Personal Finance A Exam Review

authorized user

A person who has permission to use and/or carry another person's credit card, but isn't legally responsible for paying the bill. May be fees, no improvement on credit score

lower interest rates. No need to repay until after graduation.

Advantage of federal student loans over private

great way to save money, and used cars don't depreciate in value very much. Used cars unfortunately face more maintenance issues since they've been previously owned, and these maintenance costs are not covered by a warranty like they would be with a new car.

advantages and disadvantages of buying a used car

Charge for overdraft protection, make transactions you don't have money for which is harmful in the long run because you now owe the bank (they charge fees)

What is misleading about the term, "overdraft protection?"

from the credit bureaus Equifax, TransUnion, and Experian, up to 3 times a year with one from each bureau.

Where can you access your credit score for free?

payment history and debt

Which factors have the biggest effect on your credit score?

P2P lenders are more likely to give you a loan because they let you explain why your score is bad, and there are many investors who share the risk. They can also adjust the interest rate based on your credit score.

Which type of lender is more likely to give you a loan if your credit score isn't great?

Overdrafts and credit cards. (Overdrafts let you spend more than you have in your account, and credit cards let you buy what you want with borrowed money. They charge interest.)

Which types of credit involve repaying different amounts each month, depending on your activity?

Credit Utilization Ratio

balance/limit determines

payment is delayed, so they don't feel the pain in the moment while they have just bought or are just experiencing something - instead, they will deal with it later. Additionally, people don't think as much about the costs associated with a credit card, but rather the delight they will get in what they spent it on.

explain the two reasons we tend to spend more with credit than with cash

ARM

fixed or ARM: Carl, who is living in Boston until his girlfriend finishes her med school program there:

setting up direct deposit, knowing how you're protected, and taking advantage of alerts

how do you FULLY maximize all of the benefits of a checking account?

term

how much time you have to pay back the loan.

fixed-rate

interest rate remains constant during the duration of the loan

Banks, insurance companies, landlords, employers, and creditors

people or organizations who can request to see YOUR credit report.

There are no taxes associated with an HSA Pay for medical costs (emergencies and expected) Interest can be earned HSA visa cards make paying easy Money rolls over every year HSA follows you wherever you are in the stage of careers and life

potential benefits of an Health Savings Account

share an entree, join fav restaurant's email list (be careful), search groupon for deals, eat dessert at home

save money when eating out

Disadvantages of prepaid card

There are many fees, it's a hassle to constantly reload money and go to check cashers, less organized

security, fees and interest rates, who can receive and send money

3 criteria to consider when choosing a mobile banking app

300-850

FICO credit score range

Fees for sending money through credit card and for instant transfer. No FDIC insurance, transactions cannot be cancelled, payments must be accepted within 2 weeks

Square cash app cons

General purpose credit cards, store cards, and charge cards (service)

Three types of credit cards

Use paper to your advantage - write everything down, fill out all the forms, and send things in the mail. Provide the evidence in a precise way - explain what's happening and provide paperwork examples. Prepare by giving yourself enough time, and don't wait if you find an error.

3 pieces of advice to someone who finds a credit report error.

safety, convenience, quick access to money, increased savings

4 benefits of direct deposit

debit card

A bank card that automatically deducts the amount of a purchase from the checking account of the cardholder

Prepaid card

A card that allows you to spend only the amount you have pre-deposited into an account.

If a business charges you a higher interest rate or denies an application, if you discover inaccurate information on your credit report as a result of identity theft, or if you are between jobs (not employed but planning to get a job within 60 days)

After 3 free reports, Give 3 situations in which the credit bureaus would have to provide you an additional free report.

net pay

Amount of income left after taxes and deductions have been taken out.

so they can move their existing debt to a new card where they aren't charged any interest for the first little while. This allows them to get out of debt quicker and to get back on their feet. There are more benefits to this, such as combining many payments on one bill and getting rewards.

An example of why someone would want to use a balance transfer

a. $2.75/pound b. $2.20/pound c. Option b, the 5 pound box for $11.

At Grocery Mart, tomatoes are $2.75 per pound, or you can buy a 5 pound box for $11. What is the unit price for the first tomato option? What is the unit price for the second tomato option? Based on price, which is the better value option?

long-term goals, get ahead of inflation, increase wealth

Benefit of investing

avoid debt, have money to buy something you want or need

Benefits of saving

Providing a place to live, investing for the future

Buying a home achieves which two financial goals at the same time?

fees for debit and credit card usage, instant transfer is not always supported, users must have paypal account or email address

Cons of paypal

Only keep credit cards you will currently need with you so you don't risk others getting stolen. Check through statements for suspicious activity Don't leave blank spaces on the receipt when paying with card Be picky about the companies you share your credit card account numbers with (security lock symbol for website, and good companies over phone) Make sure no one sees what you enter into pin pad

Credit card security tips

single payment to keep track of each month, reduced interest on unsecured debt payments. Must meet all payments and can't use credit until complete.

