Finance
You want to avoid policies that only cover market value of your contents.
"Market value" means the insurance company only gives you the same amount of money you would have received if you had sold your belongings on Craigslist. Replacement cost means they would give you enough money to actually replace your belongings at the full retail price. Most policies provide very limited coverage for specialty items, including: Firearms Artwork Electronic data Jewelry Money
Utilization ratio
(the percentage of time spent in billable work)
Chapter 7 bankruptcy
, which is liquidation under the bankruptcy code, is when the courts may discharge all or most of your debts after your liquid assets are turned over to the courts. The courts can only seize or require the use of non-exempt assets, which are determined by each state to qualify for Chapter 7: Your income must be below the median income in your state. You must receive credit counseling from an approved agency
Lenders want a couple years of credit history
-$1000 limit credit card -Buy books --$600ish or 60% utilization ratio -minimum monthly payment for a month -cost a few dollars in interest -pay off second month -credit report --60% utilization and no balance
The five C's of credit
--Character -do you have willingness to pay bills on time -Your willingness to pay your bills on time. Your credit history is the key here. Late payments may be an indication that you are not as serious about your financial obligations as you should be. Most creditors won't report a late payment until it is more than 30 days late. So late payments raise a "red flag" to lenders and hamper your ability to get the loan or at best increase the rate you have to pay. --Capacity -Income each month compared to debt you have -Your ability to pay the loan. Do you have the financial resources to pay the loan when it is due? Typically this comes from your income. Do you have enough income after all your other obligations to pay back the loan? Lenders usually do not like to see your debt payments (home, car, credit cards, and other loans) exceed roughly 36% of your gross monthly income. Anything more is a sign to a lender that you do not have adequate resources to pay the loan on time. --Capital(accumulated assets) -what assets do you have that could be sold to repay lender -Your assets or the things you own. Here the lender is trying to see if you could sell anything to satisfy the loan in a worst-case scenario. Closely related to this is your net worth. It helps the creditor understand if, over time, you are moving in the right financial direction. A negative net worth is not necessarily bad. It depends on the circumstances. A college graduate at age 22 who has a negative net worth of $15K from student loans is in much better shape than a 45-year-old with a small positive net worth. --Collateral -something of value the lender can take to satisfy debt -A specific asset of some value that you own that is pledged to the lender. It can be taken away by the lender and sold to satisfy the debt if you don't pay the loan. You typically receive better loan terms when you provide collateral like your house or your car for a loan. --Conditions -what economic conditions are in play at the time the loan is being paid -Lenders take into account the big picture. What economic conditions, typically beyond your control, could affect your ability to repay the loan? Are you working in an industry that is currently downsizing? How well is the economy in general doing? Did you leave your last job of ten years to go to work for a new company? When the economy is good, credit is readily available and relatively cheap. When the economy is sour credit is more difficult to get and more expensive. -lenders use them every time a loan is made, EXCEPT for student loans because you have no credit yet.
Renters Insurance (you need renters insurance)
--Only about 40% of renters have renters insurance --you are taking huge financial risk without renters insurance --A landlords policy wont cover you or your personal property --Renters Insurance is the best and cheapest insurance u can buy(range from 120-150 per year) --Will write you a check to replace everything you own in case it is lost in a fire or natural disaster. --A typical renters insurance policy will help you find a new place to live if needed, and if it costs more than you are currently paying in rent, they will pay the difference --Also cover liability insurance, about 50k in liability insurance coverage for you. covers both negligence and vicarious liability. --If mom and dad are on the lease, their homeowner's policy may extend to you. --if you aren't registered as a full-time student, you aren't protected by renters insurance from mom or dad.
Pitfalls to Poor Financial Literacy
-1.2 million person bankruptcies annually. -Student loan debt is more than is owed on all credit cards -80% don't know how a credit card works -60% of students don't have a credit card -60% of students move back home -Makes you an easy target for "Sales pitches" and "financial guru's"
mandated minimums for insurance in north carolina
-30 the amount paid to any one person for injury from the accident(30,000) -60 the total amount paid to all parties for injury from the accident (60,000) -25 total amount of property damage paid to others (30,000) -simply isnt enough to cover you. you can't afford not to pay more
What is a credit score
-A "GPA" on how you handle your money
Identity theft
-A risk we all face --its not a matter of if, its a matter of when --can take years to recover --will need attorney experienced in identity theft --threat is from someone you know --and do not -Don't leave cards lying around -Do not carry social security card -Never share your PIN -Shred important stuff -Be very careful online
advantages of credit cards
-Advantages --no need to carry cash --buy now, pay later --easier bookkeeping --much more convenient
Consumer Protection and Spending
-Americans spend more on taxes than anything else.
So what is credit?
-An attribute or characteristic about you --shoe size --shirt size --more importantly, your financial grade
What the bank can approve you for is not what you can afford
-Approved doesn't = afford. -they don't know your budget or what you are going to buy. -they are simply saying this is the max amount we can lend you without getting in trouble. -you are the boss of your money. -Being approved for a loan simply means that is how much the bank will lend you. Only you know whether you are willing or able to spend that much money on the loan based on your budget.
Four ways to manage risk
-Assumption --assume the risk, understand it exists, failure to recognize a risk is an automatic acceptance of the risk and everything that comes with it. accepting the risk -Avoidance -requires that we recognize the risk is out there and make a conscious decision as to how were gonna handle it. -Reduction -when we cant practice avoidance but recognize a risk we use reduction. if we have to practice assumption and recognize the risk exists, then we can practice reduction. (Ex: wear seatbelt, use turn signals, etc.) -Shifting -moving the financial risk from us, to another entity(a thing with independent existence). for example: an insurance company. -covering your AARS
Bad Debt Ratio
-Bad Debt Payments/Monthly income -More than 25% is a problem
Good goals for after graduation
-Build an emergency fund -Invest for retirement -Save for big purchases -Save for a house -pay off debt
Good goals for college students
-Build an emergency fund -Use student financial aid and loans for school expenses only -Pay off debt
Manage your budget
-Can you afford it? -Write down your goals in your budget -A budget will let you enjoy your life and control your money.
But what if you're already in trouble
-Contact your creditors -Know your rights --everything must be in writing --never give out bank account number to collection agencies -Collection agencies buy bad debt for pennies on the dollar --negotiate in writing
Credit and Accidental Death Life Insurance
-Credit life insurance pays off specific debt -Accidental death insurance pays off only if you die in an accident
What lenders measure
-Credit worthiness -ability to repay -willingness to repay
Managing debt
-Debt is a tool to help accomplish financial goals --buy a house or start business --but too much debt is suffocating *approved is not the same as afford*
Disability Insurance Policies
-Definition of Disability- no longer able to practice your regular job -Waiting period is the deductible -Non cancelable -Guaranteed renewable
Who offers disability insurance
-Does your employer offer it? -Social Security-must be disabled for over a year before insurance kicks in -Workman's Compensation-will pay you if you are injured on the job(only on the clock)
How much life insurance?
-Enough to recreate your income if prudently invested -if you make 50k prudently invested @ 7% return would require 750k in life insurance
When you Borrow Money?
-Every dollar you spend adds up. All of the small purchases add up. -When you borrow money every dollar spent is a dollar owed.
