

If in 25% bracket, you put $100 in 401(k) retirement plan at work, you will receive $25(25% of 100) from the government for your 401(k).

tax refund

If withholding and estimated payments exceed the tax liability, IRS will send this money back to taxpayer

means test

In bankruptcy, a court determines whether an individual debtor's Chapter 7 filing can be presumed to be an abuse of the bankruptcy laws requiring dismissal or conversion of the case. Test to see if person can pay off debts

KNOW miscellaneous fees p 267

KNOW miscellaneous fees p 267

Professional Interests

Long-standing topics and activities that engage your attention

6 classifications of itemized deductions

Medical and dental expenses Taxes you paid (ex. real estate taxes) Interest you paid (home mortgage loans) Gifts to charity (church, schools) Casualty and theft losses (storms, vandalism) Job expenses and most other miscellaneous deductions (magazine subscription for business, commuting costs to work) BOOK: p. 126-127

Minimum-Balance account Average-balance account

Minimum: Average: SEARCH BOOK p. 158

3 classifications of assets

Monetary: Tax refunds due, money others owe you Tangible: automobile, house, furniture, electronics, jewelry Investment: stocks, 401(k), Real property (ex. apartments)

credit unions (CU)

Not-for-profit institutions that accept deposits and make loans, MEMBERSHIP REQUIRED. All share a common bond ex. same employer, work for or attend same school, or live in same community insured by NCUSIF administered by the National Credit Union Association (NCUA)

Fair Credit Reporting ACT (FCRA)

One part of the law requires that credit reports contain only accurate relevant information and allows consumers to CHALLENGE errors or omissions of information in their reports. bureau has 45 days to check

loan-to-loan (LTV) ratio

Original or current outstanding loan balance divided by the home value.

Health Maintenance Organizations (HMOs)

Pre-paid managed care insurance plans in which individuals or their employers pay a fixed monthly fee for services instead of a separate charge for each visit or service. 342-344

Retaliatory actions

Prohibitions against retaliatory actions such as rent increases, eviction, or utility shut-off for reporting building-code violations or otherwise exercising a tenant's legal rights.

security deposit return

Prompt return of a security deposit, and limits on the kinds of deductions that can be made. Landlords must explain specific reasons for deductions. Some localities require that interest be paid on security deposits.

MSRP

Retail Price Set by manufacturer 231

2 Basic types of life insurance

TERM LIFE INSURANCE CASH-VALUE LIFE INSURANCE 368

Savings

The accumulation of excess funds by intentionally spending less than you earn. 393

Reason to have life insurance

To allow your family members to continue with their lives free from the financial burdens that your death would bring 362

community banks

Type of commercial bank that focuses on providing traditional banking services in their local communities where they obtain most of their core deposits locally and make many of their loans to local businesses relational transactions between bank and clients

Coverage C

Uninsured & underinsured motorist insurance 317

Discount Brokers

charge commissions to execute trades that are often 30-80% less than the fees charged by full-service brokers, but also offer fewer services

big data

collecting as much information as possible about everything so it can be mined for lessons and used to make predictions about the future

debt-consolidation

combining several unsecured debts into a single, new loan that is more favorable

Permanent Insurance

coverage is maintained for the entire life of the insured as long as premiums are paid. Aka Cash-value insurance 369-70

tax evasion

deliberately and willfully hiding income, falsely claiming deductions, or otherwise cheating the government out of taxes owed.

career ladder

describes the progression from entry-level positions to higher-levels of pay, skill, responsibility, or authority

credit lifestyle

how your credit affects your life

joint accounts

owned by 2+ individuals

Stockbroker

professional who is licensed to buy and sell securities on behalf of the brokerage firm's clients

tax avoidance

reducing tax liability through legal techniques

10-K Report

same as 10-Q report but filed annually

expense that can count as both variable & fixed expenses

savings

tax liability

this is the final amount of federal income taxes one will owe the government

Default Risk (credit risk)

uncertainty associated with not receiving the promised periodic interest payments and the principal amount when it becomes due at maturity

liabilities

what you owe

insolvent

when a person owes more than the he/she owns and the person has a negative net worth

monetary safety

your funds are free from financial risk

Maximum amount of gap time in health care coverage

3 months

coinsurance

A sharing of loss between the insurer and the insured (ex. 20% insured responsibility & 80% of loss is insurer responsibility)

Suicide clause

Allows the life insurance company to deny coverage (although all premiums will be refunded) if the insured commits suicide within the first 2 years after the policy is issued. If the specified number of years has elapsed, the full death benefit will be paid. 373

Why should you delete "mom"

If you are married, do not let your spouse keep his or her mother's name on their life insurance policy as the beneficiary. People do this a lot when they are single and then forget to change the beneficiary when they marry. Life insurance proceeds are not covered by whatever is written in a will. 12.3d

Prospectus

Highly legalistic information presented by a firm to the SEC and to the public with any new issue of stock.

Common Stock

Most basic form of ownership of a corporation. Large, mid, small, and micro-cap stocks: size of company, amount of income

2 types of organizations that issue open-end credit

1. Retail Sellers and Businesses: retail credit cards / propriety credit cards 2. Financial Institutions: Bank Credit Cards Interest charges begin 1 month after a purchase made, typically 18% interest/year

The 2 expectations of stock investors

1. The corporation will be profitable enough that INCOME WILL EXCEED EXPENSES, thereby allowing the firm to pay cash dividends 2. THE MARKET PRICE of a share of stock, which is the current price that a buyer is willing to pay a willing seller, WILL INCREASE OVER TIME.

2 things you have to do before your attorney requests a bankruptcy discharge

1. complete credit counseling w an agency 2. attend counseling about fundamentals of personal financial management

physical checks

2: check number 10: routing number (9 digits) 11: account number 7: address of bank (picture on phone)

contents replacement-cost protection

Option sometimes available in home- owner's insurance policies (including the renter's form) that pays the full replacement cost of any personal property.

Paid-up

Point at which the owner of a whole life policy can stop paying premiums. 369-70

Who elects the Board of Directors? Who hires the Management of a Company?

STOCKHOLDERS vote to elect the company's board of directors. The company's BOARD OF DIRECTORS sets policy and names the principal officers of the company (management) who run the firm's day-to-day operations.

Kelly Blue Book (KBB)

Shows average retail and wholesale price of new and used vehicles 231

fixed-time deposit

a certificate of deposit that has as specific time period that the savings must be left on deposit; otherwise a penalty is assessed for early withdrawal

Marginal Tax Rate

The tax rate at which your last dollar earned is taxed, and it refers to the HIGHEST tax bracket that your taxable income puts you in. Tiered $0-5,000.. x 10% tax = 1,500 Ex. If earning 66,000 annually and receive bonus of 1,000, that bonus must be taxed. $250 + $60(fed income) + $76.50(local income t/SS/Medicare) = $406.50

Work-style personality

Your own ways of working with and responding to job requirements, surroundings, and associates.

cooling-off rule

a Federal Trade Commission rule that gives consumer 3 days to cancel a contract of $25 or more after signing it for a sale made anywhere other than a seller's normal place of business 250-1

savings account (statement savings account)

a deposit account held at a bank or other financial institution that provides principal security and a modest interest rate

money market deposit account (MMDA)

a deposit account that requires a larger initial deposit to open (often $2,500) and requires a min. balance to be maintained, checks must be written for a min. amount, and only allows a limited number of checking transactions per month

checking account (transaction account)

a depository account held at a financial institution that performs transactions that allow for withdrawals and deposits

depository institutions

financial institutions in the US that are legally allowed to offer checking and savings accounts to individuals and businesses as well as provide loans checking accounts savings accounts loans

Adjusted gross income (AGI)

gross income less any exclusions and adjustments The results of income adjustments

card registration service

notifies all companies (whom you have debt with and credit cards) in event of card loss. $50-240/year for these services

credit freeze (or credit report freeze)

prevents a credit bureau from releasing your credit report to merchants and financial institutions without your consent. Intended for a consumer who is worried about an identity thief who may open a fraudulent account in the consumer's name

3 conditions of a full warranty

1. A product must be fixed at no cost to the buyer within a reasonable time after the owner has complained 2. The owner won't have to undertake an unreasonable task to return the product for repair (ex. ship back a fridge) 3. A defective product will be replaced with a new one or the buyer's money will be returned if the product cannot be fixed after a reasonable number of attempts 244

Monetary asset management

the task of maximizing interest earnings and minimizing fees on all of your funds kept readily available for day-to-day living expenses, emergencies, and savings and investment opportunities

3 types of ways interest is calculated.. Most commonly used how and by..

1. Declining-balance method: credit unions, credit cards, & home mortgages 2. Add-on method: installment loans at banks, savings banks, & consumer finance companies (cars, furniture) 3. Discount method

The 5 fundamental steps in the financial planning process

1. Evaluate your financial condition relative to your education and career choice. 2. Define your financial goals. 3. Develop a plan of action to achieve your goals. 4. Develop/implement spending plans to monitor & control progress toward goals. 5. Review your financial progress.

Transfer of risk

through sharing the losses suffered by members with other premiums paying insured's who have not suffered losses

flood insurance

through the National Flood Insurance Program

Expense

total expenditures made in a specified time such as reported on a cash-flow statement

Additional Investing concepts p 402

transaction costs (commissions) leverage bull market: market goes up 40% or more bear market: market falls 20% or more market correction (stay on for ups and downs) Buy & hold p 408 Dollar cost averaging DRIP p 412

Dividends per share

translates the total cash dividends paid out by a company to common stockholders into a per-share figure.

Liability limits quoted as 3 numbers

250/500/150 ex. 250,000 limit for bodily injury liability to any oe person

The concept of risk

99% a loss is likely to occur, uncertainty are relatively low .001% probability a loss is likely to occur, risk & uncertainty are relatively low 20% probability, 1 chance in 5, a loss is likely to occur, risk & uncertainty are relatively high

Invitation to Apply vs. a Prescreened solicitation vs. Pre-approved solicitation

?? SEARCH BOOK ??

tiered pricing? how are subprime borrowers affected?

?? SEARCH BOOK ??

How to say "no" when multiple offers arise

???? search book ?????

credit application

A FORM and/or an interview that requests information that sheds light on your ability and willingness to repay debts, such as your income, assets, and debts.

Bankruptcy

A constitutionally guaranteed right that permits people (and businesses) to ask a court to find them officially unable to meet their debts. 196

social networking

A set of connection of friends, colleagues, and other personal contacts with a common interest who use websites or other technologies to communicate with each other and share information and resources.

escrow

A special reserve account at a financial institution in which funds are held until they are paid to a third party.