Debt management plan

ATM, P2P, going in person

Depositing money

it lets you determine the price per weight of food, rather than just assuming something is a better deal because it's cheaper overall or because it's "value sized." Finding the lowest unit price will help you get the best deal.

Describe how unit pricing can help you make better financial decisions in the supermarket.

(lowered interest rates, waived fees, or debt settlement negotiations). Not damaging to credit score, debt consolidation loan options. Help or advice, easy to slip back into debt.

Do it yourself

Using a zero based budget does not necessarily mean that your bank account will hit $0 at the end of each month - it's a good idea to have a cushion if you don't use up all your income on expenses so you don't incur overdraft fees. Using a zero based budget just means that all the money you earn in that month gets used up somehow, or has a purpose, rather than just laying around doing nothing or being spent on things out of your budget you don't need.

Does using a zero-based budget mean that your bank account will hit $0 at the end of every month?

Making your own coffee, Eating a packed lunch, Grocery lists, Coupons and deals apps, Price per unit checking, Only use sales on items you need, Spend more on things you care about, and less on things that are less important, Consider eating habits and meal plan, Turn off lights in rooms not being used and unplug unused electronics, Do dishes and laundry early in morning or late at night, Locate cheapest gas stations and go for regular unleaded gas, Consider if you even need a car, Keeping tabs on events and scheduling cheaper entertainment

Every day strategies to save money

Debt is considered part of what you owe, or liabilities, and subtracts from your assets to equal your net worth. Having more debt would contribute to having a lower net worth. Ideally, a person's net worth should increase as they pay off their their debt.

Explain how debt impacts a person's net worth

require you to make a refundable deposit that's held as collateral through the duration of the account. (You can only borrow the equivalent of what you have deposited. You do get your money back at the end and it works just like any credit card.)

Explain how secured credit cards work

a checking agreement gives you an idea of what's involved with different checking accounts, while your checking account statement will tell you specifics about your account, what's been put in and what you owe

Explain the difference between a checking agreement and a checking account statement

change your direct deposit so part of your paycheck goes directly to your savings account. Another way is to set up automatic transfer, where money is transferred from one account like a checking account to your savings account. In both of these methods, there is virtually no work required on your part once everything is set up.

Explain the two different ways you can automate the process of paying yourself first.

fraud alert or security freeze on their own credit report so that businesses are more careful when accepting them for credit or something else. This helps protect them from losing money or weakening their credit score, as the business must be extra sure that their identity is confirmed.

Explain why someone might want to put a "red flag" on their own credit report.

if it's secure, if you can earn interest, what the fees are, and the convenience (if there's an app, atms nearby, etc)

Factors that are important for choosing a savings account

ARM

Fixed or ARM: Kristie, who needs lower payments for a few years, until she's done paying off her student loans, and who could then afford far greater payments

Subsidized direct loans

From an interest perspective, which Federal loan type is best?

unaccepted cash is returned, credit cards not accepted, works best on android phones

Google pay cons

split bills, order online items, keep many cards on phone, fraud protection, tracking of previous purchases, rewards, no cashing out fees

Google pay pros

Every time you complete a transaction with a check or debit card, you should record it in the register. Update it more often if you're having issues with insufficient funds, and compare it to your bank statement.

HOW OFTEN should you update your check register?

by writing down your account balance on the top right column. Record the check or transaction number, the date, description of why you're paying or getting paid, and the amount on the transaction. Subtract debits and add credits and always update your balance. Write check marks once a transaction has cleared.

HOW do you complete a check register?

By paying your entire balance before it's due

How can you avoid paying interest on your credit card?

checking accounts are for easy access and every day transactions. Savings accounts are not as accessible as checking accounts, as you need a transfer or withdrawal connected to a checking account to spend what's in it. They are intended for things you are saving up for, rather than paying everyday expenses. Savings accounts also earn interest, while checking accounts typically don't. Checking accounts have more fees. Savings accounts are also used by banks to make loans to other people, while checking accounts are not.

How do savings accounts differ from checking accounts?

interest payment starts out relatively low and then changes after five, seven, or ten years. The interest rate can then be lower or higher than the initial rate, but cannot exceed 5% more than your initial rate.

How does an adjustable rate mortgage work?

The longer you go, the higher the amount you get since you will be taking a percentage of a larger number each year, so the interest increases each year. (if there's compound interest, the amount of interest increases each year. ex: The interest is not 5% of the starting balance like it is for simple interest, it's 5% of whatever the new balance is)

How does the age a person starts saving at impact the amount they can earn in compound interest?

charge high interest on loans, get involved with the credit card business, buy and sell currencies, trade, charge yearly fees, and give loans out to many people. (More fees mean a bank is more profit-oriented.)

