Personal Finances
What is Fred's Law when it comes to buying a car?
-The price you pay is inversely related to the amount of the salesperson's time you waste. The more time you waste, the lower the price tends to go. -You have the money. So you are the boss.
What are the four essential types of coverages that standard homeowners insurance policy include?
-The structure of your home -Your personal belongings -Liability Protection -Additional living expenses
What are the two options employers can offer so your money is not forfeited (use-it-or-lose-it)
-The time period is extended by the employer, up to March 15th of the following year -The employer may allow you to carry up to $500 per year to use in the following year
What are the items covered with a comprehensive coverage?
-Theft of contents, glass breakage, falling objects, animal collisions -Fire, explosions, windstorm, hail, water, flood, earthquakes -Malicious mischief, vandalism, rioting
Similarities between Traditional 401(k) and a Roth 401(k)
-There is no difference in contribution limits. If your current limit is $18,500 it can be put into either type of account or shared, but the total cannot exceed $18,500 combined for any one year. -There is no difference in what is an eligible investment -There is no difference in the matching contribution percentage. However, since matching contributions made by an employer are tax-deductible to the employer, they must go into a traditional 401(k) account -This ensures there cannot be a situation where the employer deducts the contribution and the employee deducts the withdrawal
Home equity Loan
A one-time lump sum loan secured by the property, with a fixed rate of interest, to be paid off with equal monthly payments over several years. The interest is probably not tax deductible unless the loan is used to "substantially improve" the home.
Equity
A permanent ownership take in the business. Raising outside equity may mean giving up some percentage of your ownership and control, but the difficulty is defining how much to give in return for the needed cash, this is called dilution. Try to minimize it. -Owners may want dividends to be paid along -investors will ant to monetize their state, turn it in to money, by selling their shares
How to prepare for retirment and longevity?
A person needs to have a long term horizon.
Video: Which is an example of adverse selection in the context of insurance?
A person signs up for health insurance because they have been diagnosed with cancer.
High Deductible Health Plan (HDHP)
A plan that has a higher annual deductible than typical health plans.
Coupon
A predetermined rate of annual interest is paid twice a year in equal amounts, but when bought or sold bond interest is calculated precisely as of the day of the transaction.
Lien
A process whereby the property becomes security for the payment of a debt, but unlike a mortgage, the filer of the lien does not have the power to force the sale or take possession of the property.
Notary Public
A public officer constituted by law to witness the execution of certain classes of non-contentious(not likely to cause an argument) documents.
Negative cash flow
Not generating enough income to cover monthly expenses
Balance transfer fee
A fee that might be charged by a new lender if you transfer the balance from your credit card provider to another. Usually a fee of 2% to 5% of the balance is transferred
Fixed Rate Mortgage
A fixed-rate mortgage enables you to lock in your interest rate for the entire life of the loan.
Disability Insurance
A form of income replacement which pays an insured person an income when that person is unable to work because of an accident or illness.
Rental Insurance
A form of property insurance that provides coverage for a policy holder's belongings and liability within a rental property.
General Annuity
A general annuity is an annuity where the payment intervals are not the same as the interest intervals. Formula: PV_annuity = C/r (1-1/(1+r)^T) C = cash flow
Mechanic liens
A guarantee of payment to a contractor, subcontractor, laborer, or material provider recorded with the county recorder's office.
Standard deductions and how much is it?
A no-question asked deduction to income before calculating your tax. No record no proof necessary. -Single ($12,000)* -Married and filing jointly ($24,000)* * Every year it varies
A home equity loan is
A one-time lump sum loan
Does liability protection pays everything?
No, if there is gross negligence on your part, it might not cover you. Anything beyond your policy limit is your personal responsibility.
If you sell the house for a loss, is that tax deductible?
No, if you sell the house for a loss, there is no loss for tax purposes. So be sure to keep good records for the IRS.
Is liability optional?
No, it is mandatory in nearly all states and may require proof of insurance
Would your insurance cover everything in a car accident?
No, it would only cover up to your policy limits, and you may be held responsible for losses in excess of that amount
Are the employers' contributions to Social Security and that of the employee's tax-deductible?
No, only the employer's contribution to social security is tax deductible, but not that of the employees.
Does insurance (structure of the home) cover the land or waterfront property?
No, only the house
Does the base price include all the options already on the car?
No, options can easily add 5% to 10% to the price.
Are real estate investments liquid?
No, they are not highly liquid. It can take months or years to sell.
Can a company not give your 401(k) plan?