CD laddering

A strategy in which an investor divides the amount of money to be invested into equal amounts to certificates of deposit (CDs) with different maturity dates; it decreases both interest rate and re-investment risks.

Transit spending account

A transportation reimbursement plan. If you contribute $510 in pretax income to employer's transportation plan, you save 204 (510 x .40) because this amount is not taxed

Job boards

A website devoted to helping employers find suitable new employees by providing job listings, job sites, job search tips, job search engines, and related articles; some allow posting of résumés.

open-end credit

An account under which you are allowed to make repeated purchases or obtain loans and you may pay the balance in full or you may pay in installments. Has a credit limit.

What is the "Fed"

Federal Reserve Bank Controls interest rates Lend banks money

money market mutual funds (MMMFs)

Money market accounts offered by a mutual fund investment company (rather than at a depository institution) A liquid investment

Current Income/Return

Money received while you own an investment. Usually received on a regular basis as interest, rent, or dividends. Ex. Interest, Dividend (stocks), Rent (real estate) 394

adjustable-rate mortgage (ARM), aka variable-rate mortgage

Mortgage in which the borrower's interest rate fluctuates according to some index of interest rates based on the rising or falling cost of credit in the economy—thus transferring interest rate risk to the borrower.

Coverage D:

Physical Damage Insurance Automobile physical damage insurance for the insured vehicle collision insurance comprehensive automobile insurance

debt repayment at 15-18% of disposable personal income: Current Debt Situation, Borrower's Feelings, and "Should you take on additional Debt?"

Precariously over indebted Borrower feels seriously stressed about debts and hopes no emergency event arises Absolutely should not take on more debt and should consider contacting a nonprofit credit counseling agency

Insurance Applicants are grouped into 1 of 4 groups by Underwriters

Preferred applicants: pay lower rates Standard applicants: pay standard rates Substandard applicants: pay higher rates Unacceptable applicants: denied coverage

The limited liability of stockholders

Stockholders have limited liability, as their RESPONSIBILITY for business losses is LIMITED TO AMOUNT INVESTED in the shares of stock owned. These amounts may be small or large The most the shareholder can lose is the original amount invested.

Treasury Securities (Treasuries)

Securities issued by the U.S government, including bills, notes, and bonds

Know how to calculate a monthly payment for a big ticket item

Table 7-2 p. 219 (amt. borrowed) / 1,000; multiply this number by number found in table

Investing in the USA (or home country)

Tax law changes Product becomes illegal (incandescent light bulbs or plastic shopping bags) Product becomes required (10% ethanol) Difficulty in obtaining licenses or permits (ex. keystone XL pipeline) Change in US foreign policy

municipial bonds (munis)

Tax-exempt Long-term debts issued by local governments and their agencies that are used to finance public improvement projects ex. regional airport, convention center, water treatment facility

8 types of tax-sheltered investments

Tax-exempt municipal bonds Roth IRA Individual Retirement Accounts Capital Gains on housing Coverdell Education Savings Accounts Government savings bonds Qualified Tuition programs Savings plans for the disabled

Installment payments for a fixed period

The beneficiary may receive an income from the death benefit for a specific number of years. 12.3c

Who receives the proceeds of life insurance policy

The beneficiary receives the insurance proceeds but if the beneficiary dies before the insurer then the contingent beneficiary receives the proceeds 373

minimum payment warning box

The box on credit card statements must show how long it would take to pay off the card's balance by making only the minimum payments, and how much you'd need to pay each month to clear the balance in 36 months.

Economic Growth

The condition of an economy of increasing production and consumption which increases national income

homeowners association

The condo development is run by the owners through homeowners association. They pay a monthly fee for the management of the common grounds and facilities and insurance on the buildings

Price (earning) ratio, aka P/E ratio

The current market price of a stock divided by earnings per share (EPS) over the past four quarters used as the primary means of VALUING a stock

Opportunity Cost

The value of the next best alternative that must be forgone (14) ex. Opportunity cost of spending money on living expenses = lose opportunity to save and invest and you gain opportunity to gain interest in loans

credit-monitoring service

These companies allow one to access his/her credit report as often as daily and obtain a personal FICO credit score. A waste of money

Condo & co-op vs. single family dwelling ownership

These forms of ownership typically cost less than single-family dwellings, offer recreation facilities, and have few if any resident maintenance obligations.

Average financial benefit of an internship

They earn $10,000 more than those who did not intern

Health Savings Account (HSA)

This is a tax-advantaged medical savings account, thus all funds you put in your account are 100% tax deductible from gross income as long as they are used for health care expenses. 342-344

prepayment penalty

This occurs when buyers sign a contract to pay a penalty stating that if they pay off their mortgage in a set period of time, usually between three and five years they owe it.

price-to-rent ratio

This ratio is the median existing home price divided by the average annual rent you would pay for a comparable home in the area. The national average is 11. Higher the number the better it is to rent over buying the home

Who has not been impacted by the ACA

Those who already have insurance 335

Who has been impacted by the ACA? Who can be covered by ACA under their parents?

Those without health insurance Under age of 26 335

savings and loan associations (S&Ls)

Thrift institutions that focus primarily on accepting savings and providing mortgage and consumer loans. focused on housing

How business Cycle risk is reduced

Through counter-cyclical investments 428

Preferred Stock

Type of fixed-income ownership security in a corporation that pays fixed dividends. Dividends must be paid before dividends to common stockholders Prices are subject to interest rate risk Stockholders rarely have voting rights

Do deposits held by landlords earn interest?

Typically no but some require interest on security deposits

Debt to income method.. Desirable...

Your monthly debt repayments (including your prospective mortgage, and any other loan or alimony payments you must make) are divided by your gross monthly income and multiplied by 100 Desirable: 36% or less and should decrease with age 87 / 185

Wage earner plan (Chapter 13) (regular income plan) Steps..

a bankruptcy protection scheme that allows income earners to satisfy outstanding debts in whole or in part within a specific time frame. 1. file petition for bankruptcy 2. court issues automatic stay 3. hearing is scheduled 4. debtor follows strict budget while repaying obligations

standard deduction

a base amount of income that all taxpayers (except some dependents) who don't itemize deductions regardless of their actual expenses may SUBTRACT from their adjusted gross income Single= $12,000 Married=24,000 Head of Household=18,000

Cash account

a brokerage account that requires an initial deposit (perhaps as little as $1,000) and specifies that full settlement is due to the brokerage firm within three business days after a buy or sell order has been given

money order

a checking instrument bought for a particular amount with a fee assessed based on the amount of the order

Know these preshopping information 8.1b

Break the dealers code on new vehicle prices Know the value of your trade-in vehicle Assess environmental impact 231

Capitalism

a country's system of trade and industry that is controlled by private owners seeking profit

garnishment

a court order directing money or property of 3rd party be seized to satisfy debt owed

automatic stay

a court order that temporarily prevents all creditors from recovering claims arising from before the start of the bankruptcy proceeding

Straight bankruptcy (Chapter 7) (immediate liquidations plan) steps..

a debtor's assets are sold, creditors receive payment, and the debtor is freed from most if not all of his/her debts. Last option. Permitted when repayment is nearly impossible. AKA Straight bankruptcy 1. pass a means test 2. assets are distributed to creditors Cannot file Ch. 7 for min. 6 years

credit report

a detailed account of an individual's credit history prepared by a credit bureau and used by a lender to determine a loan applicant's creditworthiness.

debt-repayment needs

a family that has bought sufficient life insurance for the replacement of lost income probably will not need to make specific insurance provisions for the repayment of most debts 362-3

automatic billing (or auto renewal billing)

a feature that allows a vender to automatically charge a customer's credit/debit card or bank account on a regular basis through a recurring profile set up on the account

point (interest point)

a fee equal to 1 percent of the total loan amount. Lenders use points to increase their income return on loans.

tax-sheltered investments

a financial arrangement with the government that results in a reduction or elimination of taxes due

payable on death (POD) or Totten trust

an arrangement between a bank or credit union whereby upon the death of the client the assets are immediately transferred to the designated beneficiaries

Stewardship

carrying out the duties of managing a large household; ex. estate manager, personal assistant

variable-rate (adjustable-rate) certificates of deposits

certificates of deposit that pay an interest rate that is adjusted (up or down) periodically

financial services industry

companies that provide monetary asset management and other services

earned income

compensation for performing personal services

Making an insurance claim

contact insurance agent ASAP Document your loss with notes, photographs, and police report (when necessary) File your claim (claims adjuster) Sign a release (only when you are satisfied that the full magnitude of the loss has become evident)

Monetary assets

convertible to cash

refinancing

loaning an even larger amount than current loan to pay it off and using remainder of money for other purposes when you refinance or rewrite a loan for an even larger amount before it has been completely repaid. debt-con

professional interests

long-standing topics and activities that engage your attention

high severity & low frequency

losses should be insured against

low severity & high frequency

losses should be prepared for in your savings and budget planning The key is severity: how much could the loss be?

fortuitous losses

losses that are unexpected in terms of timing and magnitude CERTAIN losses are NOT insured

travel and entertainment (T&E) cards (corporate cards)

Cards issued by non-banks that are often used by businesspeople for food and lodging expenses while traveling.