How does the bank make a profit?

(The credit card companies' definition of a deadbeat means) someone who pays back all of what they borrowed every single time, on time. (Typically, a deadbeat refers to someone who is lazy and doesn't do what they're supposed to. I think credit card companies use this term because they don't like it because they can't earn money off of you if you're a deadbeat.)

How does the credit card companies' definition of a deadbeat compare to the traditional meaning?

If you have a bad credit score, then you will likely be charged higher APR for loans. Additionally, typically higher credit scores are needed to get loans from a bank.

How does your credit score impact the personal loan options you have available?

you are self employed for the most part, meaning you set your own schedule for when you want to work, you decide who you want to work for, you set your own rates, and you have a date when you'll be done with that specific work you're doing when the project is complete.

How is being a freelancer different from being an employee?

no cash is needed and you just pay directly using a credit card reader. They both usually have some sort of fraud protection as well. (Usually a debit card is connected to the digital wallet.)

How is using a digital wallet payment similar to using a debit card?

At least one full paycheck

How much money in checking account?

6 months worth of earnings, or expenses

How much money in emergency fund?

20% of the price of the home

How much money should you put toward your home's downpayment?

20% of income

How much should you save?

once a month at least

How often do you think you would want to check your bank statement?

Set an alarm for when the amount in account is below a certain amount. Opt out of overdraft protection

How to avoid overdraft fees

I would dispute the error with a credit agency if it's a quick, easy fix for a more minor problem. If the problem is more major and in depth, such as fraudulent activity, then I would probably go to my bank or lender to settle it in person and get some guidance.

How would you decide whether to dispute the error with a credit agency or with your bank/lender?

$150,000

If you bought a home that cost $100,000, it is currently worth $200,000, and you still owe $50,000 on it, how much equity do you have in the home?

30 days to remove the error after receiving a written dispute

If you review your credit report and find an error, and you're able to prove it is, indeed, an error, how long does the credit bureau have to remove the error?

CD

If you want to maximize your interest rate and won't need your money for a year or more, which savings option is probably best?

pay off debts with highest interest rate first (saves more money in the long run)

If you're using the High Rate Method, how do you organize your debts?

the debt with the lowest balance. ("boost" as you pay off each amount. Motivation, manageable)

If you're using the Snowball Method, which debt do you focus on first?

what kind of fees they have, if they bear interest, if you have to pay for your own individual checks, and the security level

Important factors in selecting a checking account

Federal student loans, private student loans, collections accounts, tax debt, and child support.

In general, nonpayment on what types of loans can lead to wage garnishment?

comparisons (mission out on products, services, vacays - fomo), ads and sponsorships

In what ways can social media motivate people to spend more money?

you only have to keep track of your phone rather than a card, and Apple Pay does not remember payments so it's more difficult for people to commit fraud than through a debit card

In what ways is Apple Pay more secure than using a debit card?

Contributing 3% of your paycheck to a 401(k) plan offered through your job, Buying shares of stock in your favorite clothing company, Giving your cousin $5000 to help start his business, in exchange for 5% of his monthly profits

Investing examples

to avoid fees and to look responsible to banks

It's important to manage your checking account well because...

know where you're at and make adjustments to fix it and improve it. Additionally, you can catch fraudulent activity and keep it from escalating.

List 2 reasons to check your credit score.

Online lenders, credit unions, and banks

List at least 3 types of lenders who grant personal loans.

Digital coupons are experiencing an increase in value, more so than paper coupons, and are expected to surpass the value of paper coupons within a couple years. Digital coupons usually offer a better discount on food items than paper coupons do, which account more for non-food items. Digital coupons can also be accessed more quickly than paper ones.

List the advantages of using digital coupons over paper coupons

they get to make their own schedule and work when they want, and they can set their own rate and don't need to abide by an employers' set hourly wage. You can also work for a variety of clients.

List two reasons why people choose to freelance.

supplies, housing, transportation, utilities/laundry, food, net cost after aid, tours and extras, activities,

Major college expenses

microwavable meals, grocery delivery services (be careful), preparation

Make eating at home more convenient

Have a credit card that fits your style, Look at the fine print (limits and deadlines), Don't spend more just because of reward card ( - just be sure you use card when making purchases that card has rewards on)

Maximize credit card rewards

They are paying down large student loans instead They prefer to spend money on travel experiences rather than homeownership They have to self-fund retirement to a greater extent

Millennials are buying fewer homes than in previous generations for each of these reasons

credit

Money put into your account is listed as

debit

Money taken out of your account is listed as

a credit card company, a mortgage company, and a car dealership

Name three people or businesses who might request to see your credit history

use strong passwords, protect personal info, watch what you share, protect internet security, secure your smartphone, think before downloading apps, verify email attachments, keep technology up to date, don't keep sensitive info on phone

Online and mobile banking security tips

Bank characteristics

Profits are given to shareholders, offer checking and savings accounts, CD's, and loans, deposits are insured up to $250,000, fees tend to be higher

free, convenient, accepted by all banks, pay variety of people, fraud protection

Pros of paypal

Charge-offs (seven years) Debt collections (seven years) Bankruptcy (7 - 10 years) Foreclosure (seven years) Repossession (seven years)

Record each of the 5 credit disasters to avoid AND how long each stays on your report if you make that credit error.