Who uses a credit score
-Everyone uses a credit score --including employers
Automobile Insurance
-Financial Responsibility Laws -Or, requires drivers to prove they have the ability to cover the cost of the damage or injury caused in a wreck 1. Liability -covers the damage you do to someone else(only insurance we legally have to buy for the automobile, unless you borrowed money to buy vehicle. then the lender can legally require you to get collision and comprehensive) 2. Collision -covers you when your car is involved in an accident 3. Comprehensive -covers everything other than collision(no one is behind the wheel and something happens). a tree hits ur parked car
Types of debt
-Home loans -Car loans -Consumer loans - loans to purchase things like washers/dryers/fridges/appliances. loans for specific purchase. open end loans -Credit cards - don't involve purchase of specific item. line of credit. can be used over and over again. -Payday loans-definitely bad debt -Student loans-can be considered good debt, ur going to last longer than loans, and its for your education.
Impact of Taxes on Spending
-Imagine you're in the 25% federal tax bracket -You keep 75% of everything you make. -We work and are paid in a pre tax world but live and pay in a post tax world -because of taxes everything is more expensive than you realize
Most financial plans fail
-Listed expenses underestimated -Impulse buying -Forgotten Bills -Emergencies
L.I.F.E.
-Listed expenses underestimated -Impulse buying -Forgotten bills -Emergencies
Tips for Saving on Car Insurance
-Look for discounts by combining multiple types of insurance coverage from the same company. If you have homeowner's insurance and car insurance with the same company, request a multiple-policy discount. But only buy both policies from the same company if it is providing the best price overall. Many times, it can be cheaper to get your car insurance from one company and your homeowner's insurance from another, despite the multi-policy discounts. -If you do something that presents less risk to the company, make sure they know about it. Inform the insurance company if your house has an alarm system or sprinkler system. Make sure it knows if your car has OnStar, LoJack, or another alarm system. You are probably eligible for a discount. Be sure to take advantage of the dozens of discounts. -Take advantage of group plans that are available to you if the price is lower than you could get on your own. Most midsize or large employers have group plans for medical insurance and life insurance, and some even have plans for car insurance and disability insurance as well. If you are a member of an organization such as a credit union, you may be able to participate in its group plans. Again, the key is to shop around and ask questions. -Buy directly from the insurance company as opposed to going through a local agent. Companies like GEICO, Progressive, Traveler's, and USAA sell directly to you. You can buy online or speak to a representative using a toll-free number. In either case, you avoid an agent's commission. The tradeoff is that it requires more work from you to fully understand what you are buying. You'll spend more time poring over long contracts and policies. However, if you're willing to do the homework, you can save on your monthly premiums. -Purchase from an independent agent. Some agents only represent a single insurance company. Others can represent multiple insurance companies and shop around for the best price. However, many of the companies they use do not have large advertising budgets, so you may be unfamiliar with them. You have to balance between comfort level and cost.
What is on a credit report
-Name and all aliases -current address -SSN -Current loan amounts -Opening date and payment history on your credit cards and loans (including on-time and late payments) -Back taxes owed to the IRS -Credit applications, credit denials and the reason -Public record information such as judgments and liens
two types of liability
-Negligence(failure to take proper care) --failure to ordinary and reasonable care Vicarious --held responsible for the actions of others
Credit Card Rules
-Not there to supplement your income -life is full of emergencies -know tricks to avoid them -get help if needed
Life Insurance
-One the most abused and oversold financial products in existence -most people buy the wrong type and either too little or to much coverage -the amount you need is a judgement call
Do you think most people are personally financially successful?
-Overwhelming majority think No. -So lets not do what most people do
debt repayment prioritizing
-Pay Off the Highest Rate First Many financial experts advocate to pay off the loan with the highest interest rate first. List your debts in order of highest to lowest interest rate. Begin by paying off your highest-rate debt first, since that is costing you the most in interest. Then work your way down to the last debt. This may make the most sense for you, but is not right for everyone. Mathematically this approach makes sense, but personal finances are more about the person than the math. What if your highest-interest rate loan is one of your largest and will take five years to pay off? Are you willing to adjust your lifestyle and work towards paying off your first debt if it will take that long to check even one debt off your list? One of the other two methods may make more sense for you. Pay Off the Smallest Debt First Begin by paying off your smallest debt first and then moving on to the next smallest until you eventually get to your largest. Add every extra dollar you can to the payment of your smallest loan. This approach leads to quicker gratification as you quickly check the first loan off your list. The success of paying off your first debt gives you the emotional charge to continue to work towards the next debt. It also quickly gives you a much larger payment to work on the second debt. By starting with the smallest debt first you pay off the easiest loan first. By the time you get to your last debt you will be making a very large payment. Focusing on the smallest debt first is a very powerful and quick way to eliminate debt. And the more you add to your debt payments, the faster you eliminate your debt. If you like to check items off your list quickly this method may be for you. Create Cash Flow First Concentrating on monthly cash flow is also a good way to decide which debt to go after first. It is particularly effective if you are running into cash flow problems (running out of money) each month and need to free up some money. In this case focus on the debt that will free up the most money in the shortest time, yet is still reasonable for you to do. The decision of which debt to tackle first is a little more difficult, as this is a judgment call based on your own set of circumstances. Determine which of your debts has the highest payment but can still be paid off in a reasonable amount of time given the amount of extra money you can add to the payment. This is easily determined by using your time value of money calculator, plugging in the larger payment amount, and solving for Number of Time Periods (N). Just as with the other methods, once the first debt is paid off turn your focus on the second. Unlike the other methods, if you are using this approach to increase your cash flow, you will probably use the money you are no longer paying on the first loan and spread that out to your other budget categories. Now your budget will not feel so tight every month. If you can, try to use at least a little bit of the payment from the first debt and add it to the next one. You'll still have the first two or three loans gone in no time.
What Makes Up a Credit Score?
-Payment History --Biggest part of credit score -are we paying bills on time -Debt amounts --need a history of paying loans to increase credit score --you have to use your credit card to boost a credit score(utilization ratio) -Length of credit history --basically like the amount of experience. if you have a long history of good payments. -New History --if you are acquiring a lot of new debt very quickly that will lower your credit score -Types of Credit -revolving loan, etc.
Risks we face.