What happens when you write a check

Check is cashed/deposited by payee when institution pays funds required of check then it will be "cleared" checks are scanned/cleared electronically (instant fund transfer)

demand deposit account

Checking accounts that typically pay no interest

What to do when job accepted but better one arises

Choose better job

Income Stock

Company that pays a cash dividend higher than that offered by most companies. Stocks issued by telephone, electric, and gas utility companies; beta often less than 1.0.

other special needs

many families have special needs that must be considered in the life insurance-planning process ex. a family might have a child with special needs who will require medical or custodial care as an adult 362-3

selling agent

represent the buyer. Get commission from seller

listing agent

represent the seller . Get commission from sale of the house

Dealer Invoice price

the amount the retailers charge the dealership for new vehicles 231

Exposures

sources of risk

payment due date

specific day when credit card company should receive payment from cardholder

replacement-cost requirement

specifies that you insure the dwelling for either 80% or 100% of its replacement value or only a portion of even small losses will be covered

lemon laws

state laws that provide guidelines for arbitrators to used to order a dealer's buyback of a "lemon" as defined under the law--commonly a car that has been in the shop 4+ times to fix the problem within FIRST YEAR after purchase. The idea-- you don't receive a car that consistently has the same issues 250-1

life line banking account

streamlined checking designed for low-income customers that has low balance requirements, no monthly fees, and is offered by large financial institutions as a way to offer basic banking services to the broad public

Annual Percentage Rate (APR)

the annual rate that is charged for borrowing expressed as a percentage number that represents the actual yearly cost of funds over the term of a loan

tiered interest

the combination of a base interest rate and a higher rate paid on interest-earning accounts SEARCH BOOK p 156

purchase agreement

the contract outlining the agreed-upon price and terms for the purchase of a home

Office of the comptroller of the Currency

regulates banks

principle of indemnity

the insured recovers no more than the actual amount of the financial loss suffered (ex. to be made whole again)

modern code

the language of the digital world writing the source code for a computer program can earn 6 figures immediately

career

the lifework chosen by a person to use personal talent, education, and training

average daily balance

sum of daily outstanding balance (on credit card) during billing period divided by # of days in period

IRS tax table vs. tax-rate schedules

tax table: used for tax returns with incomes up to $100,000 tax-rate schedules: used for tax returns with incomes above $100,000

itemized deductions

tax-deductible expenses that may be used to directly reduce income and reduce one's tax liability

Tax-sheltered compounding

tax-free money loaned from the government to taxpayers to help fund their investment and retirement plans

Job referral

the act of recommending someone to another by sending a reference for employment

Federal Fund Rate

Interest rate banks charge each other for loans

Total Income

compensation from all sources

transaction date

date of purchase w/ credit card date received credit

job vs. career

job=short term career=long term

income replacement needs

the income when someone becomes financially dependent on you 362-3

rent

the regular payment to a landlord charged for using an apartment or other housing space.

Maximum insurance coverage for single, joint, per account.

$250,000 Sharing account w/ another person DOESN'T change maximum coverage Coverage increases if you have more than one account. Ex. 2 accounts = $500,000 (combined)

disadvantages of using credit

(1) it is tempting to spend more money (2) credit reduces one's future financial flexibility and purchasing power (3) future income is committed to previous credit contracts (4) slows progress to achieving financial goals (5) the risk of over indebtedness is real (6) interest is costly, perhaps as much as 18 percent or more per month (7) interest and fees substantially increase the cost of goods and services purchased (8) increases credit related solicitations via mail, e-mail, text, and telephone calls (9) reduced privacy when providers sell your personal information to others for solicitation (10) increases possibility of identity theft (11) it is much more difficult than you think to pay off old debts later and increase your FICO score (12) users worry and stress about their debts (13) may have negative impacts on relationships (14) may result in property loss via repossession (15) could result in one declaring personal bankruptcy (16) can negatively impact one's credit history and credit score (17) may result in damaged personal reputation.

3 types of advance directives

(1) living will (2) health care proxy (3) durable power of attorney 353

17 advantages to using credit

(1) to enjoy the convenience (2) to enjoy goods and services now (3) to reduce the need to carry cash (4) to buy when funds are low (5) to shop on the Internet and by telephone (6) to show identification (7) to enjoy the grace period of 21 days on new credit card purchases (8) to pay for emergencies (9) to obtain an education (10) to make travel reservations (11) to obtain rebates, such as cash and travel miles (12) to pay off several purchases with one monthly payment (13) to easily return merchandise (14) to protect against seller rip-offs and frauds (15) to provide record keeping for business expenses (16) to help open a business (17) to buy expensive items sooner rather than later, like a home and vehicles.

Consumer Price Index (CPI)

(11) a broad measure of changes and prices of all goods and services purchased by consumers. Cost of Living / Inflation Rate o CPI Base of 100: since 1982-1984 o CPI of 251: means the cost of living is 151% higher than the base period 251-100=151

Deflation. What does the government do during deflatio?

(12) A broad, sustained decline in prices of goods and services that is hard to stop once it takes hold, causing less consumer spending, lower corporate profits, declining home values, rising unemployment, and lower incomes. Government policymakers often embark on massive spending programs to stimulate the economy. Such spending creates high national liabilities that could be repaid when the economy is stronger

Why do banks pay higher interest rates to long term depositors

(13) it's a risk for the saver. There is a high degree of inflation over a longer period of time.. Must be compensated for uncertainty of changes.. Dangerous because the inflation vs. interest rate change

Trade-Off

(14) Giving up one thing for another. ex. giving up current spending to enjoy financially comfortable future

The very best kind of income / 2nd best kind of income

(15) 1st best: Tax-exempt income (16) 2nd best: Tax-sheltered (No tax FOR NOW) [Income that is legitimately exempt from income taxes and may or may not be subject to taxation in a later tax year.]

Utility

(15) Being useful

Marginal Cost

(15) The additional cost of one more incremental unit of some item. ex. cost of sitting closer to stage in a concert ($250) vs. sitting back ($150) Desirable if marginal utility exceeds marginal cost.

Marginal Utitlity

(15) The extra satisfaction derived from gaining one more incremental unit of a product or service. ex. seeing better when closer to concert stage

lien

(an ACT) a legal right to keep possession of property belonging to another person until a debt owed by that person is discharged

7 effects of the ACA

-a mandate for health insurance companies to cover everyone regardless of pre-existing conditions (which one in two Americans have) -stops insurers from charging women more than men -prohibits dropping coverage for any reason except for fraud -eliminates annual and lifetime limits on health care -mandates that insurers cover 10 essential health benefits -wellness visits and preventative services with no out-of-pocket costs -generally increases the quality of American's health care. 337

investment-grade bonds

...

5 tips on how to build a good credit score

1. HAVE YOUR SMARTPHONE AND UTILITIES BILLED TO YOUR NAM. The fact that you can maintain a good payment pattern on your telephone and utility bills indicates that you can manage your money wisely and will do the same with your credit repayments. 2. ESTABLISH BOTH A SAVINGS AND CHECKING ACCOUNT. Lenders see people who can handle these accounts as being more likely to manage credit usage properly. 3. APPLY FOR A BANK CREDIT CARD. Your own bank is the best place to start your search for a credit card. If not successful there, you usually can find some bank that will issue you a card (search at www.bankrate.com). The credit limit may be low (perhaps $1,000) and the APR high (perhaps 24 percent), but at least the opportunity exists to establish a credit history. Later you can request an increase in the credit limit and a lower APR. 4. REQUEST, ACQUIRE, AND USE CREDIT CARDS FROM RETAIL SELLERS AND BUSINESSES. These cards are relatively easy to obtain. Use the credit sparingly, and pay the entire balance in full and on time each month. 5. STAY CURRENT ON YOUR STUDENTS LOANS. Making payments on time and paying off student loans quickly will show prospective lenders that you are a responsible borrower.

The risk management process

1. IDENTIFY your exposures to risk: identify what you own, do, the perils. 2. ESTIMATE risk & potential losses 3. CHOOSE how to handle your risk of loss 4. IMPLEMENT the risk-management program: Select policies & coverages, Large-loss principle (insure the risk of losses that you can reasonably afford to pay out of your own funds) 5. EVALUATE and adjust the program as your situations change 300-302

4 Action steps to take when disputing an error on billing statement

1. Notify merchant involved of error 2. Write to the creditor 3. Send your letter so that it reaches creditor within 60 days 4. Withhold payment for disputed items

5 factors used to determine FICO scores

1. Payment history.: Late? Consistently pay your bills on time 2. Amounts owed: How much do you owe others? 3. Length of credit history: How long have you had account? 4. Taking on more debt: How many new accounts do you have? 5. Types of credit used: Do you have a good mix of credit usage? # of total accounts?

simplest ways to handle risk

1. Risk avoidance: don't fly, drive 2. Risk Retention: You accept all the risks, accept portion of risk 3. Loss Control: Techniques to limit the frequency/severity of loss (ex. dead bolts & padlocks on doors, put goods out of sight in car trunk) 4. Risk transfer: transfer to a 3rd party (ex. insurance company) 5. Risk reduction: reducing risk to an acceptable level (ex. co-insurance)

Guidelines for endorsing a check

1. only endorsed by the payee (person who owns) 2. a restrictive endorsement has "for deposit only" and can only be deposited by payee 3. special endorsement: "Pay to order of" can only be cashed at specific institution

How much is overtime pay

1.5 of regular hourly pay (Time & a Half)

(MTB) Marginal Tax Bracket OR Marginal Tax Rate

1/7 income-range segments at which income is taxed at increasing rates. progressive

3 types of hazards

303 PHYSICAL: a particular characteristic of the insured person or property that increases the chance of loss. ex. high blood pressure in a person covered by health insurance MORALE: exists when a person is indifferent to a peril. For example, a mo- rale hazard exists if the insured party, knowing that theft insurance will pay for the loss, becomes careless about locking doors and windows. MORAL: the possibility that the insured person will want or even cause peril to occur in order to collect reimbursement from the insurance company.

Blue-Chip Stock

A company that has been around for a long time, has a well-regarded reputation, dominates its industry (often with annual revenues of $1 billion or more), and is known for being a solid, relatively safe investment; betas are usually around 1.0.

Countercyclical (defensive) Stock

A company whose profits are greatly influenced by changes in the economic business cycle in consumer-dependent industries automobiles, housing, airlines, retailing, and heavy machinery betas of about 1.0 COUNTERcyclical because it exhibits price changes contrary to movements in the business cycle, thus prices remain steady during economic downturns. Examples are cigarette manufacturers, movies, soft drinks, cat and dog food, electric utilities, and groceries. 1.0 or less = defensive / countercyclical

sales finance company

A finance company that buys at a discount the installment sales contracts of merchants or that directly finances retail sales. ex. financing vehicle: 3-4 year loan to pay monthly installments

Earnings per share

A firm's profit divided by the number of outstanding shares.

conventional mortgage

A fixed-rate, fixed-term, fixed-payment mortgage loan.

service credit

A form of open-end credit granted to consumers by public utilities, physicians, dentists, and other service providers that do not require full payment when services are rendered.

The rule of 70

A formula to determine how long it will take for the value of a dollar to decline by one-half. 70/inflation rate (12)

Accountable Care Organization (ACO)

A group of doctors and/or a hospital who have made a deal with a private insurer or Medicare to provide safe and appropriate services, rather than operate as a fee-for-service organization. high-deductible health care plan has a high deductible that you must meet before the insurance will start paying for your office visits, lab tests, and prescriptions. 342-344

cover letter

A letter of introduction sent to a prospective employer to get an interview Contains requested meeting w/ employer, will be contacting them in future, link to an online resume, enthusiasm for job, etc.

unsecured loan

A loan issued and supported only by the borrower's creditworthiness, rather than by a type of collateral, because it is obtained without the use of property as collateral for the loan. No blackmail (?) ex. student loan

secured loans.. includes an agreement..