Putting $20 per paycheck into an account to help pay for books during college, Depositing your annual income tax return into an account until you have enough to buy a car

Saving examples

have 4 banks (saving, spending, investing, and giving), set savings goals (money diary), save first not last, cut your expenses, be a smart shopper

Saving tips include...

design your own debit card, rewards, get paid early, free atm withdrawals, investing in stocks and bitcoin, low fees, fraud protection and security

Square cash app pros

The name, address, and phone number of the agency she got the information from. You can ask what in the credit report caused her to deny you as well.

Suppose you apply for an apartment, and the landlord informs you that, based on your credit report, she is not going to rent you the apartment. According to FCRA, what information must she legally provide you about that decision?

to see how long it takes to double an investment, divide 72 by the rate of growth. (quick and easy to compare rates, accurate)

The Rule of 72 tells me...

cash allowance

The allowance is a rebate or discount that is applied to the vehicle price or provided as "cash back," which the customer can receive as a rebate check in the mail.

The amount of student loan debt you'll have - how much does the college cost, and how much financial aid do they offer? Whether you find a good job or not (which affects income - avg salaries after school)) If you graduate or not (lower level of education often makes it harder to find jobs, and jobs that are offered typically have lower salaries. Does the college educate you enough to be prepared for adult life or not - will you leave knowing how to manage your money well?

The college you choose can impact your future adult finances in the following ways:

Avoid independent marketers, choose a rewards program you will use, evaluate APR, consider annual fee, look for other fees/terms/conditions, pay attention to introductory periods, watch out for balance transfer fees, understand how often interest is compounded, pay attention to balance computation, watchout for minimum finance charge

Tips for choosing a credit card

there isn't as much of an increase in your total that then gets compounded, so you won't get as much in interest. (The compound interest would probably be more similar to simple interest than if a bigger rate was used)

Today's savings accounts do not offer interest rates much higher than 1%. How does this impact the power of compounding?

Amazon, Walmart, office supply stores, printing one online, or when you open your checking account

WHERE do you get a check register?

keep track of your account balance, identify mistakes made by the bank, avoid bounced checks and overdraft fees, know your budget and spending trends, see what you've paid off, and to catch identity theft

WHY would you want to use a check register?

Is what I'm buying truly necessary? Do the monthly payments fit in my budget? Could I save instead of borrow? Is it worth the added interest?

What 4 questions should you ask yourself before using credit to make a purchase?

ontact your mortgage company to find programs or refinancement options. You can also meet with a counselor to establish a plan. Some options are a forbearance plan, which reduces your payments during a hardship, a loan modification for lower monthly payments, and a short-term higher monthly repayment plan. You can also find ways to increase your income

What SHOULD you do if you're having trouble making your mortgage payments?

monthly maintenance fees as well as withdrawal fees

What account fees should you avoid with savings accounts?

gives you a price range you should be looking in to buying a home. Additionally, you can get your credit and financial status evaluated. These will help you know how to budget and how much to spend on a home.

What are 2 benefits to getting pre-approved for a mortgage?

you have a set spending limit based on how much you deposit, which makes it so you aren't really spending more than you can afford. easier to get approved for with bad credit.

What are 2 reasons someone might want to open a secured credit card?

retirement, emergency fund, and education

What are 3 important categories to save in?

ATM withdrawal fees, overdraft fees, account keeping fees, and eftpos fees

What are some examples of fees that can be seen on a bank statement?

it makes it so you can't spend any more than what you have physically available in your budget. The feeling of handing over cash is often more damaging than swiping a credit or debit card, so people may also spend less with this method. It is organized and the limits are simple to stick to since once you run out of cash, you can't spend anymore in that category. It's also easy to see directly where your spending money is going each month.

What are some reasons that a cash envelope system can be an effective way to budget for your "wants"?

debt will continue to grow if it is not paid back, your credit score will be lowered, you may face phone calls, legal action, lowered wages, seizure of property or possessions, and you don't have much financial freedom and have to be on a strict budget if you want your situation to get better

What are the downsides of unmanaged or unpaid debt?

Secured loans are protected by collateral, while unsecured loans are not. they have lower interest rates and for lenders, they are a plus since they aren't as risky.