-Peril: the cause of the possible loss --fire --robbery --windstorm --disease -Hazard: something that increases the likelihood of the loss occurring -drunk driving -smoking -wet floor
Tax season checklist
-Personal Information Bank account and routing information (for e-file and direct deposit) Estimated taxes paid last year (if you paid quarterly estimates) Social Security numbers for yourself, your spouse Tax return from the prior year -Determine Filing Status Different credits and deductions are available based on filing status. Single Married Filing Jointly Married Filing Separately Head of Household Qualifying Widower -Income Alimony received Forms 10991099-B Proceeds from broker or barter exchange1099-C Cancellation of debt1099-DIV Dividend income1099-G Unemployment income, state taxes, local taxes1099-INT Interest income1099-MISC (contractor work)1099-R Distribution from IRAs or retirement plans1099-S Income from or sale of property Miscellaneous income: scholarships, gambling, jury duty, etc. Rental property income Schedule K-1 Partner's share of income, etc. SSA-1099/1042S Social Security Benefits Unemployment compensation W-2 forms for self and spouse -Expenses to Determine Adjusted Gross Income Receipts for classroom supplies (teachers only) Health savings account expenses Certain self-employment expenses Fees for vehicles Form 1095-A Health insurance marketplace statement (If purchased health insurance from exchange) Form 1098-E Student loan interest Form 1098-T (or receipts) Tuition statement Home office expenses Investment interest expenses IRA contributions Self-employed pension plan contributions Alimony paid receipts -Itemized Deductions Cash donatedCollegesPaycheck contributions to charity Places of worshipOther cash donations to charities. Statements from charities the best proof. Non-cash charitable donations—need receipts Adoption expenses—need receipts Childcare costs—need evidence of payment Job-hunting expenses—need receipts for hotel, travel not reimbursed by the company Medical and dental expenses—receipts from co-pays and all unreimbursed payments. Insurance-covered expenses not deductible. Receipts for miscellaneous items: continuing education, union dues, unreimbursed employee expenses, etc. Personal property taxes. Receipts needed from large purchases. Real estate taxes— proof from cancelled checks or from Form 1098, Mortgage Interest Statement Rental property losses State and local income taxes paid. Cancelled checks will provide this information. Form 1098 Mortgage interest and points Mortgage insurance premiums paid from Form 1098 Receipts for tax preparation fees paid (businesses only) -Proof of Eligibility for Other Credits Child tax credit Foreign tax credit Education credits from Form 8863 Residential energy credits -Proof of Payments Already Made or Specialty Tax Benefits W-2 showing federal income tax withheld Estimated tax payment receipts Combat pay American Opportunity Credit Earned Income Credit (EIC) -Bank Account Information for Refund or to Make Payment on Amount Owed Bank direct deposit information for refund Bank EFT information for electronic payment
Automobile Insurance premium factors
-Premium factors --deductible-if you are paying more, you are paying less premium due to you assuming more of the risk --Automobile type-cars that carry more risk are going to cost more for insurance --Rating territory - zip code. an area with a higher cost or living, or higher number of accidents will make insurance more expensive --Driver Classification-more inexperienced drivers cost more. we are rated by a point scale. the more points mean we are riskier drivers. --Credit report- people who lead messy lives lead messy financial lives
types of risk
-Pure risk --no profit can be made. --accidental, unintentional --can be predicted -insurable -can be --personal --property --liability -Speculative risk --chance of loss or gain --lottery --started a business --gambling --uninsurable --choose to engage in some activity where you can change the outcome
Plan for Changes
-Review your Tax Situation Every Time a life event occurs
How to keep financial plans from failing S.P.E.N.D.
-Save for emergencies -Plan your purchases -Establish your financial goals -Never let others tell you how to spend your money -Don't forget about non-monthly expenses
When it comes to credit cards, you're the boss
-Shop around --consumer reports -Read the Schumer Box(displays for you the interest rate, and how long it would take you to pay off that debt if u made the minimum payment -Negotiate terms -Complain --attorney general --naag.org
Goals should be S.M.A.R.T.
-Specific(what is rich? how much money do u want? why?) -Measurable(Track your success along the way, make sure ur on track towards ur goal) -Attainable(Make sure its a goal you can actually achieve within ur boundaries ) -Relevant(It has to be important to you) -Time frame(Long term, mid range, short term goals.) *make sure you always write your goals down*
Stay healthy
-Staying healthy = less likely to stay sick = less money spent in medicine
Tax Lingo
-Tax Refunds --Signs of poor tax management A. Owe --you underpaid during the year B. Refund --You overpaid during the year C. Neither --Just right
-4 types of taxes
-Taxes on earnings(income tax) -Taxes on Purchases(sales tax) --expect 7.25% on everything except food which is around 2%(must be consumable) -Taxes on property(real estate tax) --annual tax based on estimated value of home. --not just land, can also be boats, trailers, cars -Taxes on wealth and gift taxes(estate tax) --at state and federal level through inheritance tax --even when we die the government is still taxing us.
Talk to Mom and Dad
-This is a serious issue --treat it as such -Talk about this class --All that you have learned --Not just credit cards -Have the bill sent home --give mom and dad access online -Don't abuse it
Retrain your brain
-We have been trained to spend -when we are happy, sad, sorry, celebrating
Net worth
-What we own minus what we owe -Helps us understand where we are in comparison to other people -The older you get, the higher your net worth should be -Net worth has no meaning or relevance to your worth as a person. used to gauge how we are achieving our financial goals -As long as your net worth is increasing ur on the right track -Use net worth as a way to make sure ur on ur way to achieving financial success.
Tax Lingo 4.
-When is a tax not really a tax? FEE=TAX
GOOD. CREDIT SCORE
-While standards can adjust at any time, a score of 760 or above has historically been considered the best risk, and you should receive the best loan terms and interest rates if your score is in that range. There is really no advantage to raising your score above 760, as most lenders lump you in the same category as the people with an 800 or above. -For lower scores between 620 and 759, lenders will charge you more interest for a loan or car insurance companies will charge you a higher premium for your insurance policy. As your score moves higher within this range, you will pay less of a premium above the best rate. It is worth the effort to raise your score above 759. It is time to take action to improve your credit score if it is below 620.
Disability Insurance
-You are more likely to become disabled then die at any given moment in your life -can be long term or short term disability -arguably need disability insurance more than life insurance
Why we buy insurance
-You buy protection(policy) and pay regular premiums -The insurance company assumes the financial risk -We buy insurance because we are RISK AVERSE(we are happy to send money to insurance in order to protect us from financial ruin -we prefer the certainty of the smaller multiple premiums(amount paid for an insurance policy) rather the possibility of a single huge loss
credit and debt
-are not the same thing -both tools to build your financial freedom -and both can get you into really big trouble
Buy smart
-buy in bulk-lower price per quantity pays dividends to budget ahead. -start learning to shop price per quantity
Buy value
-buy value for big ticket purchases(over 100 dollars) -learn to stop paying others for things you can do yourself
cleaning up identity theft
-call companies where fraud happened -place a fraud alert and get a credit report -report the identity theft to the ftc(federal trade commission) -file a report with your local police department -contact your creditors -get your credit report corrected -follow up
what lenders want
-couple of years of good credit history -why wait until you graduate to get started? -Lenders determine if they will lend money to you and how much they will lend based on how risky they perceive you to be.
how lenders measure
-credit report and credit score --credit score is all information from credit report put into algorithm and comes back with a number. -information about you -name, address, ssn, -reporting agencies -equifax, experian, trans union -all of these companies voluntarily report information about you. they will be different from all 3 companies because they are voluntary -free credit report --www.annualcreditreport.com think of credit report like financial transcript and credit score like gpa.2
Impact of Taxes on Spending - It gets worse
-federal tax rate - 25% -State Tax rate 5% -FICA 7.65% = 37.65%
Taxes
-have a huge impact on our spending
What is a good credit score?
-if you pay bills on time, control credit-debt ratio you will be fine. -ups and downs are normal as long as they aren't drastic.
The purpose of insurance
-insurance company looks at us through this Risk/Expense relationship --the more risk we present to the company, the more expensive that insurance will be. -Hope to never use insurance --or think about it this way: using every minute of every day. -Buying Protection --Protection is the product -Key is to buy the right amount of insurance for the best price
Ah-Ha Moment
-it's not about how much you make its about how much you spend that will determine your financial success. -focus on what you can control
Why we go into debt?