A loan where the borrower has pledged some asset as collateral to guarantee the loan. includes a security agreement (loan contract for secured loan)

Preferred Provider Organization (PPO)

A managed care organization of medical doctors, hospitals, and other health care providers who have agreed with an insurer or a third-party administrator to provide health care at reduced rates to the insurer's clients. 342-344

Net worth / formula

A measure of your financial worth assets - liabilities = net worth What is owned - What is owed = net worth

Add-on interest method

A method of calculating the annual percentage rate for installment loans where the (interest rate) x (amount borrowed) x (number of years) = interest

Declining-balance method

A method of calculating the annual percentage rate for installment loans where the interest assessed during each payment period (usually each month) is based on the current outstanding balance of the installment loan.

bitcoin

A peer-to-peer experimental digital cash currency based on an open source cryptographic protocol that can be bought at an exchange and transferred through a computer or smart phone without an intermediate financial institution

credit statement (billing statement)

A periodic report that credit card companies issue to credit card holders showing their recent trans- actions, balance due and other key information.

Effective Marginal Tax Rate

A person's total marginal tax rate on income after adding federal, state, and local income taxes as well as SS and Medicare taxes

prepaid cards

A plastic payment card that is easy to use and reloadable, and it may be used almost anywhere to buy online, make bill payments, get cash at ATMs, pay bills, get direct deposits, and make everyday purchases.

Umbrella liability insurance

A policy that extends the basic liability coverage provided in different types of policies including home, auto, boat, and tenant. Protects your assets & future earnings from lawsuits 321 STUDY how it works

Sponsor

A powerfully positioned champion who "leans in" with an employee by advocating on their proteges' behalf and guiding them toward key players and assignments.

10-Q report

A report required by the SEC prepared by the company showing: its financial results for the quarter a discussion from management a list of material events and other RISK FACTORS that have occurred forecasts of the company's future notes of any significant changes or events QUARTERLY

Medicare Parts A, B, C, and D

A: Hospital insurance B: Supplemental Medical Insurance C: Medicare Advantage Plans D: Prescription Drug Coverage 344-346

In bankruptcy, what is taxed?

ALL debt, including forgiven debt

Financial Responsibility

Accountability for your future financial well-being. Striving to make wise personal financial decisions.

ACA

Affordable Care Act, Obama Care Patient Protection and Affordable Care Act (PPACA) 335

listing agreement

Agreement that brokers require homeowners to sign that permits the broker to list the property exclusively or with a multiple-listing service.

Rights of life insurance owner

All rights and privileges granted by the policy, including the right to amend the policy and the right to designate who receives the proceeds. 373

Living Will

Allows you to document in advance your specific wishes concerning medical treatments in an emergency or during end-of-life health care. 353

10 Essential health benefits of ACA

Ambulatory patient services, such as doctor's visits and outpatient services Emergency services Hospitalization Maternity and newborn care Mental health and substance use disorder services, including behavioral health treatment Prescription drugs Rehabilitative services and devices Laboratory services Preventive and wellness services and chronic disease management Pediatric services, including oral and vision care 338

disposable income

Amount of income remaining after taxes and withholding for such purposes as insurance and union dues.

Coverdell education savings account

An IRS-approved way to pay the future education costs for a child younger than age 18 whereby the earnings accumulate tax-free and withdrawals for qualified expenses are tax-free

Individual Mandate

An affordable Care Act provision that requires that all Americans and legal residents buy health coverage no matter how sick and regardless of any pre-existing health problems

credit

An arrangement in which goods, services, or money is received in exchange for a promise to repay at a future date.

subleasing

An arrangement in which the original tenant leases the property to another tenant.

electronic benefit transfer (EBT) cards

An electronic system that allows state welfare departments to issue benefits via a magnetically encoded payment debit cards.

certificate of deposit (CD)

An interest-earning savings instrument purchased for a FIXED period of time, such as 6 months, or 1, 2, or even 5 years FIXED time deposit penalty for early withdrawal

line of credit

An open-end credit account between a financial institution (usually a bank) and a customer that establishes a maximum loan limit that the bank will permit the person to borrow.

Economic Indicator

Any economic statistic that suggests how well the economy is doing now and in the future. ex. unemployment rate, GDP, inflation rate

Why is the accuracy of the application important

Any errors or omissions in the application may allow the insurance company to deny a request for payment (usually within the first year) of the death benefit and instead any premiums will be refunded. 373

Effective employment search strategies

Ask for the Job wait and be patient negotiate and accept the job

Securities

Assets suitable for investment, like stocks, bonds, mutual funds, and real estate. 393

habitability

Assurances of some legally prescribed minimum standard of habitability for items such as running water, heat, and a working stove and the safety of access areas such as stairways.

Bump up scam

Auto dealers sometimes tell people that their credit score is not the best, and as a result, they have to pay a higher interest rate. The dealer then BUMPS UP the interest rate they have to pay to finance their car, truck, or SUV 238-9

Why do some taxpayers have an effective marginal rate as high as 40%?

Because of their Effective marginal Rate (combination of several taxes) plus, If they are also self-employed, they are their own employers so they pay both portions of the SS tax (doubles it).

How to issue a stop payment

Call bank or do it online. Need: check number, amt. & date on check, the person the check is payable to and reason for stop payment.

nonrefundable tax credit

Can reduce one's tax liability only to 0. If the credit is more than the tax liability, the excess is not refunded.

refundable tax credit

Can reduce your tax liability to below 0 and the excess amount will be refunded You must file an INCOME TAX RETURN to achieve this

Legal rights of employees

Can't be forced to go on early maternity leave Can take leave for personal or family medical problems, pregnancy, etc. Can't be unfairly discriminated against or harrassed and employed in a safe workplace

Different formats of résumés

Chronological: reverse order (most recent first) Skills: emphasizes aptitudes and qualities functional: emphasizes career-related experiences

Portfolio

Collection of investments assembled to meet your investment goals. 393

Federal Insurance Contributions Act (FICA)

Composed of Social Security and medicare taxes

Taxes

Compulsory government-imposed charges levied on citizens and their property

Condo vs. co-op

Condo developments are run by the owners through a homeowners association while a co-op is run by professionals. They both pay monthly fees: Condo owners pay monthly for the management of the common grounds and facilities and insurance on the building while Co-op owners have the same fees plus an additional to pay for the professional management.

loan

Consumer credit that is repaid in equal amounts over a set period of time.

Distinguish between consumption, savings, and investments

Consumption - Spending on Goods and Services Savings - Income not spent on current consumption for use in achieving future goals Investments - Assets purchased with the goal of providing additional future income.

credit history

Continuing record of a person's credit usage and repayment of debts.

insurance policy

Contract between the person buying insurance (the insured) and the insurance company (the insurer).

promissory note (note)

Contract that stipulates repayment terms for a loan.

credit agreement

Contract that stipulates repayment terms for credit cards.

Growth Stock

Corporations that are leaders in their fields, that dominate their markets, and that have several consecutive years of above- industry-average earnings; pays some dividends. Investor awareness of such corporations is widespread, and expectations for continued growth are high. The P/E ratio is high; betas of 1.5 or more. Well-known growth stocks Lesser-known growth stocks

level-premium term insurance

Cover for 5, 10, or more years with the annual premiums set at the average over that time span 368-9

tax losses

Created when deductions generated from an investment (such as depreciation and net investment losses) exceed the income from an investment.

prestige cards

Credit cards often with a precious metal in the brand name such as "gold," "silver," or "platinum" that require that the user possess superior credit qualifications and offer enhancements such as higher credit limits.

credit & mortgage life insurance

Credit will pay the remaining balance of a specific loan if the insured dies before repaying the debt. Mortgage will specifically pay off a mortgage debt 368-9

Types of preferred stock

Cumulative Noncumulative Convertible Preferred

chargeback

Customers may dispute charges to their credit card when goods or services are not delivered within the specified time frame, goods received are damaged, or the purchase was not authorized by the credit cardholder. Approved by law Must be completed within 60 days of charged bill

Strategies to reduce income tax liability (4)

Defer income: purposefully making arrangements to receive some of this year's income in the next year when marginal tax rate is lower Accelerate deductions: prepaying deductions Take all of legal tax deductions: ex. purchase home w/ mortgage loan, donate and save in taxes Shift income to a child: pay children

Types of Checking accounts

Demand Deposit Share Draft Tiered Interest Lifeline

Financial Statements

Describe an individual's or family's current financial condition.

Ways to get out from under excess debt

Determine all your account balances and required Monthly payments Focus your budget on debt reduction Contact your creditors Don't take on new credit Refinance to lower interest rates Find good help and Avoid bad help (credit counselors that charge fee)

8 steps in calculating your income taxes

Determine your total income Determine and report gross income after subtracting exclusions Subtract adjustments to income to arrive at your adjusted gross income (AGI) Subtract either the IRS's Standard Deduction for your tax status or itemize your deductions Subtract the value of your personal exemptions Determine your preliminary tax liability Subtract tax credits for which you qualify Calculate the balance due to the IRS or the amount of your refund

Durable Power of attorney vs. Limited (special) power of attorney

Durable power of attorney - gives the designated person absolute power to manage your financial affairs. Allowed to make bank transactions, collect Social Security payments, apply for disability, and pay bills while an individual is medically incapacitated. Limited (or special) power of attorney - narrower in scope and could be restricted to one specified act or a certain time period, such as signing the maker's name at the closing of the sale of a home or managing the maker's investment accounts.

professional abilities

Job-related activities that you can perform physically, mentally, artistically, mechanically, and financially

Types of financial needs families must meet upon the death of a family member

Final expense needs Income replacement needs Readjustment-period needs Debt-repayment needs College-expense needs Other special needs 362-3

Distinguish between financial success, financial security, and financial happiness

Financial success - achievement of financial aspirations. Financial security - the comfortable feeling you have when you believe your financial resources are adequate. Financial happiness - the feeling when you are satisfied with your money matters.

cooperative (co-op) in regards to a "type of ownership"

Form of ownership in which the owner holds a share of the corporation that owns and manages a group of housing units as well as common grounds and facilities. Condo the owner owns the legal title, Co-op the owner holds a share worth their unit.

condominium (condo) in regards to a "type of ownership"

Form of ownership with the owners holding legal title to their own housing unit among many, with common grounds and facilities owned by the developer or homeowners association.