What are the main advantages to a secured vs. unsecured loan?

building credit by paying rent on time, avoiding fees and costs like repair and property taxes, and flexibility if you have a lifestyle that requires you to move frequently.

What are the top three reasons to RENT?

it gets you in the habit of saving first and not using just your leftovers. If you don't save first, then you may spend all your money and not be able to save at all that month. Additionally, it helps you reach your goals sooner and improves your focus and motivation for reaching them. It's a smart technique for preventing you from spending too much and getting money into your savings.

What are the two reasons that "pay yourself first" works so well?

become an authorized user on your parents' account so you can get a head start from the credit they have. Additionally, you can choose a card that's meant for those under 21. It's important to make payments on time and pay off the whole balance. Make sure bills get paid on time if you are dealing with those.

What are two ways you could gain access to credit, even if you're under 21?

because they offer lower interest rates (if you have good credit history), there are fewer fees, and you can get out of debt quicker. The reason for this is that there aren't as many costs to run P2P, and investors can spread out the risk.

What aspects of peer-to-peer lending make it (frequently, but not always) less expensive to the borrower than traditional bank loans?

Lenders who review prospective borrower's credit reports can get an understanding of how reliable a borrower is, and whether they should lend to them or not. They are more likely to be protected from customers that default if they are lending to customers that they know are more trustworthy based on their credit reports.

What benefit do lenders get from reviewing a prospective borrower's credit report?

Borrowers will experience lower interest rates and be approved for more loans or even phone plans if they have good credit history and a good credit score.

What benefits does a borrower receive from maintaining a positive credit history?

food, housing, transportation, taxes, healthcare, and energy.

What budgeting categories are typically included in cost of living calculations?

increased demand, decreased production, fewer employees, (costs more to produce), increased money supply,

What causes inflation to occur in the first place?

identification, opening deposit, application/signature card, and proof of address

What documentation do you need to have to open a checking account?

Deposit money into your savings account before spending on anything else

What does it mean to "pay yourself first"?

putting the first portion of your income towards savings, retirement, or an emergency account to help you reach your financial goals efficiently. It's done before you spend any income on anything else.

What does it mean to "pay yourself first?"

credit score, how much and how long you're borrowing for, and ability to pay back the loan

What factors determine interest rate?

APR as a whole (including extra fees), the loan term, and if special features such as grace periods are offered.

What factors, other than rate, should you consider before choosing a personal loan?

Peer 2 peer (payments. transfer money online)

What is P2P?

a written (or somehow visually organized) plan for keeping track of, setting an allowance for, and adjusting (if needed) spending in different aspects of living each month, based on your income.

What is a budget?

Your credit score is a number from 300 to 850 indicating how reliable of a borrower you are. The main components that determine your credit score are payment history, debt to credit ratio, the length of credit history, types of credit, and new credit accounts or inquiries.

What is a credit score?

the rates can go up based on the index. Therefore, they are unpredictable

What is a danger of taking a variable rate loan?

you may have to make adjustments a lot in the beginning if the amount of cash you have allotted in some categories is too large or not enough for your expenses. Additionally, with several different envelopes for different categories rather than a single plastic card, you could lose an envelope filled with cash and there goes that money.

What is one potential downside of using a cash envelope budget?

Your money will be transferred automatically and guarantees you will be contributing to your savings

What is the benefit of automating your savings account contributions?

you end up with no extra money, as every cent counts and goes towards something important even if you have extra money after every expense in your budget has been taken care of. The goal is to have your budget down to $0 at the end of each month.

What is the core characteristic that defines a zero-based budget?

Fixed rate mortgages require you to make the same monthly payment each month for the entire duration of the mortgage, in a specified period of time. Variable rate mortgages have differing interest rates throughout the duration of the mortgage. (ARMs, for example, start with a relatively low initial interest rate, and then after 5,7, or 10 years, the interest rate can fluctuate up to 5% from the initial interest rate.)

What is the difference between a fixed and variable rate mortgage?

Principal is the amount that you are paying back for what you borrowed, while interest is what you are charged for borrowing as a percentage of the loan and is given to the mortgage company. (balance is the total left you owe)

What is the difference between principal balance and interest?

annualcreditreport.com

What is the one website you can visit in order to request a free credit report from any of the three bureaus?

to show you what purchases were made (using debit), and what money is put in (credit). fees that you owe, the date of the statement, your account balance, and overall how your account is doing

What is the purpose of a bank statement?

Emergency funds allow a source that teens can draw from if something unexpected (and necessary) comes up so that they don't have to take loans and fall into debt.

What is the relationship between an emergency fund and credit/loans?

People who save money in banks receive interest, while borrowers are charged higher rates of interest. The savers are essentially providing money or resources that the bank can use to loan out to other people.