-keeping up with the jone's(comparing to others and feeling the need to keep up with them) -using money to punish -immediate gratification -unrealistic expectations -lack of communication -finance charges jump
If credit cards run a company
-look for behaviors that occur frequently and how to make money off them
disadvantages of credit cards
-much more convenient --#1 cause of over spending --buy now pay later --cost $$$$ -many hidden costs -obligates future income -they really are out to get you
The goal of insurance is to
-not only buy the right kinds of insurance, but the right amounts
Focus on what you can control
-not really anything you can do about tuition prices as those are legislated mostly by state. -focus on reducing how much you spend --gourmet coffee, energy drinks, smoothies --bottled water --cable subscriptions --paying full retail --begin saving
Financial Literacy
-the knowledge and skills to manage money -purpose it to be more informed with financial decisions -you get financial literacy and competency from this class
Biggest factor or influence on the premium you pay is
-the number of points on your license
acheiving goals
-there always numerous ways to achieve financial goals -to know how to get where you want to be you have to know where you are
Rich according to uncle sam
-top 1% - 464k -top 10%- 125k -top 25%-73k -top 50%- 36k -bottom 50% - <36,055k 5-10 years post grad ur gonna find yourself in the top 25%
credit card tricks
-use your cards for everything - points for everything -hidden fees - late payment and over the limit -0% interest - high transfer fees on moving balance -increasing credit limit -decreasing minimum monthly payment
Problem with financial gurus
-very cookie cutter -personal finance should emphasize around being *personal*, not one size fits all.
What is debt?
-when you owe something to someone else -debt obligates future income -debt takes away your choices -debt is a necessary evil Debt is what you acquire once you actually borrow.
Expenses rise to meet the New higher income
-you can't control your income -focus on what you can control -More money is not the answer to your financial problems.
After-Tax Multiplier
1 - Marginal Tax Rate
common lifestyle forces
1. Age 2. Education level 3. Marital status 4. Employment status 5. Income level 6. Number of dependents 7. Economic conditions 8. Health status
Good Debt
1. Appreciates in value - The asset must increase in value or produce more cash flow than the upfront cost. 2.Last longer than the loan - Simply put, the loan must be able to be paid off before the useful life of the asset has expired. 3.Positive financial leverage - The purchaser must get more out of the asset than its total cost, including interest.
How to determine if you need life insurance
1. Are there people who depend on your income? -if anyone partially or fully depends on your income u need life insurance -if not then you probably don't need life insurance at all -if. you are a parent with a young child you probably need life insurance -if your parents are living off their retirement assets they probably don't need life insurance -if you are a college student with financial aid loans you might need life insurance
3 Costly Myths with Insurance
1. Benefits should equal the premiums --benefits should far exceed any premiums you pay 2. Only cover disasters that are likely to happen --if the disasters are likely to happen, then practice reduction 3. Premiums are wasted if you don't recoup in benefit. --you shouldn't feeling your getting your moneys worth, you are protected should anything ever happen to your property
Steps to resolution of product defects or poor service
1. Contacting the company 2. Reporting lack of satisfactory company response to one of the consumer protection agencies 3. Utilizing Mediation or arbitration if available. 4. Filing a lawsuit
Anytime you pay someone else to do something for you, consider...
1. Could I do it myself? 2. How difficult would it be to learn this myself? 3. Is there a friend or someone else I can ask for assistance instead of paying a professional? 4. How many hours would I have to work at my job to earn enough to pay someone else to do it?
Financial Planning Process
1. Develop your goals(What do you want to acheive, what is it going to take?) 2. Manage your budget 3. Monitor and review(at the end of the month look at how u spent ur money vs how u said u were. what are you going to do going forward?) 4. Repeat
three components to budget
1. Fixed expenses 2. Variable expenses 3. Discretionary income
When it comes to spending you need to know two things
1. How to live within your means(an action or system brought about by result) 2. The true cost of your purchases
four laws for buying insurance
1. Insure for the big stuff --buy the largest deductible(portion of the insurance claim you pay for out of your pocket before insurance pays) you can afford. higher the deductible = cheaper the insurance. smaller deductible = higher risk. higher the deductible the more you pay. you accept more financial risk with higher deductible. --protection for assets, income, and from large expenses --Not to smooth out the bumps of everyday life --only get insurance on things that would cause financial ruin if damaged. if it can come from your pocket without causing too much financial harm, then don't insure it. -if you an afford to replace it then you don't need to insure it -avoid little policies like extended warranty. 2. Buy Broad Coverage --Flight insurance? cancer insurance?. so many ways to die is it really necessary --Avoid unnecessary riders(extra coverage that is in addition to what you receive in original coverage, of course this costs extra)(watch for up-sales) --Exceptions(cash, jewelry, guns) 3. Shop around --You are the boss, you are doing the insurance company a favor by using their insurance. --Premiums vary widely --Group discounts -Multiple policies --Buy direct -progressive, GEICO. avoid agents commission because it takes more time for you to understand what you're getting. 4. Choosing an Agent --Independent or Exclusive. typically an agent working for one company will have in depth knowledge. Independent agents are good for helping you shop around and weigh the pros and cons. Even independent agents will try to get you to pick the insurance that gets highest commission. --Commission or Salary -How are you paid? -Asking an agent if they earn salary or commission might be beneficial. Sometimes agents receive extra incentives for selling certain warranties or protection plans.
Good financial literacy
1. Keeps you from being had/tricked 2. Impacts your wallet 3. Affects your personal relationships *you can't separate your personal life from your financial life*
10 tips to improve credit score
1. Pay your bills on time. 2. Pay down your debt. 3. Pay down credit cards—try to keep the balance on each to no more than 30% of your available credit. 4. Get a credit card if you don't have one already, but you don't have to have a balance. Just use it on occasion and pay it off before the due date. 5. Get an installment loan. If you don't have a loan such as a car payment, consider taking out a personal loan and paying it off over several months. Having a mix of different types of debt is good for your score. 6. Use your older credit cards—the length of your older accounts is important so use your oldest credit cards once in awhile. 7. Check your credit report and get the following errors fixed: Negative items older than seven years (or 10 years for bankruptcy). These items should have come off your credit report automatically. Accounts that were handled in bankruptcy but still show up as unpaid. Credit limits that are incorrectly reported as lower than they actually are. This will affect your utilization rate. Late payments, collections, or accounts listed as "settled," "paid derogatory," or "paid charge-off" if these are not accurate. 8.Ask to have late payments erased or have your accounts "re-aged" if you messed up in the past but have been on time for several months. 9. Dispute negative information that is older than three years. Small accounts may not be verified by collection companies. If they do not verify them, then the reporting bureaus will drop them. 10. Avoid closing unused accounts. Cancelling old cards could make your credit utilization go up which will make your score go down.