Employee benefits / nonsalary benefits

Forms of remuneration provided by employers to employees that result in the employee not having to pay out- of-pocket money for certain expenses

16th ammendement 1913

Grants congress the "power to lay and collect taxes on incomes, from whatever..."

Beta value greater than 1 & less than 1

Greater than 1 - higher than market volatility Less than 1 - less sensitive to the market Both move in the same direction to the market but greater than 1 moves at a higher percentage

6 types of employer provided group health care plans

Health Maintenance Organizations (HMOs) Preferred Provider Organization (PPO) Provider-sponsored network (PSN) Accountable Care Organization (ACO) Health Savings Account (HSA) 342-344

pros & cons of renting

In the short run, renting is usually less expensive than buying. In the long run, the opposite is usually true.

lease

In this context, a contract specifying both tenant and landlord legal responsibilities.

Total Return

Income an investment generates from CURRENT INCOME and CAPITAL GAINS. 394

Inflation

Increase in prices of goods and services (10) o (2-3% = good moderation) Increased wages Increased employment (thoughts: money worth more in future = increased savings)

Capital Gain

Increase in the value of an initial investment (less costs) realized upon the sale of the investment. Money gained by selling investment 394

Durable goods

Items with high selling prices that have relatively long life and provide utility to the user 230

11 suggestions to keep student debt under control

KNOW YOUR LOANS: keep track of the lender, balance, and repayment status for each of your student loans to determine your options for loan repayment and forgiveness. LIMIT STUDENT DEBT: don't borrow more than 50 percent of your first-year salary, 100 percent at the most. Rather than borrow, get a part-time job to cover living expenses. Choose a school that costs less than the big-name college or university. OPEN EVERY PIECE OF LENDER MAIL: Open and read every piece of mail, paper and electronic, you receive about your student loans. KEEP LENDERS UP TO DATE ON YOUR ADDRESS: Whenever you move or change your phone number or e-mail address, tell your lender right away. Otherwise, you might miss the next payment. PREPAY THE LOAN IF YOU CAN: If you can afford to pay more than your required monthly payment toward the "loan balance," you can lower the amount of interest you have to pay over the life of the loan. PAY OFF THE MOST EXPENSIVE LOAN FIRST: If you're considering paying off one of your loans ahead of schedule, experts say to start with the one that has the highest interest rate. Others say to first pay off the one with the smallest balance because you will do so more quickly, providing the gratification and momentum to pay off all your debts. PICK THE RIGHT REPAYMENT OPTION: When your federal loans come due, your loan payments will automatically be based on a standard 10-year repayment plan. If there are other options, you can change plans down the line if you want or need to. KNOW YOUR STUDENT LOAN GRACE PERIOD: A student loan grace period is the period of time a lender gives you to make your repayments without having to pay interest or late fees. FORGIVENESS MAY BE AVAILABLE: For those employed in government, nonprofit, and other public service jobs relief may be possible. The lender may offer some type of forbearance, often for a fee, or you may be able to make interest-only payments for some period of time. You also may get deferments, forbearance, and/or an income-based repayment schedule. Do Not Extend the Loan(s). Extending your repayment period beyond 10 years can lower your monthly payments, but you'll end up paying more interest. To Consolidate or Not: A consolidation loan is the combining of several unsecured debts into a single, new loan that is more favorable. It may result in a lower interest rate or a lower monthly payment, or both.

Obsolete Knowledge

Knowledge that may have been valid at one time but is erroneous and no longer valid. Also knowledge that we are not motivated to validate with new information.

What to LEAVE, and GOALS when window shopping for a big ticket item

Leave: Credit cards, debit cards, & check books Goal: Get info on financing options, leasing vs. financing, & warranties 237

Advance directives (advance medical directives)

Legal documents that explain the type of end-of-life health care you do or do not want when you cannot make your own decisions because of illness or incapacity 353

title

Legal right of ownership interest to real property.

Asset formula

Liabilities + net worth

uniform settlement

Lists all of the costs and fees to be paid at the closing. final figures are calculated right at the end of the deal when all parties know the loan is going to close.

Municipal Government Bonds (munis)

Long-term debts (bonds) issued by local governments (cities, states, and various districts and political subdivisions) and their agencies. Tax-free/Tax-Exempt

2 Channels available for uninsured Americans to find insurance under ACA

Lower-income Americans: covered via a federally funded expansion of Medicaid Everyone else: access to subsidized policies sold by private insurers who cannot discriminate based on medical history that are subsidized depending upon one's income 335

5 Payout/settlement options

Lump sum payment Installment payments for a fixed period Income payments of a fixed amount Life interest income payments only Income payments for life 12.3c

Secrets to investment growth

Make savings & investing AUTOMATIC Minimize expenses or costs on investing

professional networking

Making and using contacts with in- dividuals, groups, and other firms to exchange career information.

investment certificates

NOT CDs. an investment product offered by an investment company or brokerage firm designed to offer a competitive yield to an investor. Avoid these

Problems w global investment risks

Nationalized assets exchange rate changes different accounting and auditing rules varying economic conditions in different parts o he world varying laws respecting the private ownership of property or capital economic or military disputes between nations

cash advances

Obtained by credit card customers from an ATM or over the counter at a bank or other financial agency, up to a certain limit. has a fee of 3-5% of amount borrowed

entrepreneur

One who is starting out a company and is hopeful about their situation because they organize, manage, and assume the risks of a business or enterprise

Voluntary system

Our system of tax collection is required but is considered voluntary You are responsible for filing the appropriate tax returns on or prior to the due date

debt limit

Overall maximum you believe you should owe based on your ability to meet repayment obligations.

Follow the scenario for trying to fit the purchase of a new car in budget

P 233

periodic tenancy vs. tenancy for a specific time

PERIODIC TENANCY: for example, week-to-week or month-to- month residency), where the agreement can be terminated by either of the parties if they give proper notice in advance TENANCY FOR A SPECIFIC TIME: usually for one year. When this period expires, the agreement terminates unless prior notice is given by both parties that the agreement will be renewed.

Term Life Insurance

PURE PROTECTION against early death; pays benefits only if the insured dies within the time period (term) that the policy covers For a specific face amount For a specific time period (term) May be renewed for a new "term" Premium amount usually doesn't go up within a term Premium goes up with each renewal as you get older 368

Page 82: Know in what category each item on the balance sheet should go

Page 82: Know in what category each item on the balance sheet should go

Required for employers to.. (4) Legal Rights for Employees

Pay minimum wage established by federal, state, or local laws Provide unemployment insurance Provide workers' compensation benefits for job-related injuries or illness Pay SS taxes to gov., which are then credited to the employee's lifetime earnings accounted maintained by the SS Admin

Alternative lenders with high-priced loans

Payday lenders: businesses that grant credit when they honor a personal check but agree not to deposit check for a week+ illegal in some states Rent-to-own program: renter doesn't own product until final payments made. ex. furniture. default=repossession Pawnshop: business that offers secured loans to people with items of personal property used as collateral that borrower turns to pawnshop. (Items used for blackmail)

subprime borrowers

People with poor credit histories who are required to pay lenders more than others for credit.

Disposable income method

Percentage of disposable personal income available for regular debt repayments aside from set obligations. focuses on the amount of monthly debt repayments-- not one's total debt 87 / 185

commission

Percentage of the price of the home given to the real estate agent

How can pets affect security deposits

Pets often require a larger security deposit

Pg 365 & 367 Read the section about calculating the life insurance needs of a young person and focus on the portion of the text on page 366 and 367 mentioning your risk of dying and insurance rate schedules.

Pg 365 & 367 Read the section about calculating the life insurance needs of a young person and focus on the portion of the text on page 366 and 367 mentioning your risk of dying and insurance rate schedules.

Interest

Price for borrowing money Money received when lending money

Values

Principles, Standards, or qualities that you consider desirable

Property vs. Liability losses

Property: the financial loss can be estimated Liability: estimating the financial loss is complex The severity of loss depends on the circumstances of the person you harmed

Liability insurance

Protection from financial losses suffered when you are held liable for others' losses

professional liability insurance (aka malpractice insurance or errors and omissions insurance)

Protects individuals and organizations that provide professional services when they are held liable for their clients' losses. ex. Doctors

title insurance

Protects the lender's interest if the title search is later found faulty. Your attorney or title company will conduct a title search by inspecting court records and prepare a detailed written history of property ownership called an abstract.

Property Insurance

Protects you from financial losses to property such as damage or destruction 301

Consumer Reports

Provide 2-5 page narrative analyzing the products and summarizing the information in chart form; The April issue is devoted entirely to the purchase of automobiles 231

Whole (Straight) Life insurance

Provides lifetime life insurance as long as the premiums are paid every year the person is alive. The policy remains in effect and does not need to be renewed. Most popular cash-value insurance 369-70

Universal Life Insurance

Provides the pure protection of term insurance and the cash-value buildup of whole life insurance, along with variability in face amount rate of cash-value accumulation, premiums, and rate of return. 371-2

2 primary risks related to longevity and finances

Risk of LIVING TOO LONG and DYING TOO SOON (life insurance should be focused on this)

Service Contract (Extended Warranty)

Purchased separately from product. NOT a financially wise decision because it makes no economic sense to insure against risk that can, if necessary, be paid for out of current income or savings. Horribly overpriced. 80% of contracts unused It's cheaper to set aside money for rainy-day repairs p. 244, 245

Pure risk

Pure risk exists when there is no potential for gain, only the possibility of loss. Fires, automobile accidents, illness, and theft are examples of events involving pure risk.

Investing

Putting saved money to work so that it makes you even more money. 393

13 risks in investing

Random/unsystematic risks Market/Systematic Risk Business failure risk (Ex. Kmart, Blockbuster, Sears) Inflation Risk Deflation Risk Time Horizon Risk (How long before I get money back; ex. CD, bonds, stock) Regulatory/Political risk Business Cycle Risk Volatility risk Global investment risk (foreign) Liquidity risk (speed: how quickly can I get cash?) marketability risk (what price will I get when I want to sell?) reinvestment risk (if I sell this investment, where can I invest the cash to earn at least the same return? investor risk 400-2

Read discussion about the financial advantages of home ownership cvs. renting 9.1d

Read discussion about the financial advantages of home ownership cvs. renting 9.1d

How to reduce random/unsystematic risks

Reduce through diversification Spread out where you put your investments "Don't put all the eggs in the same basket" If you do this, you cut down the risk by 50% If you spread it out within 15 different areas, you reduce the risk to 0% 400-1

How to reduce Market/systematic risk

Reduced by investing in different markets 400-2

Overtime pay required when? NOT required when?