What is the relationship between people who save money in banks and people who borrow money from banks

Assets - debt

What is wealth?

quick and easy, renew loan with small fee instead of paying it back

What makes payday loans enticing?

showcasing an idealistic future, use appealing words, appeal to customer

What marketing strategies are the credit card companies using?

not all places accept them, if your device dies then you can't pay, and sometimes there's errors and payments don't go through

What potential downsides do you see for using a digital wallet payment?

responsible for formulating your credit report. Your score may vary slightly among them since they have different timing and systems, but should be relatively similar because they all base your credit score off your history and report.

What role do the 3 credit bureaus play in your credit history and score?

keep making monthly payments so your car is not repossessed. Then call the lender to discuss options. (Also: calculate negative equity, reach out to the lender, take on a new loan, sell your car)

What should you do if your car loan becomes too expensive?

All your accounts and payments, such as credit cards, student loans would be included on a credit report. It's kind of like a timeline of all the ways you've used credit.

What types of information would be included on a credit report?

tax debt and mortgages

What types of loans could result in the seizure of your property?

social media, which aids in advertising and selling, the internet for remote communication, online stores (like etsy) that allow people to sell their products, apps like uber and doordash that people use for service (and others can use as a gig job)

What types of technology have enabled gig jobs to become a larger part of the workforce?

an ID issued by the government, your social security number, your birthday, your phone number, a taxpayer identification number, and an initial deposit

What you need to open a bank account

Students should borrow no more than what their planned income is after their first year of graduating. (Consider loans you qualify for, how quick you could pay it back)

What's a good "rule of thumb" for how much student debt you should consider taking to attend college?

many people so they end up just renewing the loan with several smaller fees, which can ultimately add up to way more than the initial loan amount. Additionally, payday loans are often charged extremely high interest.

What's dangerous about taking out a payday loan?

it only pays for certain eligible expenses, you pay a high deductible (up front cost)

What's one potential downside of an HSA?

Can I still function in life without this item? What will happen if I don't have it?

When deciding if you should buy something, what can you ask yourself to determine if the item is a need or want?

the total amount of interest you owe decreases because more of the interest is paid in the beginning (it's a percentage of the balance, and then there is less interest later on and you are paying more principal)

When loan payments are amortized, the total amount you owe every month remains constant. Why does the amount of INTEREST you owe decrease every month?

Labor Rent Equipment

When you are eating at a restaurant you are helping pay for all of the following (why meals cost 3x more than the cost of the food)

needs and wants

Which of the following represent the two main categories of a basic budget?

Loans and mortgages. (They are used for bigger purchases like a car or boat and charge you interest. Mortgages are specific to house payments and they are a type of loan.)

Which types of credit involve repaying a fixed amount for a fixed # of months?

APR for purchases, grace period/how to avoid interest, and set-up/maintenance fees. A low APR (fixed rate though), low maintenance fees (if any), and explanation of how to avoid interest are all signs of a good credit card.

While ALL the information in a Schumer Box is important, which items do you think matter most on a day-to-day basis?

Fee from the ATM, and fee from your bank

Why are there 2 non-network ATM fees?

You get charged interest from the start and the government doesn't take care of any of it. It can really build up if you don't take care of it and probably cost you even more later on

Why do they recommend making some payments on unsubsidized loans WHILE you're still in college?

love of shopping, loss aversion switch (fear of missing out on deal), twisted heuristics (buying in bulk assuming it's better deal), desire to save (retailers say there product helps you save), rose tinted lenses (idealized version of future self w/product)

Why do we impulse buy?

so you can divide the amount of money required by the amount of time you will save for (know how much to save per month or week)

Why is it important to know the timeframe when working towards your savings goals?

blurred lines between really want and need, advertisements, pleasure, and senses (smell, taste, feel, etc)

Why is it sometimes SO hard to resist our wants?

lack of income, spending on wants, every day expenses add up, having to be thoughtful with money, not being able to buy all the things you want, not knowing how to start

Why is saving money difficult?

It is important to track your net worth because it's a good indicator of how well you are doing financially. Really your net worth should increase from year to year. (If it doesn't, either your liabilities and debts are increasing which is not a good sign, or your assets are not growing or are even depreciating in value. Generally having an increasing net worth means you are in a good spot.)

Why might it be important to track your net worth?

because then you may be tempted to spend that money. Moreover, you might get confused about what's for spending and what's for saving

Why shouldn't you keep your emergency fund money in your checking account?

earn twice as much by starting 10 years sooner, more time to grow and maximize investments

Why to plan for retirement early

Save money and time

Why use direct deposit, mobile banking, and financial apps?

You lose purchasing power

Why would your savings account "lose value" if the rate of return you receive is lower than the rate of inflation?

"paying the pot."

You pay yourself while working side gigs by putting extra money that you've earned one month into a deposit account, which can then pay you a bit extra over your noodle budget. In coming months, if money is tight you can still take money from that account because you set extra aside for yourself.

