Personal Finance Unit 1-6

Investment triangle

(bottom) 1 Financial security: savings, money market, CD 2 safety and income: insurance, Corp/ govt bonds 3 growth: stocks, mutual funds, real estate 4 speculation: commodities and collectibles

100/300/50

100k medical coverage per person 300k medical coverage per accident 50k in property damage

Dow Jones

30 largest companies

NASDAQ

3000 securities

70-20-10 rule

70% of the money can be spent, 20% should be saved, and 10% paid for debt

Compound Interest Formula

A = P(1+r/n)^nt

Resume

A brief account of one's work experience and qualifications.

voided check

A check that cannot be processed because the maker has made it invalid.

Cleared Check

A check that has gone through the financial institution's processing center and is listed on your monthly statement.

401k

A defined contribution plan that automatically takes out money from an employee's paycheck before income taxes and invests it in mutual funds for purposes of retirement savings

Medicare

A federal program of health insurance for persons 65 years of age and older and disabled

commercial bank

A financial institution that accepts demand deposits and makes loans and provides other services for the public (for profit)

Inflation

A general and progressive increase in prices

Equal Credit Opportunity Act

A law that protects consumers from discrimination in the granting or denying of credit

Bankruptcy

A legal process to get out of debt when you can no longer make all your required payments

Cover letter

A letter you send with your resume to provide more information about you. (Why you're applying/most qualified)

Credit Score

A measure of an individual's credit risk; calculated from a credit report using a standardized formula -FICO -300 to 850

Credit Union

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

Roth IRA

A personal savings plan; contributions are not tax-deductible; earnings are tax-free Individual puts money into acc after taxes

Budget

A plan for making and spending money

credit card

A plastic card used to make purchases now and pay for them later.

Mutual funds

A pool of money used by a company to purchase a variety of stocks, bonds or money market instruments. Provides diversification and professional management for investors.

Internship

A position in which a person receives training by working with people who are experienced in a particular field.

Job

A regular activity performed in exchange for payment

529 plan

A savings plan operated by a state or educational institution designed to help families set aside funds for future college costs

Deposit slip

A slip of paper kept by the bank to show how much money you put into your account. Used when depositing checks/cash into bank acc, signed when you're withdrawing money from the deposited amount; there's a place to add more checks on the back)

Sales tax

A tax on a sale of merchandise or services

Insufficient funds

A term used to indicate that the depositor's account is inadequate to cover the check

Grace Period

A time period during which no finance charges will be added to your account

Mobile Banking

A wireless service that allows financial transactions by using an app or Web browser from a mobile device.

Pure (insurable) risk

Accidental and unintentional

taxable income

Adjusted gross - deductions- exemptions

coordination of benefits

Allows you to combine benefits from more than one insurance plan

Gross income

Amount of money earned before payroll taxes

Premium

Amount you pay monthly, quarterly, semiannually or annually to purchase different types of insurance

Deductions

Amounts subtracted from your gross pay.

commission

An amount paid to an employee based on a percentage of the employee's sales

restrictive endorsement

An endorsement found on the back of a check restricting further transfer of a check's ownership ("for deposit only")

special endorsement

An endorsement indicating a new owner of a check ("pay to the order off")

Certificate of Deposit (CD)

An interest-earning deposit that requires the funds to remain deposited for a fixed term. Withdrawal of the funds before the term expires results in a financial penalty.

ATM/PIN

Automatic Teller Machine (convenient bc you don't have to go to the bank to withdraw or deposit money) Personal Identification Number (allows you access to bank account and provides security)

comprehensive physical damage

Automobile insurance that covers financial loss from damage to a vehicle caused by a risk other than a collision, such as fire, theft, glass breakage, hail, or vandalism. (Non accidental situation)

5 C's of Credit

Character, Capacity, Capital, Collateral, Conditions

Benefits

Compensation in forms other than direct payment (ex health/dental insurance, 401k, paid leave etc)

Desuctible

Cost of a claim that's determined by policy terms

fixed expenses

Costs that do not change from month to month

Renters Insurance

Covers your personal property in a rented apartment or home.

Open-ended credit/revolving credit

Credit is extended in advance with payments that vary. Example: credit card.

As premium goes lower

Deductible goes higher

identtity theft

Deliberate use to someone's identity to gain benefits

discretionary income

Disposable income available for spending and saving after an individual has purchased the basic necessities of food, clothing, and shelter

Medicaid

Federal program that provides medical benefits for low-income persons.

Adjusted Gross Income

Gross income-reductions (before deductions and exemptions)

Simple Interest Formula

I=prt

disposable income

Income remaining for a person to spend or save after all taxes have been paid

NCUA (National Credit Union Administration)

Independent federal agency created to regulate, charter, and supervise federal credit unions

Fair Credit Reporting Act

Law that grants consumers to the right to know who requests to view their credit report over the past year

Rows of a budget

Money earned and expenses you spend on

Income

Money received

Overdraft

Occurs when money is withdrawn from a bank account and the available balance goes below zero

Closed-Ended Credit / Installment

One time loan you'll pay back over specific period of time in payments of equal amounts

Short/mid/long term goals

One year/ 4-5 years/ extended period of time

Credit (bank register)

Outstanding deposits not in bank statement

Debit (bank register)

Outstanding withdrawals

Chapter 7 Bankruptcy

Plan made to use assets to pay of loans, remaining debts forgiven

Columns of a budget

Planned vs actual budget and the difference

Auto Insurance

Protects against losses to property and injuries to people in a car accident.

Homeowners Insurance

Protects against most types of property losses and liabilities related to home ownership

Fair Credit Billing Act

Provides consumers with a means to dispute a billing error on open-ended credit accounts (credit and charge cards)

standard of living

Quality of life based on ownership of necessities and luxuries that make life easier.