Steps to eliminating bad debt
1. list your debts 2. Establish an emergency fund -you will sleep better knowing you have enough money to keep a roof over your head for a while 3. Pay off your first debt -highest interest rate, smallest loan, biggest cash flow 4. use money from first debt to pay on next debt. spend same amount as first debt and u will be out of debt quicker. 5. 50% solution- put 50% of the amount you had been paying to the previous debt and put it towards the next debt, and the other 50% to ur monthly budget
Risks we face
1. property --might lose the car, apartment, or home, can take precautions to prevent this 2. financial --might not be able to pay bills on time 3.retirement --am I saving enough to be able to retire comfortably 4.illness --sickness, cancer, proper insurance to cover this? 5.disability --may not be able to continue to earn a paycheck 6.death --inevitable 7.liability --held responsible for our actions, or the actions of another
April 15th surprises to avoid are
1.Owing a large amount of money because you did not have enough taxes deducted from your paycheck 2.Receiving a large tax refund because you had too much tax money deducted from your paycheck during the year
2nd level up for mandate in insurance
100/300/50
how much does a person need to make in a year to be in the top 10% of earners
125k
3rd level for mandate in insurance
250/500/100
No matter which way you choose to file bankruptcy, you must provide the courts the following information:
A list of all creditors and the amount and nature of their claims The source, amount, and frequency of the debtor's income A list of all of the debtor's property A detailed list of the debtor's monthly living expenses—e.g., food, clothing, shelter, utilities, taxes, transportation, medicine
What is risk management
A long range, organized, systematic, planned strategy to protect your assets and family.
personal floater policy
A personal floater policy typically covers a specific item that is easily movable from loss or theft. Unlike a rider, floater policies also cover you from loss of the item from your own negligence. Of course, the additional coverage comes with a higher premium than a rider.
personal loan
A product that allows someone to borrow a fixed amount over a fixed period at a fixed amount of interest. generally unsecured, which means unlike a mortgage or a car loan there is not an asset attached directly to the loan as security. These tend to have the highest interest rates, since the lender does not have the option to simply repossess whatever you purchased using their money. You can use the money from a personal loan for just about anything you want, including: Vacations Medical bills In-ground swimming pools
Excise
A tax included on the price of an item. Paid by the producer or seller, but passed on to consumer with higher prices.
Audit
A thorough review more detailed look into the supporting documents and other forms of proof that: You earned the amount you claimed You are eligible for the deductions you claimed
Tax Lingo 3.
A. Average Tax Rate -Total tax paid divided by income B. Marginal Tax Rate -Tax paid on last dollar of income
Tax Lingo 2.
A. Tax Evasion --illegally not paying taxes B. Tax Avoidance --legitimately reducing your tax liability
tax exemptions
Amount that taxpayers who meet certain criteria can subtract from taxable income. was 4050 per person
Tuition and Fees Deduction
An above-the-line deduction of up to $4,000 per tax return for qualified tuition and course-related expenses.
A consumer line of credit
An arrangement between a bank and a customer that allows the customer to borrow up to a certain amount or limit that they can access to any time if they choose is similar to a credit card, but usually involves checks provided by the bank instead of a plastic card. The checks can be written to anyone, just like personal checks, or they can be written to yourself so you can have access to cash.
pyramid scheme
An illegal form of multi-level marketing in which emphasis is placed on collecting initial fees from as many people as possible. members or investors are paid based off recruiting as many members as possible. the investors or members are paid a portion of the membership fee from the new members and eventually the pyramid collapses.
Pay-day loans
An organization that lets you borrow against next paycheck. There are substantial fees for this service. If this loan is not paid back in short period (like 2 weeks), it renews with additional fees and interest. Some can result in consumers paying higher than 100% interest annually.
personal property tax
Annual tax imposed on certain personal property, such as cars or boats and based on the value of the property. in the county or state in which they reside
the IRS has the power to
Audit any individual or business Take a taxpayer to court for fraud or failure to pay taxes owed Shut down businesses that owe taxes
mortgage interest
Available to those who itemize their deductions, but not those who choose the standard deduction when filing their federal tax return. Your tax liability will be reduced by a percentage of the amount of mortgage interest you paid, based on your marginal tax rate. Attach Schedule A to your 1040 to claim.
You can choose to manage the pure risks you face every day through:
Avoidance Assumption Reduction Shifting
municipal bonds
Bonds issued by state and local governments
healthcare plans
Bronze Plans Cover 60% of the healthcare cost (you pay the remaining 40% out of your pocket); have the lowest premiums, but highest average deductibles, of just over $5,000. Silver Plans Cover 70% of healthcare costs, and have higher premiums with lower average deductibles, of just under $3,000 less than bronze plans. Gold Plans Cover 80% of healthcare costs; have higher premiums than silver plans, and average deductibles of a little under $1,300. Platinum Plans Cover 90% of healthcare costs; have the highest premiums and the lowest average deductibles, of just under $400.
Variable expenses
Costs that vary in amount and type, depending on the choices you make. these expenses can be reduced in a month or two by changing your usage.
small claims court process
Determine if the amount you are trying to claim is within the set limits. Determine if the type of suit is permissible in Small Claims Court. Determine the jurisdiction where the claim must be filed (what county, for example). File the proper paperwork and wait for the clerk to set a court date. Ensure service (or notice) to the defendant of the claim and related documents that you filed. In some jurisdictions the clerk will serve the documents; in others, you are responsible. You cannot serve them yourself so you will generally hire a process server. Gather your documentation, Organize your evidence, Appear in court to present your case. Always remember to be respectful of the judge and the procedures while in the courtroom.
People use insurance to help protect themselves and the people they care about from financial loss due to:
Disability Illness Property loss Legal liability
Health insurance plans incorporate networks of providers to reduce costs. These networks or groups include:
Doctors Hospitals Laboratories Imaging centers Outpatient centers Pharmacies Other health care providers that sign a contract with the insurance company and agree to provide their service to the insurance plan member for a specific price
what highlights the little purchases that really add up over time?
Expenses
itemized deductions
Expenses listed on Schedule A that you can subtract from adjusted gross income to determine taxable income
Your objective for managing risk is to minimize the undesirable consequences from the causes of possible loss:
Fires Robberies Windstorms Diseases
Avoid the April 15th surprise from one of the following events
Graduation Marriage Divorce Having a baby Adopting a child Receiving an inheritance Changing jobs Significantly reducing or increasing your income5
adjusted gross income(AGI)
Gross income minus deductions.
The five primary types of networks are:
Health Maintenance Organizations (HMO) Preferred Provider Organizations (PPO) Exclusive Provider Organization (EPO) Point of Service (POS) High Deductible Health Plan (HDHP) The first four network types typically reduce costs by: Sharing infrastructure, such as billing departments or information technology costs Focusing on preventative care
What you will need to know for taxes
How much you owe How to minimize what you owe How to avoid penalties How much you will owe next year
five rules to avoid getting scammed
If it sounds too good to be true, it is. If you did not initiate the correspondence, don't agree to pay anything. If you have to pay anything to claim your prize, you didn't really win. If you make money from new recruits, think twice before joining. If it comes from another country, leave it there.
disposable income
Income remaining for a person to spend or save after all taxes have been paid
Strats to minimize your taxable income
Maximize your contributions to your 401(k). Contribute funds to a traditional IRA. Maximize your contributions to a qualified health savings account. Deduct your moving expenses if you moved for a new job in the past year. Deduct student loan interest. Deduct tuition and fees or claim an eligible education tax credit, whichever leads to greater tax savings. Review all possible credits for which you may qualify, such as the earned income tax credit and child tax credit.