You qualify for good mortgage terms You have enough saved for a down payment AND an emergency fund You plan to stay in the home for 5 or more years

You should meet each of these 3 requirements before you consider buying a home:

The depreciation of the vehicle (loss of value) + interest

Your LEASE payment is typically covering

check register

a ledger that serves as a personal record of all transactions using checks on your account

credit card

a loan (monthly payments). You have to keep your balance under a set limit. If you pay the balance in full each month, you are not charged interest. linked to banks differently, as you can't withdraw or deposit money in an account, unlike with checking or savings accounts. Financial credibility is what you're trying to establish.

salary

a set amount earned in a year that is not affected by the number of hours worked. I think teachers, healthcare workers, and people working for a certain company would be paid this way, and usually these people are more skilled at their jobs than people who earn wages.

Leasing a vehicle provides a cheaper monthly payment and less overall maintenance, but typically has additional fees, higher insurance, and provides no ownership at the end of the term.

advantages and disadvantages of leasing a vehicle

Lower monthly payments than you'd get for taking a loan for the same car, because the cost is based on depreciation (you're basically just paying for part of the car). Leases are good for people who would want to switch cars often, or will only need a car for a short period of time. You get a warranty throughout the time you have the lease.

advantages of a lease

simplicity, lower monthly payments, one fixed interest rate, and there are federal and private loan options.

advantages of loan consolidation

Revolving Credit

an open line of credit that can be used for any purchases as long as you're under the credit limit. Payment amounts vary each pay period based on the size of the debt.

gets rid of credit card, loan, and medical debt. Give up valuables and very damaging to credit.

bankruptcy pros and cons

wages

based on the number of hours you work in a week, and the hourly rate you are paid. Professions with this typically involve more part time jobs, like at fast food restaurants, bars, and daycares.

simple way to manage money (no cash or checks needed, all of your spending in one payment per month, statement in mail), you can make purchases over phone and online with them, there are sometimes extended warranties, you can pay for emergencies, and you can build a good credit score.

benefits of using a credit card for purchases

advantages of prepaid card

can only spend what you have (to avoid overspending) and can be used like a debit card

Unsecured debt

debt is not tied to a specific asset; there is no collateral that can be repossessed if borrower defaults

Secured Debt

debt is tied to a specific asset that can be used as collateral and repossessed if borrower doesn't make payments

Pay lump sum, for those who don't qualify for bankruptcy. damage to credit score, lengthy process, fees, penalties.

debt settlement

You have to pay for any damage or wear and tear on the car with a lease. You also don't get to keep it, and have to give it back after a period of time. If you lease, you will have monthly payments the entire time you have a car. More down payment may be involved if you switch cars often. Leases make you stay within mileage limits, or you pay a fee for going over the limit.

disadvantages of a lease

It's kind of like you're starting over in a way, and it might take a while longer for you to pay back the loan. Additionally, since usually the term is a lot longer, you pay way more in interest, making your total payment a lot higher. Another disadvantage is that you might miss out on repayment benefits since you have new loan terms.

disadvantages of loan consolidation

make own vacay days (no pto), no retirement or health benefits

disadvantages of working in gig economy

50/30/20 rule

division of spending on needs, wants, and savings

the length of the mortgage, or how long you are paying it back for. The longer the loan, the more you will pay in total interest making your overall payment larger. Additionally, the downpayment impacts how much of a loan you will need and how much interest you will pay. Larger down payments result in a smaller loan and lower overall payment. The interest rate itself affects the total amount you pay, too. People with better credit scores or larger down payments usually get better interest rates.

factors that affect the total amount of money you pay for a mortgage

Affordability, real estate value, if the area is good, and proximity to family and friends

factors when pursuing a place to live

fixed

fixed or ARM: Tanya, who's worked out a budget that allows her to pay her mortgage and save for her 3 young children's college funds

High interest rates (usually over 20%) You are charged for a cash advance - either 5% or $10 of the transaction, depending on which one's higher. There is not a grace period with cash advance, so you automatically pay interest if you don't pay it back in time

give three reasons why a cash advance is a costly way of using your credit card.

To use online bill pay, you log into your account and go to bill pay. Choose a provider, if you don't have them added already, add their account number and billing address before giving authorization to make payments

how does one get set up to use online bill pay?

will the item actually be of good use? Research prices. Is it something I need, or really want?

how to fight impulse buying

Variable-Rate

interest rate can change during the duration of the loan based on the prime rate or an index rate

mobile deposit alert

let workers know when their paycheck comes. This helps people stay on top of bills and know when they can make automatic withdrawals

Low balance alert

let you avoid overdraft fees and to help keep a specific, chosen amount of money in the account at all times

gig economy

made up of short term jobs as opposed to full time or part time ongoing ones, usually by people who self employ.