No, you will always be 100% vested in your own contributions to a 401(k) since that is your money. Limitation applies
The following traditional IRA withdrawal exceptions can be made without payment of taxes:
None of the above
When purchasing a house, the purchase price includes A.Closing costs B.Inspection costs C.Move-in costs
None of the above
Credit Unions
Nonprofit organizations owned by their member depositors -They are nonprofit organizations, surplus earnings of credit unions are returned to their members in the form of higher saving rates and lower borrowing rates -Most are insured by FDIC
Card Act: Credit card issuers may not raise interest rates on ...
PRIOR CHARGES solely on the basis of current changes in a credit report or a credit score
Who pays the inheritance tax?
Paid by the heirs
Which parts of Medicare have deductibles?
Part A, B and D have deductibles ( the amount of money that you have to pay out-of-pocket before Medicare begins paying for your health costs. ) Part A: Pay the first $1260 and then medicare kicks in Part B: $146 deductible
Dividends
Part of the earnings of a corporation which are distributed to its shareholders. -Paid out after-tax profits -Distributed quarterly to the shareholders -Taxed twice: once at the corporate level and again at the shareholder's level -Not all corporations pay dividends -Decided by the board of directors, which is elected by the shareholders -Not tax deductible expense to the corporation -Taxable income to the shareholder
In a short sale
The current market value of the house is less than the amount of the loan
Equity
The difference between the current market value of the property, less what is owed on the mortgage(s) and any other debts against the property. Equity represents the value of what you would receive if the property were sold and all debts against the property were repaid. You may be able to borrow against the equity in your house by taking out a home equity loan or establishing a home equity line of credit.
What is one requirement of a 401(k)?
The employer designated the investments from which employees are allowed to select. This limits the choices available to plan participants. The employee is actually managing the account, but only within the scope of investments offered by the employer.
How were mortgage brokers paid back then during the recession?
They were paid for finding and arranging loans for lenders, serving only as intermediaries in the transaction, sharing none of the risk. They were paid their commission whether or not a loan ultimately failed or the investor lost money.
Why do individual investors buy speculative grade bonds?
They want to be paid a higher rate of interest and are willing to accept a higher risk of default.
Why do individual investors buy investment grade bonds?
They want to receive a reliable source of periodic income along with safety of principal.
The lower the quality of the bonds, the higher the
interest rate must be to attract investors.
Who grant the stock options?
Board of directors
Who sets the price oat which the employee can purchase shares of stock sometime in the future?
Board of directors
Bonds issued by the US Treasury are guaranteed by...
Bonds and notes issued by the US Treasury are guaranteed by the federal government -Considered the safest investment in the world
Bonds
Bonds are an interest-bearing security obligating the issuer of the bonds to pay the bondholder a specified amount of interest for a specified period of time, and then repay the bondholder the face amount of the bond, usually $1,000 per bond, on the termination date according to its terms and conditions -Debt that must be repaid
Municipal Bond (Muni Bonds)
Bonds issued by state and local government agencies -Secured by assets, taxes, revenue, -Interest from municipal bonds issued by state and local governments is free from federal income tax -In some states it might also be free from state income tax
Credit Score
Total information in your credit report determine your credit score
Individual Retirement Account (IRA)
Tax-sheltered account ideal for retirement investing. It permits investment earning such as interest, dividends, and capital gains to accumulate tax free and be reinvested within the account, super charging the already powerful effect of compound interest.
What is the biggest single expense over your lifetime?
Taxes -Federal income taxes -State income taxes -Social Security Tax -Medicare Tax -Sales tax -Property Tax -Estate Tax -etc.
What does bankruptcy does not relieve you off?
Taxes, alimony, child support, or most student loans
What should you do if you are trading a car and buying a car?
Tell the salesperson you are willing to buy the car at the price if they agree to give you 30 days to bring them the old car, or replace it with a check equal to their trade-in offer.
True/False: When leasing a car, the residual value is as important as the capitalized cost.
True
True/False: When you marry you do not legally take on the debt your partner amassed before you wed.
True
How much should you borrow when getting a student loan?
Try to limit borrowing to no more than what you realistically would expect your annual salary to be upon graduation -for students loan payments should not exceed 10% of your expected monthly gross income once you graduate -For parent, total debts should not exceed 36% to 43% of gross income (home mortgage, credit cards, car loans, and education loans)
Bilateral Contracts
Two party contacts
In what type of income do you not pay social security taxes?
Unearned income (interest, dividends, or capital gains)
Example of a Lien
When a contractor or subcontractor make improvements or repairs, or when the owner fails to pay all property taxes and assessments.