best practices for credit card usage
Negotiate better terms. It's easy to call your current credit card company and negotiate better terms. You can call them at any time and ask for a better rate. Simply state that you have a better offer from another company, you have been a loyal customer, and you want your current company to match the better offer. Often you'll get a lower rate. Even if they do not say "yes" there was no cost to ask. Call and ask for late fee waiver. If you are late on a payment, call the company and ask to have the late fee waived. Let them know that you regularly pay your bills on time and that this was an unusual case. In addition, let them know you expect no increase in your interest rate. If they are reluctant to agree, take your business elsewhere. Remember, you are the customer. You are the boss. There are a lot of other companies out there that really want your business. Of course, this works only if you pay your bills on time. If you make a habit of late payments you will end up paying a lot of money in late fees, see your interest rate rise, and damage your credit score, and the credit card company will be very unlikely to work with you. If you are in good standing you have a much better chance of getting better terms from the credit card company than if you abuse or misuse your credit. Make your payments on time. Use automatic direct draft or online bill pay from your bank. Monitor your minimum payment, as it will change with changes in your balance. Keep your e-mail confirmation or print the confirmation page for your files as verification you made your payment. In the event that a credit card company tries to argue that you did not pay on time, you will have proof. If they try to do anything you think is unethical or illegal, first try to resolve the issue with the credit card company. If you are not able to resolve the issue directly with your credit card issuer, then you can make a complaint to the office of the attorney general for your state. You can find your attorney general's contact information at www.naag.org9.
Develop your financial goals
Place on a timeline: -Short term goals(couple months-3 years) -Mid-range goal(3-5 years) -Long term goals(5+ years)
property insurance
Provides payment to the insured person if his or her property is damaged or destroyed by an accident covered by the insurance policy.
A good healthcare insurance policy will cover the following health benefits within the limits of your deductibles, co-pays, and limitations.
Routine doctor's visits and care, including preventive health care such as immunizations, mammograms, and other cancer screenings Emergency Department visits and other emergency services such as visits to urgent care centers Overnight hospital visits for at least 120 days to include room and board Reasonable laboratory tests Outpatient care, including doctor and outpatient center visits Prescription drugs Rehabilitation services, such as physical therapy Care for chronic diseases, such as diabetes and other chronic pain Mental health services and substance-abuse treatment If you plan to have children, look for maternity and newborn care along with pediatric care (including dental and vision).
Four ways to manage risk example
Scenario: building a beach house --Assumption: build a house at the beach --Avoidance: don't build a house at the beach --Reduction: build the house a certain way to withstand storms --Shifting: get insurance on the house.
Schumer Box
Schumer box) that summarizes most of the key points of the contract, including the: Annual fee Interest rate Grace period Other fees4
There is more you can do to get out of debt.
Sell Unused Items. First, sell the stuff you don't need on Craigslist, on eBay, or at a yard sale. It may only lead to a few hundred dollars, but that is a good start to your emergency fund or towards reducing your smallest debt. You may be just a couple of months from paying it off! Earn Extra Income. Next, consider a part-time job. This is a temporary situation. Many college students work a part-time job. If you find yourself in this debt situation after graduation, and you are working full-time, you can still pick up a part-time job on the side. Depending on your experience and skills a part-time job could be anything from delivering pizzas to working in the back office of a retail store to preparing taxes a few months out of the year. Be creative and find a way to bring in some extra money for a short period of time. You only need to make enough to build an emergency fund and pay off one debt until your monthly budget is manageable. (In this case use the method that starts with the debt that will free up the most money the fastest.) A short-term sacrifice could mean a long time of reduced stress. Just keep in mind the tax consequences of that second job. All of that income is fully taxable at your marginal tax rate. There is almost never enough money withheld from your second paycheck to cover the taxes unless you direct your employer otherwise. Use "Found" Money Only To Pay Off Debts. Finally, start using any extra money that comes in to pay off debt. Tax refunds, pay raises, bonuses, and birthday money all go toward paying off the loan you are working on first. After all, you were living without that raise up until this point anyway.
the budget process
Step 1: Create a 1 month estimated budget Step 2: Track an actual 1 month budget Step 3: Compare the two budgets Step 4: Create a 12 month budget plan
steps to eliminating bad debt
Step One. Let's begin by listing all loans, the minimum monthly payments, the amounts owed, the interest rates, and the due dates. It is important to understand where you are now so you can best map out the course that gets you to your financial goal, in this case becoming debt-free. Step Two. Choose in which order you would like to pay off your debt. How do you know which order to list your debts? It depends on your personal preference. Your three options are: Start with the smallest debt. Start with the highest interest rate. Start with the debt that will free up the most money the fastest. Step Three. Before making any extra payments on any loan, establish an emergency fund. An amount equal to one month's rent or mortgage payment, or to $1,000, whichever is more manageable, is a good target. The reason is twofold. First, you will sleep better at night knowing that if something happens you have enough money to keep the roof over your head for the next month. Second, as you begin to pay off your debt you can expect something to happen that will set you back. Remember, L.I.F.E. happens. At some point the car needs to be repaired or your roommate breaks an appliance in your apartment. An emergency fund lets you handle these situations without borrowing money. It helps you stop digging the debt hole deeper. Step Four. Tackle the first debt. Which debt is the first to pay off? That depends on your situation, your personality, and your goals. You can ask ten different experts and you will get ten different opinions. The key is to focus on one loan at a time. Make the minimum payment amount on every loan except the one you decide to pay off first. If you have any extra money you can identify in your budget, use that extra money and add it to each month's payment. By concentrating all your resources on one debt at a time you will see progress much quicker. Step Five. When you pay off your first debt, simply take the money you had been paying on that loan and add it to the payment on the next loan you want to concentrate on. Doing so lets you pay off the second debt much quicker without having to add extra money. You were already making that payment anyway so you will not miss the money. After you pay off the second debt, simply take the money you had been paying (which includes the money from the first debt) and add that to the third debt. Now you are paying much more than the minimum amount without sacrificing anything new. You are still spending the same amount on debt as you were before, but you will be reducing your overall debt much faster. This cycle continues until you have eliminated your last debt.
Two types of life insurance
Term Life Insurance -provides death benefit protection for a specified period of time. -to simply purchase a death benefit get term insurance Cash Value Life Insurance -Universal, whole life -Part of. your premium goes towards paying a death benefit. other part goes to savings account. savings accounts are relatively poor performers -Pay high commission prices -Buy Term!!
Lenders look at two factors before they lend money to you:
The ability to repay your loans. The willingness to use your resources to do so.
The key to credit cards is to understand:
The consumer protections laws governing credit cards How they work What purpose they should serve When you should and should not use them
Tax deduction charitable gifts
The deduction for a donation to a charity is available to those who itemize their deductions, but not those who choose the standard deduction when filing their federal tax return. Your tax liability will be reduced by a percentage of the amount donated to charity, based on your marginal tax rate. Attach Schedule A to your 1040 to claim.