Reduced food tax

Reduced tax rate for certain food products (unprepared food, seeds / plants, refrigerated, room temp)

W2

Report sent from the employer to both the IRS and the employee, showing gross income, total taxes paid, and total voluntary deductions. (Must be provided by Jan 31st)

dependent

Someone who relies on someone else for income and care

Net income

Take home pay after deductions

Federal Open Market Committee (FOMC)

The Federal Reserve committee responsible for open market operations and managing the money supply in the United States.

New Balance

The amount you currently owe.

Risk

The chance of loss from an event that cannot be entirely controlled or injury

Federal Reserve System

The country's central banking system, which is responsible for the nation's monetary policy by regulating the supply of money and interest rates

job application

The form you fill out to ask for a job at a business.

credit limit

The maximum dollar amount that can be borrowed

bank reconciliation

The process of matching your checkbook register with the bank statement

1040EZ

The quick tax form most often used, in paper or online, for those with uncomplicated tax situations. (Must be sent to IRS by April 15th)

Coverage

The risks covered and amount of money paid for losses under an insurance policy

W4

The withholding form each new employee fills out, stating the number of exemptions. the more exemptions listed, the less withholding tax will be taken from the paycheck.

Chapter 13 Bankruptcy

Use future earnings / assets to pay debts

online banking

Using the Internet and a bank's website to keep track of bank accounts, moving money from one account to another, and paying bills.

bounced check

When you write a check and do not have sufficient funds in your checking account to cover the check. Fees will be charged for every individual bounced check.

savings account

a bank account that accumulates interest

Savings bond

a bond issued by the government and sold to the general public.

Cashier's Check

a check drawn by a bank on its own funds and signed by an officer of the bank (guaranteed LARGER amount than money order)

Replacement value

a claim settlement method in which the insured receives the full cost of repairing or replacing a damaged or lost item

tax audit

a detailed examination of your tax return by the IRS

Truth in Lending Act

a federal law that requires certain disclosures when extending or advertising credit

income tax return

a form, such as 1040 or 1040EZ, on which a taxpayer reports how much money he or she received from working and other sources and the exact taxes that are owed

speculative investment

a high-risk investment that might earn a large profit in a short time

Credit rating

a measure of a person's ability and willingness to make credit payments on time

Aptitude

a natural ability to do something

Financial planning

a process used to achieve financial success based upon the development and implementation of financial goals and planning

Commodities

a raw material or primary agricultural product that can be bought and sold, such as copper or coffee.

money market account

a savings account that requires a minimum balance and earns interest that varies from month to month

Home Equity Line of Credit

a secured loan.A home equity line of credit is a mortgage loan that allows the borrower to obtain advances up to an amount that represents a specific percentage of the borrower's equity in a property.

Co-payment

a specific amount of money a patient pays for a particular service

Stock index

a statistic that tracks how the prices of a specific set of stocks have changed

Pension

a sum paid regularly to a person, usually after retirement

Gift tax

a tax on money or property that one living person gives to another

Personal Property Tax

a tax on such items as furniture, machinery, and equipment

Coinsurance

a type of insurance in which the insured pays a share of the payment made against a claim.

stop payment order

a written notice that tells the bank not to pay a certain check

money order

a written order for the payment (check) of a sum to a named individual that's gotten at the post office and has a small processing fee (guaranteed/cleared money)

APY (annual percentage yield)

amount of interest that a $100 deposit would earn, after compounding, for one year

checking account

an account at a bank against which checks can be drawn by the account depositor.

FDIC (Federal Deposit Insurance Corporation)

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

Exemption

an amount you may subtract from your income for each person who depends on your income to live

Overdraft protection

an automatic loan made to you if you write a check for more money than you have in your account

blank endorsement

an endorsement consisting only of the endorser's signature

Collectibles

an item valued and sought by collectors.

Periodic Expenses

arise occasionally during the year

Real estate property tax

based on the value of land and buildings

Annual Percentage Rate (APR)

cost of credit expressed as a yearly percentage

Liabilities

debts that you owe

variable expenses

expenses that change from month to month

IRS (Internal Revenue Service)

federal agency responsible for collecting income taxes

Intangible good

goods that we cannot reach out and touch, such as education

COBRA (Consolidated Omnibus Budget Reconciliation Act)

helps with continued medical benefits after leaving your employer.

S&P 500

index that shows the price changes of 500 different stocks, leading securities

life insurance

insurance paid to named beneficiaries when the insured person dies

bodily injury liability

insurance that covers physical injuries caused by a vehicle accident for which you are responsible

Networking

interact with other people to exchange information and develop contacts, especially to further one's career.

Assets

money and other valuables belonging to an individual or business

equity capital

money that a business gets from its owners in order to operate

beneficiary

one who benefits from something; a person who is left money or other property in a will or the like

Insurance

protection against possible financial loss

allowances

reductions in the amount of tax withheld from your paycheck

Estate and Inheritance Tax

tax on the transfer of property when a person dies (fed/state tax)

potential earning power

the amount of money you may earn over time

Liquidity

the ease with which an asset can be converted into cash

Values

the ideas, beliefs, and attitudes about what is important that help guide the way you live

Major Expenditures

the largest expense categories in a spending plan- includes housing, transportation, food, and insurance

Actual Cash Value

the payment you receive is based on the replacement cost of an item minus depreciation

Federal Income Tax

the taxes that the federal government imposes on personal income in order to provide services

tax liability

the total amount of taxes owed

Goals

things you want to accomplish S (specific) M (measurable) A (attainable) R (relevant) T (time-based)

Net worth

total assets minus total liabilities

Opportunity cost

whatever must be given up to obtain some item

Traditional IRA

you can deduct your contribution each year from your taxable income