Personal Finance 1521

Types of insurance

-Life -Health -Vehicle -Home -Travel

Saving options

-Savings account -Stock -Bonds -Real Estate

Priorities for responsible money management

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Purchasing Options

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Responsible use of credit

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Cash advance

A cash advance is a service provided by most credit card and charge card issuers. The service allows cardholders to withdraw cash, either through an ATM or over the counter at a bank or other financial agency, up to a certain limit. For a credit card, this will be the credit limit (or some percentage of it).

7 steps to financial peace

Baby Step 1: $1,000 cash in a beginner emergency fund Baby Step 2: Use the debt snowball to pay off all your debt but the house Baby Step 3: A fully funded emergency fund of 3 to 6 months of expenses Baby Step 4: Invest 15% of your household income into retirement Baby Step 5: Start saving for college Baby Step 6: Pay off your home early Baby Step 7: Build wealth and give generously

Consolidation

Debt consolidation is combining several unsecured debts — credit cards, medical bills, personal loans, payday loans, etc. — into one bill. Instead of having to write checks to 5-10 creditors every month, you consolidate bills into one payment, and write one check. Dave Ramsey says: When you do a debt CONsolidation, you just move the debt from one place to another. Debt isn't the problem here; it's the symptom of buying what you can't afford. 88 percent of the time people do debt consolidation, they don't change the behavior and go right back into debt. The only time I recommend debt consolidation is when you're facing bankruptcy. You need to get on a budget and get in attack mode, not do this loan.

Budgeting

It's basically just a plan. When you budget, you're spending with purpose, before the month begins.

Risk-return ratio

Many investors use a risk/reward ratio to compare the expected returns of an investment to the amount of risk undertaken to capture these returns. This ratio is calculated mathematically by dividing the amount the trader stands to lose if the price moves in the unexpected direction (the risk) by the amount of profit the trader expects to have made when the position is closed (the reward).

Saving vs. investing

Saving-Short-term: Ready to go Saving is typically for smaller, shorter-term goals in the near future (usually three years or less) like going on vacation or having money for an emergency. Ready access to cash- A savings account gives you access to ready cash when you need it. But many savings accounts do limit how often you can take your money out. Ask at your bank. -Minimal risk: If your money is in an FDIC-insured savings account, it's at minimal or no risk, because your funds are insured by the Federal Deposit Insurance Corporation (FDIC). That means that if anything ever happened to the bank, the FDIC insures each person's money to at least $250,000. -Earn interest: You can earn interest by putting money in a savings account, but savings accounts generally earn a lower return than investments. Investing-Long-term: Achieve major goals Investing can help you reach bigger long-term goals (at least four to five years away), like saving for a child's college education. -Harder to access cash When you invest your money, it's typically not as easy to get your hands on it quickly as compared to a savings account. -Always involves risk:You may lose some or all of the money you invest. -Potential for profit: Investments have the potential for higher return than a regular savings account. Your investments may appreciate (go up in value) over time. This increases your net worth, which is the value of your assets (what you own) minus your liabilities (what you owe). If you sell for higher price than you invested initially, you make a profit.

Debt snowball

The debt snowball method is a debt reduction strategy where you pay off debts in order of smallest to largest, gaining momentum as each balance is paid off. When the smallest debt is paid in full, you roll the money you were paying on that debt into the next smallest balance.

Balancing checking account

The point of balancing or reconciling your checking account is to make sure you and the bank agree on how much money is in your account. That means you have to keep a record of your spending. The easiest way to do this is to write every transaction in your checking account register when the transaction takes place and keep a running balance.

Sinking fund

a fund formed by periodically setting aside money for the gradual repayment of a debt or replacement of a wasting asset.

Emergency fund

is an account used to set aside funds needed in the event of a personal financial dilemma, such as the loss of a job, a debilitating illness or a major expense.

Mutual Fund

is an investment vehicle made up of a pool of moneys collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and other assets.

Compound interest

is interest calculated on the initial principal and also on the accumulated interest of previous periods of a deposit or loan.

Purpose of insurance

s simply to restore your property and possessions or business to the point it was before the insurable incident occurred, to re-establish normalcy in your life.

Liquidity

the availability of liquid assets to a market or company. -liquid assets; cash. -a high volume of activity in a market.