Real estate taxes paid
The deduction for real estate taxes paid is available to those who itemize their deductions, but not those who choose the standard deduction when filing their federal tax return. Your tax liability will be reduced by a percentage of the amount of real estate taxes paid, based on your marginal tax rate. Attach Schedule A to your 1040 to claim.
non-refundable tax credit
The portion of the credit that is not needed to reduce your tax liability will not be paid to you and cannot be carried forward to reduce your tax liability in the future
common cash value insurance sales pitches
The premium will be paid up in ten years, so you no longer have to make payments. True. What is really happening is that the total premiums for your entire lifetime are paid over a ten-year period. You pay very high premiums because you pay for a lifetime of insurance, but have to cram those payments into just ten years. Plus the cash value decreases. Not a good deal for you. Most people cannot afford term insurance as they get older. Of course, the cost of term goes up as you get older because the risk of dying is greater. But if you plan wisely, you will not need life insurance later in life, or you will need less as you age. You need life insurance while you are young and have a mortgage and kids. Once you are old and retired, and have a 401(k), your need for life insurance should be zero. You can borrow against the cash value. The insurance company gives you the opportunity to borrow your own money and pay the insurance company interest. This option is a very good deal for the insurance company, but not so much for you. The cash value of the policy grows tax-deferred. True. However, individual retirement accounts (or IRAs) are better. They grow tax-deferred plus, and this reason is a big plus, they provide an immediate tax deduction as well. Cash value life insurance forces you to save. If you need a little help to be a disciplined saver, better ways exist to go about it. Alternative forced savings plans, such as payroll deductions or automatic transfers from your checking account to savings account, are much less costly.
1040EZ
The quick tax form most often used, in paper or online, for those with uncomplicated tax situations.
1040
The standard Internal Revenue Service (IRS) form that individuals use to file their annual income tax returns.
medical payments coverage
This coverage pays medical costs for you and your passengers for injuries suffered from an automobile accident should you be found at fault.
Foreign Tax Credit
This credit is a non-refundable credit for income taxes paid to a foreign government as part of foreign income tax withholdings. See Publication 17 and attach related Form 1116 to your 1040 to claim.
Lifetime Learning Credit
This credit is a non-refundable tax credit for qualified higher education tuition and expenses paid for an eligible student. Your tax liability will be reduced by the dollar amount of the credit. This credit can be used if you itemize or if you choose the standard deduction when filing your federal tax return. For more information, go to Publication 17 and attach related Form 8863 to your 1040 to claim.
Electric Vehicle Credit
This credit is a non-refundable tax credit for the purchase of a qualified electric vehicle. Your tax liability will be reduced by the dollar amount of the credit. This credit can be used if you itemize or if you choose the standard deduction when filing your federal tax return. See Publication 17 and attach related Form 8963 to your 1040 to claim.
American Opportunity Tax Credit (AOTC)
This credit is a partially refundable tax credit for qualified education expenses with a maximum of $2,500 during the first four years of postsecondary (college) education for an eligible student. Your tax liability will be reduced by the dollar amount of the credit. This credit can be used if you itemize or if you choose the standard deduction when filing your federal tax return. See Publication 17 and attach related Form 8863 to your 1040 to claim.
Earned Income Credit
This credit is a refundable tax credit for individuals or families with low to moderate income, especially those with dependent children. Your tax liability will be reduced by the dollar amount of the credit. This credit can be used if you itemize or if you choose the standard deduction when filing your federal tax return. See Publication 17 and attach related Schedule EIC to your 1040 to claim.
traditional ira contributions
This is an "above-the-line" deduction, which means you are eligible to use the deduction even if you choose the standard deduction when filing your federal tax return. Your tax liability will be reduced by a percentage of the amount you contribute to a qualified plan, based on your marginal tax rate. Enter the amount of contribution to your traditional IRA on page 1 (line 32) of Form 1040's section entitled "Adjustments to Gross Income".
Student Loans Interest Deduction
This is an "above-the-line" deduction, which means you are eligible to use the deduction even if you choose the standard deduction. Your tax liability will be reduced by a percentage of the amount of student loan interest you paid, based on your marginal tax rate. See www.IRS.gov for more information and enter the amounts paid in the Adjustments to income section of your return to claim.
financial life cycle
Typical 3 stages of wealth a person accumulates during the life cycle 1. Wealth Protection: begin their full-time career, gain advanced college degrees, start earning significant money, and perhaps begin a family. In this stage, you start accumulating wealth for your retirement, even though you may not retire for 30-40 years. 2. Wealth Accumulation: includes your peak earning years, children leaving home, and focusing on your own wealth building. At this stage, you work towards maximizing your retirement contributions and invest any excess funds to prepare for your upcoming retirement years. 3. Wealth Distribution: retirement—reaping the rewards of your hard work in the previous two stages. You determine how much money you will need to live each year in retirement and focus on detailed estate planning in order to distribute the remainder of your wealth to family, charities, and other causes after your death.
Lenders use your credit report and credit score as their main tools to determine your creditworthiness.
Ultimately, lenders are trying to determine if you are a good risk or a bad risk when lending you their money.
To put your risk management plan to work ask yourself...
What should be insured? For how much? What kind of insurance? From whom?
Purchasing insurance is similar to purchasing any other product, but with one significant difference:
You are buying something you hope to never use.
small claims court
a court that deals with legal disputes that involve amounts below a certain limit 3,000-10,000
scam
a dishonest scheme purposefully designed to swindle others.
Annual fee
a fee that a credit card company charges the cardholder simply for the privilege of having the card; can range from $10 per year to hundreds of dollars per year. Annual fees are more prevalent among credit cards that offer high-end rewards.
Retail loan
a loan attached to a specific item purchased but is offered by either a retail store or third party finance company where you simply borrow a fixed amount that you repay over a specified period of time. also called a closed-end credit
installment loan
a loan repaid with interest in equal periodic payments
Introductory rate
a special lower interest rate used to attract new customers. It is common for credit card companies to offer a very low, or even 0%, APR for six months to one year that will then switch to a higher APR.
no-fault state
a state with laws that require a minimum level of no-fault automobile insurance
child tax credit
a tax credit given for each qualifying child under 17
Capitation
a tax imposed on an individual regardless of income or assets owed
Car-title loans
a type of secured loan where borrowers can use their vehicle title as collateral
APR
acronym for annual percentage rate; the interest rate used to calculate the interest charge when a balance is carried on a credit card. There are two types of annual percentage rates: fixed and variable. For variable-rate cards, the APR changes with changes in market or government interest rates. The APR for fixed-rate cards does not change from what is stated in the credit card contract.
rider
an add-on to an insurance policy that increases coverage
standard deduction
an amount of money set by the IRS that is not taxed
36,000 per year income
average income after college. Income: 3,000 per month -Federal taxes: 400 -State taxes: 300 -FICA: 200 -Rent: 500 -Car Payment: 400 -Car Insurance: 100 -Utilities: 350 -Food: 400 -Student Loans: 250 Leftover - 100 per month.
Health Insurance Exchanges
can influence the amount of money you owe or the refund you receive when filing taxes
Cash advance—
cash loan from a credit card. The most common cash advances are using a credit card to obtain cash from an ATM and requesting cash back when making a purchase using a credit card. Less common cash advances include using a credit card to make a wire transfer, buy foreign currency, buy travelers' checks, or purchase a money order. Most credit card companies charge an additional fee, usually around 3% of the cash advance, on top of interest charges and other fees.