credit union characteristics

must be part of specific member group to join, offer checking and savings accounts, CD's, and loans, deposits are insured up to $250,000, customers earn higher interest on deposits

Unusual Activity Alert

notify people when there's a large amount transferred or missing at once, as this is something that indicates an issue. Staying on top of these actions and reporting suspicious activity will make it more likely you get paid back what was stolen. Overall this alert keeps your money safer.

maintenance, ATM withdrawal, and transfer

other fees on checking accounts

make sure that the credit counselor or company doesn't offer quick results that are too good to be true and require no effort. Stay away from counselors that charge unnecessary or large fees, ask personal questions before deciding to help you, require you to make donations, or won't answer your questions.

scams to avoid when looking for a credit counselor

co-signing

signing a legal contract that states that the adult will be financially responsible for your loan or credit card debt if you don't pay on time

start researching, determine your budget, get prequalified and preapproved, find good real estate agent, shop and make an offer, get home inspection, work with mortgage banker to select loan, have home appraised, coordinate paperwork, close the sale

steps to buying a home

tracking your spending, paying more than the minimum payment, and creating and sticking to a budget to pay off and stay out of debt

strategies for getting out of debt

create a budget, to have an emergency savings fund, to start investing in retirement, and to pay off all loans. (these apply to all workers, but gig workers especially.)

suggestions for saving and financial health if you work solely in the gig economy

advise and educate people about finances, and help them with things like getting on a better path to repay debt, determining a budget, and being responsible with credit.

summarize what a credit counselor does and how they could help if you were in debt.

principal

the amount you're borrowing

overdraft fees

the largest frequently charged fee on checking accounts

interest

the percentage that you are charged on top of what you already owe (payment for borrowing money)

list debits and credits, subtracting debits and adding credits to find out your balance (electronically or on paper)

the steps for balancing your account.

To reconcile your account, you just have to check your records from your check register with the records you receive from the bank (online or paper) to make sure they match so you can detect fraud or errors

the steps for reconciling your account

gross pay

the total amount of an employee's earnings before deductions are taken out

Starting your credit soon so you have a longer credit history, choosing a card that's right for you (such as looking for cards you can apply for if you're under 21 or those offered at your bank), and paying off your entire balance each month on time to avoid interest are ways to build credit. (Other helpful tips are to become an authorized user on your parents' account, not co-signing for people even if it's a friend, not opening several accounts at once, and protecting your identity.)

things that are most important for a college student to build credit responsibly while in school

exhaust free sources of money, save as much as possible before college, buy used textbooks, live off campus or with roommate, cut unnecessary expenses

tips to reduce loan debt in college

write out a list beforehand and only grab what's on that list in the quantity that you need. Make sure you don't shop hungry, and if you only need a few items, just use a basket so you aren't tempted to fill up a cart.

tips you can use from the video to avoid overspending at the grocery store

unit price

total price/# of units

Installment Loans

used to finance a specific purchase for a specific amount of time. Regular payments are made to pay the interest and the principal.

Make extra payments, shorter-term mortgage (and higher monthly payments), and larger down payment (reduces loan amount)

ways you could DECREASE the total amount of money you pay for your home mortgage.

assets - debt

wealth

to gain ownership of it, to have stability with payments and minimize risk or uncertainty, and to build equity and lower the costs you pay in the future.

what are the top three reasons to BUY a home?

Not only will you gain a growing mountain of debt, but your lenders will become frustrated and therefore expect you to face consequences. You can't borrow large sums of money for free, and you can't just not pay it back. (no tax refund, bad credit score, low wages, or even getting sued)

what happens if I ignore my student loans?

you avoid fees, but the interest piles up leading to debt.

what happens if you make the minimum payment every month?

impulse buying, not looking for deals, low income, lack of education or poor head start in paying off debt

what may cause people to live paycheck to paycheck?

free checking, atm usage, online banking, bill pay, check writing, and no monthly maintenance fee. They should also have low minimum balances.

what should a good checking account offer for FREE?

30% or less

what should the credit utilization ratio be?

home equity loan

what you own - what you owe

direct deposit

when your employer puts your paycheck directly into your bank account

joint account

where a parent shares an account with their child and makes the payments, but the student improves their credit score

secured debt/secured loans, student loans, taxes, and child support debt.

which types of debt will NOT be eliminated in bankruptcy?

balance transfer fees may be expensive, rate shoots up high, negative impact on credit score

why a introductory rate or balance transfer APR of 0% might not be a good offer after all.

you can get good rates on many different things, and can be approved for pretty much everything. (For example, you get low interest rates on credit cards, auto insurance, and loans. Additionally, you can get approved for credit cards, apartments, and loans more easily, you have more options to look from and negotiate with, you are able to borrow more, and you don't need security deposits on cell phones and utilities.)

why it's so important to maintain a good credit report and score.

ATM, online, or in-store purchases

withdrawing money