Personal Finance Exam 1

Practically everything you receive in return for your work or services and any profit from the sale of assets is considered income, whether the compensation is paid in cash, property, or services. Listing these earnings will reveal your:

Total income

FDIC (Federal Deposit Insurance Corporation)

an agency developed by the federal government to regulate banking and and investment activities

credits

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

negotiable order of withdrawal (NOW) account

an interest earning checking account at a depository institution

Certificate of Deposit (CD)

an interest-earning savings instrument purchased for a fixed period of time

The interest rate of most concern to a savings account depositor is the

annual percentage yield (APY)

fixed expenses

expenses often in the same amount that recur at fixed intervals

variable expenses

expenses over which you have substantial control

For couples, the specific money management tasks such as bill paying, overseeing spending, and handling banking can be divided in any way that works for the couple, but making ______ ______ should be a joint endeavor.

financial decisions

Specific long- and short-term objectives to be attained through financial planning and management efforts are one's

financial goals

Documents that evidence financial transactions, such as bills, receipts, credit card receipts and statements, bank records, tax returns, and other documents are called

financial records

Salary reduction programs that set aside a portion of an employee's pre-tax income for child-care expenses and unreimbursed medical and dental expenses are called _.

flexible spending accounts

values

fundamental beliefs about what is important, desirable, and worthwhile

Which of the following is excluded from gross income?

gifts and inheritances

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

Gross Income

the total amount of income from wages before any payroll deductions

taxable income

this amount is determined by subtracting various exclusions, adjustments, exemptions, and deductions from total income, with the result being the income upon which the income tax is actually figured.

emergency fund

this is an account that is used to set aside funds to be used in an emergency, such as the loss of a job, an illness, or one of life many "what ifs". (you should have 6 or 3? months of expenses)

______ are the principles, standards, or qualities considered worthwhile

values

Deductions

variable amounts that you can subtract, or deduct, from your gross income

regressive tax

A tax for which the percentage of income paid in taxes decreases as income increases

flat taxes

A taxation system in which everyone is charged the same rate, regardless of income.

commercial banks

Privately owned financial institutions that accept demand deposits and make loans and provide other services for the public

____ taxes are characterized by higher tax rates on higher levels of income.

Progressive

If you wanted to set up a checking or savings account with another person that granted each of you the right to make withdrawals without consulting the other, you would choose a(n)

joint tenancy account with right of survivorship

The tax rate applied to a taxpayer's last dollar of income is called the _.

marginal tax rate

standard of living

material well-being and peace of mind that individuals or groups earnestly desire and seek to attain, to maintain if attained, to preserve if threatened, and to regain if lost

The amount remaining after all budget classification deficits are subtracted from those with surpluses is:

net surplus

Money Market Account (MMA)

offered by a mutual fund investment company (rather than at a depository institution)

budget

paper or electronic document used to record both planned and actual income and expenditures over a period of time

How far back can the IRS go if you have understated your income?

6 years

gross income

all income in the form of money, goods, services, and/or property

The penalty for tax evasion can include

all of the above

income statement

A financial statement showing the revenue and expenses for a fiscal period.

Which of the following is a federal government agency that administers funds to insure accounts at commercial banks and certain other depository institutions?

FDIC

Credit Union

A nonprofit financial institution that is owned by its members and organized for their benefit.

You and your spouse have $9,000 in allowable itemized deductions in a year when the standard deduction is $12,600 for married taxpayers. How much in deductions are you allowed to take?

$12,600

What is the maximum you can lose if you notify your bank of a lost debit card within two days?

$50

Ways to protect your privacy and reducing the risk of fraud include:

All of these

monetary assets

Assets that can be quickly and easily converted into cash

In monetary assert management, safety means the speed and ease with which an asset can be converted to cash.

False

You should avoid listing specific abilities, such as using Microsoft Excel, in your résumé.

False

Your debts - the amounts you owe to others - are called:

Liabilities

Stewardship

Looking after something so it can be passed on to the next generation

Which of the following would be a fixed expense?

Rent

tax avoidance vs tax evasion

Tax avoidance is legal. Tax evasion is hiding, misrepresenting, or otherwise not recognizing income so as to illegally avoid taxation.

Which of the following reduce the additional income that might come from having a second income?

all of these

Which of the following sets NOW accounts apart from other checking accounts?

They pay interest

savings account

a bank account that earns interest

checking account

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

Which of the following is an employer not legally required to provide to employees?

a retirement plan

progressive tax

a tax that progressively increases as a taxpayer's taxable income increases

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

employee benefits

Which financial statement shows your net worth?

balance sheet

Which of the following financial statements provides a complete snapshot of one's financial condition as of a particular point in time?

balance sheet

University-, community-, and employer-sponsored opportunities for job seekers to meet with many potential employers over one or more days is called a

career fair

The progression from entry level positions to higher levels of pay, skill, responsibility, or authority is referred to as a(n)

career ladder

An interest-bearing savings instrument that requires people to deposit money for a fixed amount of time is called a(n)

certificate of deposit

In preparation for a job interview, you should

compile some personal stories and anticipate interview questions and prepare responses

It is especially important to use "key phrases" when preparing your résumé because

computer software is typically used to scan résumés in order to select better qualified candidates

The amount of take-home pay remaining after all deductions are withheld for taxes, insurance, union dues, and other items is referred to as your __________ income.

disposable

A summary record of your education, training, experience and other qualifications is your

resume

When working on your monthly budget, which of the following is a useful tool to help balance out the variations in income and expenditures from month to month?

revolving savings fund

Secured lock boxes at banks that can be rented by customers for safe storage of documents and other items are called

safe-deposit boxes

tax planning

seeking legal ways to reduce, eliminate, or defer income taxes

The essential first step in budgeting occurs with

setting goals

balance sheet

snapshot of assets, liabilities, and net worth on a particular date

financial goals

specific objectives addressed by planning and managing finances

Which of the following directly reduces your tax liability rather than your income subject to federal income taxes?

tax credit

You pay federal taxes only on your _.

taxable income

The primary reason for giving children an allowance is to

teach them how to handle money

Adjusted Gross Income

the result of adjustments subtracted from gross income

liquidity

the speed and ease with which an asset can be converted to cash