The 2009 Credit Card Accountability, Responsibility, and Disclosure Act (the Credit CARD Act)
changed some of the rules of the credit card industry in an attempt to protect consumers. Credit card companies can no longer solicit you on college campuses by offering free items to get you to sign up, and it is more difficult for you to open credit cards before the age of 21.
no-fault insurance
coverage requiring that parties to an automobile accident be indemnified(compensated) by insurance company regardless of who is at fault. aka PIP
Homeowner's insurance
covers your personal property, provides liability protection, and pays for other expenses. In addition, it covers the structure of the house. Several factors affect the price of your homeowner's policy, but the most important factor is the property's location. Other factors that affect the price of insurance include: Crime rate Distance to a fire department Distance to a fire hydrant Likelihood of various natural disasters, such as hurricanes Overall property values in the area The type and age of the structure The amount of coverage The size of the deductible Pay attention to the dwelling coverage portion of the policy. This typically covers: Your house Attached structures Fixtures in the house, such as built-in appliances, plumbing, heating, permanently installed air conditioning systems, and electrical wiring Other structures that are covered under a separate clause in the policy include: Detached garages Storage sheds Fences Driveways Sidewalks Patios Retaining walls
Open-end credit
credit as a loan with a certain limit on the amount of money you can borrow for a variety of goods and services
credit score vs credit report
credit report has all the information available about you from a financial perspective. Your credit score is all that information distilled down into a single number based on a formula that is owned by the credit agency.
debt
debt takes away ur choices
Lifestyle forces
form factors that influence how a person will live
Mutual fund
fund that pools the savings of many individuals and invests this money in a variety of stocks, bonds, and other financial assets
1040 A
income less than $100,000 and take standard deduction and/or take adjustments to income or tax credits
Tax Payer Advocate Service
independent organization within the IRS that helps taxpayers and protects taxpayer rights. Its job is to "ensure that every taxpayer is treated fairly and that you know and understand your rights under the Taxpayer Bill of Rights."
after-tax interest rate
interest rate * (1 - tax rate)
Annual Percentage Rate (APR)
interest rate stated on an annual basis which may include fees such as loan origination fees
insurer
is a risk-sharing firm that assumes financial responsibility for losses from the insured in exchange for a fee
class action lawsuit
lawsuit brought on behalf of a class of people against a defendant, e.g., lawsuits brought by those who have suffered from smoking against tobacco companies.
title
legal ownership
Freezing your credit report
makes it to where no one can look at your credit history, therefore they can't steal your identity freeze your credit report via google
legal aid societies
nonprofit entities that provide civil legal assistance for individuals who cannot afford their own legal counsel
Marriage problems with finance
one out of two marriages today end in divorce. most of these arguments stem from money struggles.
Debt elimination process that works best
pay highest interest rate first
Fixed expenses
payments each month that don't change such as rent, car payment, student loans.
Why use a credit score?
people with messy finances typically lead messy lives
after tax earnings
pre tax earnings x ATM
market value
price something should sell for in its current conditon
property vs casualty insurance
property insurance insures a physical item in case of loss, while casualty insurance insures against monetary loss resulting from liability associated with an event. For instance, if you are at fault in a car accident and someone else gets injured, if you are liable, casualty insurance would cover your financial loss.
debt utilization ratios
provide information about how much debt an organization is using relative to other sources of capital, such as owners' equity. The DUR is simply the amount of debt you have divided by the credit limit. So a $700 balance on a card with a $1,000 credit limit means you have a $700/$1,000=70%$700/$1,000=70% DUR. You want your DUR to be below 30%. You can achieve this low DUR by paying off your debt. You can also transfer balances across credit cards to keep each card's DUR as low as possible. While this doesn't help your overall DUR, each card's DUR affects your credit score.
When it comes to your finances
spending is the thing you have the most control over.
boilerplate language
standard language used repeatedly without change
umbrella policy
supplementary personal liability coverage; also called a personal catastrophe policy
Tax Credit vs. Tax Deduction
tax credit directly reduces your taxes by x amount tax deduction reduces your taxable income; actual taxes reduction depends on tax bracket always better to maximize credits over deductions
FICA
taxes that fund Social Security and Medicare
Insurance
the best way to shift risk a financial product where the insured transfers an agreed upon risk of loss to another party
Replacement cost
the cost to replace a loss from a covered item at its current market value with a similar item
taxable income
the earnings on which tax must be paid; total income minus exemptions and deductions
risk
the failure to recognize a risk is a de facto acceptance of that risk and all of its consequences
FICO
the largest and best known of several companies that provide software for calculating a person's credit score.
Credit line—
the maximum amount that can be borrowed on any single credit card.
Billing cycle—
the period between credit card billing statements. Billing cycles are typically one month, but can range from 20 to 45 days depending on the credit card and the credit card company.
what is risk
the probability of an unwanted outcome
underwriting
the process of reviewing a customers risk level by conducting a review of their credit worthiness along with other financial documents. to make their decision they might 1. Evaluate how risky you are as a borrower 2.Decide if and how much they are willing to lend 3.Determine the interest rate (The rate of interest is based on the overall level of risk you present.)
the key to buying insurance
the right coverage for the right price
If most people aren't personally financially successful
then lets avoid spending our money like them
The trick to buying insurance is
to make sure you are adequately protected from financial ruin while presenting as little risk to the insurance company as possible to ensure you are charged the lowest premiums.
the IRS uses
total income
age isn't a factor in your insurance premium
true
Positive Financial Leverage
value gained from acquiring an asset using debt is greater than the cost of borrowing
Financial Health
what are the moments in your life that you wouldn't trade for anything? did it involve money?
discretionary income
what is left over after you paid all of your necessary expenses including taxes, insurance, and other obligations.
Debt is
what you acquire once you actually borrow. Debt is a loan or obligation.
opportunity cost
whatever must be given up to obtain some item
Under Chapter 13 bankruptcy,
which is individual debt adjustment, you repay all or part of your debt through a three- or five-year repayment program worked out by the courts. You make payments to the courts and they pay your creditors. This can be especially useful for individuals who are feeling harassed by creditors and collection agencies, since you no longer have direct contact with your creditors. Once you successfully complete the program any remaining debt is discharged, which means the debts are essentially forgiven. The biggest advantage of Chapter 13 is that you may save your home from foreclosure. You can also keep secured debts, such as your car, outside of the bankruptcy proceedings, so you would continue to make regular payments on your car.
Refundable tax credit
you get the refund even if it is more than the amount you owe before subtracting the credit. you may actually receive a refund from the government for your total amount going into next year.
Balance transfer
—moving the unpaid balance of one credit card to another credit card. Typically, the reason to make a balance transfer is to move the balance from a high-interest rate credit card to a new card that charges a lower interest rate. This is usually done to save money or consolidate(make stronger) debt.
Finance charge
—the interest charged on the balance on a credit card within the current billing cycle. Note that finance charges apply not just to the balance on the credit card from purchase and cash advances, but to any balance transfer fees, cash advance fees, late fees, over-limit fees, and any other fees charged to the credit card account.
Minimum payment
—the lowest amount of money that can be paid on a credit card balance each month to prevent the credit card account from going into default. Although it varies from card to card, the minimum balance is generally between 2% and 5% of the outstanding balance.
Grace period
—time allowed to pay a credit card balance without incurring any finance or interest charges. The grace period typically can range from 21 to 25 days before the balance starts incurring interest charges. Note that some credit cards offer no grace period. Interest charges are applied immediately after a purchase or cash advance takes place. Grace periods do not apply to any balances carried forward, or to new purchases if you are carrying an outstanding balance.