Required working over 40-hours. NOT required: for salaried employies

Emergency Medical Treatment & Active Labor Act

Requires hospitals participating in Medicare (almost all) to provide emergency care to anyone who needs it even if they are unable to pay 35

The Truth in Lending Act

Requires lenders to state the finance charge both in dollars and as an annual percentage rate (APR)

annual percentage yield (APY)

Return on total interest received on a $100 deposit for 365-day period, given the institution's simple annual interest rate and compounding frequency

Review the Common Sense block p 261

Review the Common Sense block p 261

Lenders not allowed to do these during chargeback process (3)

Send dunning letters: notices that make insistent demands for repayment Apply penalties for nonpayment for the amount Send negative information about your account to credit bureau w/o stating "some items are in dispute."

2 categories of liabilities

Short-term (current): Can be paid in 1 year ex. personal loans to other ppl, credit card balances, professional services unpaid (orthodontist, lawyer), unpaid taxes, past-due rent Long-term (noncurrent): Can be paid in more than one year automobile loans, real estate mortgages, student loans

balance sheet or net worth statement

Snapshot of assets, liabilities, and net worth on a particular date.

government benefits

Social security survivor's benefits 363

Medicare Advantage Plans—Part C

Some programs compete with Medicare to serve the elderly and their programs are approved by the government. -A health care plan that offers Medicare benefits through private health plans, such as HMOs and PPOs. -Medicare pays them a lump sum annually to provide Plan A and B coverages. -Offer annual financial incentives for the better plans. -Replace Medicare for one-quarter of the nation's elderly population. -Provide broader coverage than Medicare and some also provide prescription drug benefits. 344-346

contingency clause

Specify that certain conditions must be satisfied before a contract is binding.

2 types of risk

Speculative risk Pure risk

NEVER do these:

Spend more than you earn Only think about money when you a have financial problem Believe and act on financial advice from amateurs rather than trust professional sources

affinity cards

Standard bank cards but with the logo of a sponsoring organization imprinted on the face of the card, meaning that the issuing financial institution donates a small percentage of the amounts charged to the sponsoring organization.

Distinguish standard of living vs. level of living

Standard of living is where you would like to be, and level of living is where you actually are

Interest Inventory considered the gold standard

Strong Interest Inventory Assessment

Study 12.1b page 363

Study 12.1b page 363

Cash-flow statement (aka income & expense statement

Summary of all income and expense transactions over a specific time period

résumé

Summary record of your education, training, experience, and other qualifications.

Trial Hire

Temporary workers (can become permanent) that could last a week or two to determine if candidates can do the work and fit in with the corporate culture

payroll withholding

The IRS requirement that an employer withhold a certain amount from an employee's income as a prepayment of that individual's tax liability for the year. It is sent to the government where it is credited to the taxpayer's account

Fair market value

The amount a willing buyer would pay a willing seller for an item Has a dollar sign

minimum payment due

The amount due monthly on a credit card statement that is no smaller than the amount required by the creditor. 2 choices: pay total amount due, or minimum payment due

Life interest income payments only

The beneficiary can receive the annual interest earned from the death benefit. 12.3c

Income payments for life

The beneficiary may elect to receive an income for life. 12.3c

Income payments of a fixed amount

The beneficiary may receive a specific amount of income per year from the death benefit. Under this option, payments cease when the death benefit and interest are exhausted. 12.3c

Lump sum payment

The death benefit may be received as a lump-sum cash settlement immediately after death 12.3c

the closing

The down payment and closing costs must be paid at a meeting called the closing, which is the final step in executing a real estate transaction and the ownership of the property is transferred

identity theft

The fraudulent acquisition and use of a person's private identifying information, usually for financial gain.

existing assets

The funds held in savings accounts, certificates of deposit, stocks, bonds, and mutual funds are specifically earmarked for some special goal such as retirement, travel, or college for children 363

prime rate

The interest rate banks charge their most credit-worthy customers, and it is sometimes used as a benchmark for other variable-rate loans.

broker's commission

The largest selling cost. These commissions often amount to 6 to 7 percent of the selling price of the home.

Risk

The uncertainty about the outcome of a situation or event Arises out of the possibility an outcome will differ from what is expected

Future Value

The value of an asset projected to the end of a particular time period in the future

Policy limits

The maximum dollar amount that will be paid under a policy

Purchasing Power

The measure of the goods and services that one's income will buy. (what YOU are able to buy based on your income) (12)

posting date

The month, day & year when credit card issuer processes credit card transaction and adds it to cardholder's account balance 0-3 days after transaction date

FICO Score

The most widely known credit scoring system used by 90+% of companies when making lending decisions. Fair Isaac Corporation

Gross Domestic Product(GDP)

The nation's broadest measure of economic health Reports measure of economic activity (goods & services) in US (9) o Procyclic o 3% Annual percentage change is healthy for economy (10)

Aptitude

The natural abilities and talents that individuals possess. ex. public speaking? teaching?

credit utilization ratio.. desirable %..

The percentage of a consumer's available credit that he or she has used, which is a key component of one's credit score; a high credit utilization ratio can lower your score. max: 30%

Single-premium Life Insurance

The premium is paid once in the form of a lump sum. The extreme version of limited-pay life insurance 369-70

nonperformance

The right to file a lawsuit in small-claims court against a landlord for nonperformance.

making repairs

The right to make minor repairs and deduct the cost from the tenant's next rent payment. This right is subject to certain restrictions, such as giving sufficient prior written notification to the landlord.

Problem if inflation rate is greater than interest rates

The rise in interest rates do not provide "real" gains.

Rebate

The seller refunds a portion of the purchase price of the product either as a direct payment or a credit against the purchase 238-9

Personal Finance

The study of personal and family resources important in achieving financial success and involves Spending, Saving, Protecting, & Investing Resources

Recession

The term used to describe a prolonged economic contraction and downturn phase. A 2% economic decline that lasts for 10 months

billing cycle

The time period between when credit statements are sent to borrowers 1 month

finance charge

Total dollar amount paid to use credit including interest and any other required charges such as a loan application fee 182 (READ)

Expansion Phase

Under these conditions, consumers find it easier to purchase goods on CREDIT by borrowing money to make purchases called LEVERAGE (another word for credit) low-interest rates businesses expand, investors anticipate higher profits & stock prices go up

Career fairs

University-, community-, and employer-sponsored events for job seekers to meet with many employers quickly to screen potential employers.

3 types of non-credit card debt

Unsecured personal loans: available on as-needed basis; low interest; repay every 2-5 years Home Equity Credit Line: borrower uses equity of their home as collateral. Overdraft Protection: protects account from overdraft fees when writing check w more than amount in bank. Missing amount is loaned and charged interest.

Technical Analysis

Used by investors to predict the success of a stock based on indicators of the workings of the market as a whole 429

Checking Accounts

Used for day-to-day spending with easy withdrawals and deposits Accessed through: Checks, Debit cards, & Electronic Transfers

FSA debit card (aka flexcard)

Used to access and spend funds from a flexible spending account

digitalization

Using digital technologies into everyday life to change a business model. Ex. Apple watch took everyday watch and put messaging, call, and other technologies.

Health Care Penalty

Voided in January 2019 If you don't have health insurance you must pay a penalty tax equal to the greater of 2.5% or $695 (up to family max of $2,085)

Types of income reported to IRS

Wages and salaries commissions bonuses professional fees earned hobby income tips earned BOOK p. 120-121

cosigner

When a person accepts the legal obligation to make payments on another person's debt should that person default. Someone else who signs the loan.

Risk questions to ask before investing

Which risk am I worried about? What actions will control, reduce, or eliminate the risk that worries me?

Limited-pay whole life insurance

Whole life insurance that allows premium payments to cease before the insured reaches the age of 100. 369-70

Life insurance policy

Written contract between an insurance policy holder/owner and an insurance company, where the company promises to pay a designated beneficiary a sum of money (the "benefits") upon the death of the insured person. 373

deed

Written document used to convey real estate ownership. Warranty deed is the safest.

purchase offer

Written offer to purchase real estate.

Components of a Goal

You must have a: Specific Amount (Save $120) Specific time or time horizon (every month for 5 months) Specific purpose or destination (To pay for driver's ed class) 78

counteroffer

a legal offer to sell (or buy) a home at a different price and perhaps with different conditions from those outlined int he original offer

exemption

a legally permitted amount, an allowance to reduce one's taxable income, based on the number of people supported by the taxpayer's income

Recourse clause

a loan contract that defines what actions a lender can take to get money from a borrower in the case of default.

Provider-sponsored network (PSN)

a managed care organization consisting of a group of doctors, hospitals, and other health care providers (and not insurance companies) who have banded together to offer a health insurance contract. 342-344

damage deposit

a sum of money paid in relation to a rented item to ensure it is returned in good condition. Equals a month rent, but is refundable if property is in good condition when tenants leave.

