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