FSAs are subject to a "USE-IT-OR-LOSE-IT" rule

unspent dollars in the account at the end of the year are forfeited and not returned to the employee

arbitration

a neutral 3rd party hears (or reads) the claims made, and the positions taken by the parties to the dispute and then issues a ruling that may or may not be binding on one or both parties 250-1

stop-payment order

a notice made by a depositor to his or her bank directing the bank to refuse payment on a specific check drawn by the depositor. $30-40 charge p. 158

stored-value cards

a payment card with a monetary value stored on the card itself, not in an external account maintained by a financial institution, that is usually issued in the name of an individual account holder

grace period

a period of time (usually 30 days following each premium due date) during which an overdue premium may be paid without a lapse of the policy. 373

real estate broker

a person licensed by a state to provide advice and assistance, for a fee, to buyers or sellers of real estate. Can play multiple roles either as a listing agent or a selling agent

Beneficiary

a person who receives life insurance proceeds as per the policy

certified check

a personal check draw on your checking account on which your financial institution imprints the word "certified," signifying that the account has sufficient funds to cover its payment $10-20 fee

credit cards

a plastic card with imprinted numbers and a magnetic strip, issued by a bank or business authorizing the holder to use it as payment instead of cash to buy goods or services on credit

debit cards

a plastic payment card that provides the cardholder electronic access to his/her bank account at a financial institution

Economy

a political system of managing productive resources and employment resources

mediation

a procedure in which a neutral 3rd party works with the parties involved in the dispute to arrive at a mutually agreeable solution 250-1

long-term gain/loss

a profit or loss on the sale of an asset that has been held for more than a year

dependent

a relative or household member supported by the taxpayer's income for whom an exemption may be claimed

bump-up CD

a savings certificate entitling the bearer to take advantage of rising interest rates with a one-time option to "bump up" the interest rate received

average-balance account

a service fee is assessed only if the average daily balance of funds in the account drops below a certain level during the specified time period 157-158

upside down

a situation where the owner of a financed asset owes more than it is worth, thus creating negative equity. 238-9

endorsement

a special addition to an insurance policy

adjustments

a special class of dozen-plus subtraction from gross income that reduces one's income (to get the income down to adjusted gross income)

Corporation

a state-chartered legal entity that can conduct business operations in its own name.

gift card

a stored value card that often has an activation fee, expiration date(no shorter than 5 years), and an inactivity fee if there are no transactions within a year

career plan

a strategic guide for your career through short, medium, longer, and long term goals as well as future education and work-related experiences

warranty

a type of guarantee that a manufacturer or similar party makes regarding the condition of its product 244

mutual savings banks

a type of thrift institution that also accepts deposits and makes housing and consumer loans

Sentiment

a view of or attitude toward a situation or event; an opinion. an attitude, thought, or judgment prompted by feeling : PREDILECTION a specific view or notion : OPINION

gig economy

a workplace economy that allows independent contractors (rather than employees) to move from one temporary job to the next without benefits

taxable income

amount determined by subtracting various exclusions, adjustments, exemptions, and deductions from total income. The result is the amount tax is figured

Fundamental analysis

used by investors to evaluate the financial strength of the company 429

STEM Majors

academic majors in science, technology, engineering, and mathematics

savings institutions (aka thrift institutions)

accept deposits and provide mortgage and personal loans to individuals

commercial banks

accepts a deposit in checking and savings accounts and provides transactional services such as accepting deposits, making business loans, and offering basic investment products

student checking account

account offered by credit unions and banks that is better for students than another type of bank account, usually because they offer excellent benefits, including a low minimum balance, minimized fees, and free online bill pay

hazard reduction

action taken by insured to REDUCE THE PROBABILITY of a loss occurring

loss reduction

action taken by the insured to lessen the SEVERITY of loss if a peril occurs

Lagging Economic Indicators

actual data from the past. o Ex. GDP, rate of employment, and rate of inflation

mortgage lock-in

an agreement that includes a lender's promise to hold a certain interest rate for a specified period of time, such as 30 or 60 days.

above-the-line deductions

adjustments subtracted from gross income whether taxpayer itemizes deduction or not called this because it is subtracted on 1st page of tax form just ABOVE THE LAST LINE where you enter your adjusted gross income

gross income

all income (both earned and unearned) received in the form of money, goods, services, and property before exclusions and deductions that a taxpayer is required to report to the IRS

acceleration clause

allow a lender to require a borrower to repay all of an outstanding loan if certain requirements are not met, such as missing one or more repayments. Due and payable upon demand of creditor Found in credit contracts

COBRA rights

allows a former employee to remain a member of a group health plan for as long as 18 months if the employee worked for an employer with more than 20 workers. Apply to your dependents for 36 months. The Consolidated Omnibus Budget Reconciliation Act of 1985 345

tax credit

allows a reduction in one's tax liability on a dollar-for-dollar basis that is a direct subtraction of your tax liability $100 tax deductions saves $25 if in 25% bracket. $100 in tax credit gives you $100

premium-only plans (POP)

allows employees to withhold a portion of their pretax salary to pay their premiums for employer-provided health benefits. Ex. health, dental, vision, and disability insurance. Ex. give 4,800 annually to employer to pay for employer-sponsored health insurance premium. You save 1,920 (4,800 x .40 [effective marginal tax rate]) because this amount is not taxed

Nominal Income

also called MONEY INCOME; income that has not been adjusted for inflation and decreasing purchasing power

Bond Rating

an impartial outsider's opinion of the quality - or creditworthiness - of the issuing organization

negotiable order of withdrawal (NOW) account

an interest-earning checking account at a depository institution

career planning

can help you identify an employment pathway that aligns your interests and abilities with the tasks and responsibilities expected by employers over your lifetime

hazard

any condition that increases the probability that a peril will occur

perils

any event that can cause a financial loss

money market account (MMA)

any of a variety of interest-earning accounts offered by depository institutions that pays slightly high interest rates (compared with regular savings accounts) and offers some check-writing privileges 161

Savings Accounts

are "time deposits" meaning that the intent is for the money to stay on deposit rather than be available any time as with "demand deposits" in checking accounts.

claims adjuster

assess the loss and make an estimate of the amount the insurance company will pay

Coverage B: medical payments insurance

automobile medical payments insurance personal injury protection (PIP) Subrogation rights p 215 table

online banks

banks that are regulated just like any other bank, even those they operate entirely over the internet, yet because they avoid the "bricks and mortar" costs of conventional institutions they often pay higher interest rates than other institutions.

All risk (open-perils) policies

covers losses from all perils except those specifically mentioned

Named-perils policies

covers losses from perils that are specifically listed on the policy

college-expense needs

death of a parent can impede planning for children's college expenses 362-3

Appraisal

decides market value

Basic components of insurance policies

declarations insuring agreements exclusions conditions endorsements (aka riders in life insurance)

filing status

defines the type of tax return form an individual will use as it is based on marital status and family situation , and it is a description of one's marital status on the last day of the year

Treasury bills, notes, and bonds

discount yield, I-bonds TIPS

debt payments-to-disposable income method

divide your nonmortgage debt payment by your disposable (take-home) income considered over indebted if ratio is more than 15% 185 / 6.2b

loan contract (loan agreement)

document that evidences a loan includes rules, type/value of collateral pledged, interest rate & fees, and loan repayment agreement.

Investor risk

does the investment worrying you? are yo considering investing in something you don't understand? are you "married" to the investment

Face amount

dollar value of protection as listed in the policy and used to calculate premium 368-9

cashier's check

drawn on the account of the financial institution itself and thus, backed by the institution's finances $10-20 fee

liquidity

ease with which an asset can be converted to cash

Unexcused debts for bankruptcy

education loans that have come due within the previous seven years fines alimony child support income taxes for the most recent three years and debts for causing injury while driving under the influence of alcohol or drugs.

matching contributions

employer programs that match employees' 401(k) contributions up to a particular percentage ex. you contribute $1,000 to your 401(l), your employer may choose to match that 100% or 50%, etc. (their choice) to put into your 401(k) Free money

assets

everything you own that has monetary value

3 sources of funds that survivors use to meet their financial needs

existing assets government benefits life insurance: can close any remaining gaps 363

Speculative risk

exists in situations where there is potential for gain as well as for loss. Ex. Investments such as those made in the stock market

Business (economic) cycle

expansion, peak, contraction, downturn, trough, recovery, & expansion. Trend (straight line).

Fixed expenses

expenses often in the same amount that recur at fixed intervals ex. rent payments, automobile installment loans, internet STUDY EXAMPLES pg 84

variable expenses (aka flexible expenses

expenses over which you have considerable control ex. food, entertainment, clothing, child care, magazine subscriptions STUDY EXAMPLES pg 84

transaction fees

fees charged whenever a credit card is used for a balance transfer or cash advance

employment agency

firm that locates employment for certain types of employees

variable-rate loan.. have interest rate caps..

fluctuating interest rate because it is tied to an underlying benchmark interest rate that changes periodically. adjusted annually/monthly interest rate caps: limit how much rate can increase

Job Interview

formal meeting between employer and potential employee to discuss job qualifications and suitability

Manufactured Home

fully or partially factory-built housing units designed to be transported (often in portions) to the home site. They depreciate in value each year. While other types of dwellings tend to go up in value.

time deposits

funds on deposit in a savings account (rather than demand deposits) require that account holders to give 30-60 days notice for withdrawals

Only certain losses are insurable

furtuitous, financial

Formula for TAXABLE INCOME... After this number is calculated, what is determined from it?

gross income - adjustments - amount permitted for 3 exemptions allowed - standard or total itemized deductions preliminary tax liability determined via the tax tables or tax rate schedules

career goal

identifying what you want to do for a living, whether a specific job or field of employment

closing costs

include fees and charges other than the down payment and typically vary from 2 to 7 percent of the mortgage loan amount.

real income

income measured in constant prices relative to some base time period. Money after Inflation rate has been removed It reflects the actual BUYING POWER of the money you have as measured in constant dollars

exclusions

income not subject to federal taxation ex. gifts, inherited money or property, garage sale income BOOK: p. 122 & 123

types of insurance agents

independent: represent several insurance companies Exclusive: represent 1 company (aka captive agents or direct sellers)

Roth IRA Accounts

individual retirement account of investments made with after-tax money; the interest on such accounts is allowed to grow tax-free, and withdrawals are also tax-free

Leading Economic Indicators (LEI)

information about expected future economic trends (prediction) o Taken from the consumer confidence Index & the Purchasing Managers Survey o only a Sentiment, opinion, belief

Federal Deposit Insurance Corporation (FDIC)

insures deposits in banks with the Deposit Insurance Fund (DIF)

mortgage insurance

insures the difference between the amount of down payment required by the lender's desired LTV ratio and the actual, lower down payment.

Corporate Bonds

interest-bearing certificates of long-term debt issued by a corporation

Bonds

interest-bearing, negotiable certification of long-term debt Can be bought and sold many times before maturity

traditional individual retirement account (IRA)

investment account that reduces current year income, and the funds in the account accumulate tax-free

Mutual funds

investment companies that raise money by selling shares to the public and then invest that money in a diversified portfolio of investments (154) NOT ALL INSURED: AT RISK self contribution--> mutual fund --> growth in the value of the stock benefits mutual fund <---> benefits growth of the stock

unearned income

investment returns in the form of rents, dividends, capital gains, interest, or royalties

Privately held corporation

is held by a relatively small number of people and is not traded on a public stock exchange.

Public corporation

is one that issues stock purchased by the general public and traded on stock markets such as the New York Stock Exchange.

3 types of joint ownership

joint tenancy: husband/wives, each person owns whole of asset. Don't need approval of other to dispose tenancy in common: 2+ own. Each retains control over a separate piece of property rights tenancy by the entirety: only for married. same as joint tenancy except one person can't transfer their interest in the property w/o consent of other spouse 165

A wise rule to follow with credit cards

keep credit card transactions limited to what you can pay off in full when the bill arrives

financial literacy

knowledge of facts, concepts, principles, and technological tools that are FUNDAMENTAL to being smart about money

statement date (billing/closing date)

last day of month when transactions are reported on credit card statement

stock brokerage firms.. insured by who?

licensed financial institutions that specialize in selling and buying stocks, bonds, and other investments and providing advice to investors protected by the Securities Investor Protection Corporation (SIPC), a non- government entity

miscellaneous fees

loan origination fee, home inspection, appraisal fee, survey, home title transfer fee, notary fees, Pro-rata interest

deficiency payments clause

loan requirement stating that if one default occurs on secured loan, the borrower can REPOSSESS what is secured and bill borrower for difference

Balloon loan

loan that requires a larger than usual one time payment at the end of the term 238-9

Securities Market Index

measures the average value of a number of securities chosen as a sample to reflect the behavior of a more general market

Insurance

mechanism for transferring and reducing pure risk

money market fund (MMF)

money market account in a mutual fund rather than at a depository institution

after-tax dollars

money on which an employee has already paid taxes

Procyclic Economic Indicator

moves in the same direction as the economy ex. Retail sales go up = economy is increasing (9)

Countercyclic Economic Indicator

moves the opposite direction of economy ex. Unemployment rate goes up = Economy is decreasing (pg. 10)

Examples of adjustments

moving expenses to a new job, higher-education expenses, 401(k) accounts, health savings accounts

2 main approaches for determining the dollar amount of life insurance

multiple-of-earnings approach: multiplies income by factor (ex.. 7), only addresses lost income needs-based approach: MORE ACCURATE, The best method as it includes all of the needs that must be met not just the replacement of income 364

NOT allowed when selecting employees

no discrimination on age, gender, race, color, etc.

non-sufficient funds (NSF)

not enough money in an account in order to honor a check drawn on that account Bank will charge $35+ for this results in an overdraft, bounced check, bad check

Loss frequency

number of times a loss may occur over a period of time Is the loss likely or not likely? ex. a 100-year flood event, work accidents/year

Downturn Phase?

o DELEVERAGE occurs: less borrowing and more debt paying o Retail sales lower & unemployment increase o Lower corporate profits o cheaper stock market price

Peak & Contraction Phase

o Less money to lend o Short term/regular interest rates rise o Borrowing Slows o Purchase of high priced goods decrease

financial loss

objectively measured in dollars and cents - a decline in value assets or income

deficiency balance

occurs when the sum of money raised by the sale of the repossessed or foreclosed collateral FAILS TO COVER THE AMOUNT owed on the debt plus any repossession expenses (collection, attorney, and court costs) paid by the creditor.

electronic money management

occurs whenever transactions are conducted without using paper documents

General (full-service) Brokerage Firms

offer a full range of services to customers, including investment advice and research

limited warranty

offers less protection than a full warranty ex. it may offer only free parts (not labor) 244

brokerage certificates of deposit

often pay the highest yields and are available through stockbrokerage firms

Marginal

on the edge

freelancing

one chooses to be employed with a more flexible work arrangement (often part-time) than full-time on a contract basis, often working at home, for a variety of companies, as opposed to working as an employee for a single company

Lapsed policy

one that has been terminated because of nonpayment of premiums. 373

bots (chatbots)

online texting services offered by all financial institutions and other venders who provide information and services, which can conduct human-like conversation formerly reserved for people

Cash basis

only transactions involving actual cash received or spent are recorded

super NOW accounts

pay slightly higher interest rates than a regular checking account but place a limit on the number of checks that can be written each month

2 types of "Pay as you go" systems

payroll withholding: automatic payments removed by employer Estimated taxes: required payments 4x/year

rewards credit card

pays cardholder with rewards when using credit card ex. cash, airline miles

estimated taxes

people who are self-employed or receive substantial income from an employer that isn't required to practice payroll withholding (ex. lawyers and rental property owners) are required by the IRS to estimate their tax liability and pay their taxes in advance in quarterly installments

ATM cards

plastic cards to make purchases and withdraw money from ATMs that require use of a PIN number

4 useful ways of reducing taxable income

premium-only plans (POP) transit spending accounts dependent care flexible spending accounts defined contribution retirement plans

Taxes can be classified in 2 ways

progressive tax: progressively increases as a taxpayer's taxable income increases Regressive tax: the tax rate stays the same for all income with the result that lower-income people pay proportionately more in taxes

guaranteed renewable term insurance

protects you against the possibility of becoming uninsurable 368-9

insurance companies

provide property, liability, health, life, and other insurance products

loan estimate

provides a standardized disclosures that are helpful to consumers in understanding the key features, costs, and risks of the mortgage loan for which they are applying.

Prescription Drug Coverage—medicare Part D

provides an optional prescription coverage plan. Participants pay an initial portion of prescription costs, about $30 a month depending on their level of income. 344-346

closing disclosure

provides disclosures that will be helpful to consumers in understanding all the costs of the home loan transaction.

Multiple indemnity

provides for a doubling or tripling of the face amount if death results from certain accidents. 373

Medicaid

provides healthcare for over 60 million low-income Americans Mostly children, pregnant women, disabled, elderly needing home care or those living in nursing homes 346

security deposit

provides some assurance that you will not move without paying your rent. Equals last month's rent

Earthquake insurance

purchased separately or as an endorsement to homeowner's insurance

interest inventories

scaled surveys that assess career interests and activities

Security's Street Name

securities certificates kept in the brokerage firm's name instead of the name of the individual investor

tax planning

seeking legal ways to reduce, eliminate or defer income taxes

Proxy

shareholders' written authorization to someone else to represent them and to vote their shares at a stockholder's meeting.

Elevator Speech

short 20-40 second persuasive summary of your experiences and skills when networking.

Greatest risk in investing

short term decision in long tern environment

single-payment loan vs. installment loan

single-payment loan: paid back in a lump sum at a later date installment loan: repaid in regular installments (ex. monthly). includes interest & portion of principal

individual accounts

solely owned by one person who has total control of the asset.

Collateral

something pledged as security for repayment of loan, to be forfeited in the event of a default

share draft account

the credit-union version of a negotiable order of withdrawal (NOW) account Pays interest

minimum-balance account

the customer must keep a certain amount in the account throughout a specified time to avoid a flat service charge 157-158

Maturity date

the date on which the face value of the bond will be paid to the current bond owner

decreasing term insurance

the face amount of coverage declines every year while the premiums remain constant. 368-9

Principal

the face value of the bond

Premium

the fee paid for insurance protection

deductibles

the first part of a loss that must be paid by the insured ex. insured pays the first $500 of the loss

closed-end credit

the full amount owed must be paid back by the borrower by a set point in time. ex. real estate & vehicle loans

Closed-end lease (Walk away lease)

the holder pays no charge if the end-of-lease market value of the vehicle is lower than the originally projected residual value 243

Hospital Insurance—medicare Part A

the hospitalization portion of the program; it requires no premium. Most people do not pay a monthly Part (__) premium because they or a spouse has 40 or more quarters of Medicare-covered employment. 344-346

Dow Jones Industrial Average (DJIA)

the most widely reported of all stock market indexes that tracks prices of 30 actively traded blue-chip stocks, including well-known companies such as American Express and AT&T

Capital gain

the net income received from the sale of an asset above the costs incurred to purchase and sell it

after-tax yield

the percentage yield on a taxable investment after subtracting the effect of federal income taxes that will need to be paid on the investment

readjustment-period needs

the period a family needs to readjust ex. a spouse takes several months off work and/or forgoes her education 362-3

grace period

the period of time a creditor, such as a credit card company, gives you to pay your new charges without having to pay interest on the new balance

breadwinner

the person in a family who earns an income that is primary to a unit of people who are dependent on the person's income

Loss Severity

the potential magnitude of a loss

implied warranty

the product sold is a warranty to be suitable for sale (a warranty of merchantability) and to work effectively whether or not a written warranty exists Required by law Ex. used cars 244-5

Voting Rights

the proportionate authority to express an opinion or choice in matters affecting the company.

actual cash value

the purchase price of the property less depreciation ACV = P - [ CA x (P/LE) ] p. 313

interest-rate risk

the risk that an investment's value will change due to a charge in the absolute level of interest rates

human capital

the skill set, knowledge, and other intangible assets of individuals that can be used to create economic value for the individuals, their employers, or their community

Supplemental medical Insurance—medicare Part B

the supplementary health expense insurance portion for outpatient care, doctor's office visits, and certain other services of the Medicare program. It requires payment of a monthly premium of about $130 (but more for higher income older people). Both components require patients to pay a portion of their costs, recently about $170 a year. The federal government pays 75 percent of Part (__) costs and beneficiaries pay 25 percent. 344-346

grace period

the time in days during which deposits or withdrawals can be made and still earn interest from a given day of the interest period

impulse purchase

unplanned decision to buy a product or service made just before a purchase 236

penalty rate (default rate)

very high interest rate charged by the credit card issuer when a borrower violates the card's terms and conditions 25-35% + ex. late making monthly payments

lifestyle trade-off

weighing the demands of particular jobs with your social and cultural preferences ex. like being in nature, live in rural area

deficit

when expenses exceed income on a cash-flow statement

electronic funds transfer (EFTs)

when funds are shifted electronically among various account and to and from other people and institutions

Surplus (aka net gain or net income)

when total income exceeds total expenses such as reported on a cash-flow statement

no-limit jobs

where people, especially younger workers, are employed in entry-level positions where they are expected to be on-call via a mobile device at all hours of the day and night

Single payer health system

where the government, rather than private insurers, pay for all health care costs 334

credit receipt

written evidence of the items returned that notes the specific amount of the transaction

expressed warranty

written or oral warranties 244

indexing

yearly adjustment to tax brackets that reduce inflation's effects on tax brackets

mutual

you are a mutual owner you get something back for bank's received profit you share in risk and reward

Open-end lease

you must pay any difference between the projected residual value of the vehicle & its actual market value at the end of the lease period 243

Continuous-debt method

you should be able to get completely out of debt every 4 years (other than mortgage)

Lenders only care about...

your ability to make debt repayments They do not want to be bothered about whether or not you are achieving your financial goals