Being _______, not ______ but value oriented, is the cornerstone of their wealth.
frugal, cheap
Stock grants
gifts of stock by companies to executives and managers. Grants may either be free to the employee or require purchasing the shares at bargain prices. - may or may not be restricted or vested
Title Search and Title Insurance
guarantees clear ownership of a property to buyers and lenders
The Rule of Fred
"I Get Paid First"
What is the face value/principal amount/par amount of?
$1,000
How much is jewelry, furs, art, and silverware covered if they are stolen?
$1,000 to $2,000 if they are stolen, subject to a deductible amount
What is the total student debt?
$1.5 trillion
What are the maximum individual federal estate tax, gift tax, and generation-skipping tax exemptions when combined?
$11.2 million per person with a maximum tax rate of 40% applied to amounts above $11.2 million
What is the current maximum annual tax deductible contribution for a 401(K)?
$18,500 or $24,000 for those ages 50 and over
Federal Reserve Rules: Your credit card company cannot charge you a fee more than...
$25 unless one of your last six payments was late, in which case your fee may be up to $35
What is the current maximum size for a conforming loan?
$424,100 but in high cost areas, it may be upward of $636,150
Video: In California the minimum required automobile liability coverage for property damage is:
$5,000
How much does heads of households age 55 to 64 have saved for retirement?
$65,000
What are the two most popular repayment plans for student loans?
(1) Income-based Repayment Plan (IBR) (2) Pay as you earn repayment plan (PAYE), which is capped at 10% of your disposable income.
Why tell them you are paying cash?
-Don't tell them because the dealer also wants to sell you financing and insurance for the extra fees and commissions
What costs should you consider when buying a house?
-Down payment -Mortgage payment -Closing costs -Property taxes -Insurance -Tax benefits -Maintenace and repairs -Opportunity costs
What should you do if you inherit an IRA or Roth IRA?
-Promptly check the current rules and regulations before you do anything with the money. -Always seek professional advice
What is the maturity time of US bonds, bills, and notes? Does the gov. pay interest on treasury bills?
- US treasury bills mature in 90 days to 1 year. No actual interest if paid because the government sells the bills at a discount and they mature at face value. (Ex: If the government sells a treasury bill for $950 and it measures in 1 year at $1,000 the return to the owner is 5.26% ($50/$950 = 5.26%) -US treasury notes have 2, 5, and 7-year maturities. Interest is paid twice a year. US treasury bonds mature in 10 - 30 years Interest is paid twice a year.
Roth IRA Plan Withdrawals
- after age 59.5, if the account has been opened for at least 5 years you can take out all you want - before 59.5, you can take your contributions out tax-free but any investing earnings will be taxed - when you die, money goes to beneficiary tax free, but beneficiary will have RMD to take and must meet combined 5 year test for distributions to be tax free - no require minimum distributions at age 70.5, required minimum distributions after death that apply to the beneficiaries -Money converted into a Roth IRA account from a traditional IRA can only be withdrawn tax-free if held in the account for at least 5 years -limited exclusion fro early withdrawals without penalties or taxes (permanent disabled, need up to $10,000 for a first-time purchase of a home, distribution to heirs after death)
Traditional IRA Plan Withdrawals
- after age 59.5, you can take out all you want penalty free, but you will pay ordinary income tax on the proceeds in the year of the withdrawal - at age 70.5, you must begin yearly withdrawals using the IRS required minimum distribution (RMD) schedule which is designed to get all your money out and taxed by the time you die or your beneficiaries die - if you do not take out the minimum, IRS will claim 50% of the amount you failed to withdraw
Why do lenders like credit cards?
- over 50% do not pay off their balances each month - average household has over $9000 in credit card debt - over 75% college undergrads had over $3000 avg debt
What are the best times to buy a car?
- the last two days of the month - between Christmas and New Year's because of slow period for car sales -when the last year's new models are sitting on the floor after next year's models have started to arrive
The Nightingale/Conant Institute showed that of 100 people who start working at age 25, by the time they reach age 65,...
-1 will be rich -4 will be financially independent, able to take care of themselves -45 will have some funds but will still need some form of continuing financial aid -50 will essentially be broke
How many days in advance should you make your credit card payments?
-2 days in advance before due date (paying online) -5 days before if paying by mail
What is a typical mandatory plan for liability insurance?
-20/50/25 -$20,000 of coverage for bodily injury to one person -$50,000 of coverage for bodily injury for all people hurt in a single accident -$25,000 of coverage for property damage
How much do you have to pay for Medicare tax and what about high-income earners?
-50% is paid by employee (1.45% of earned income) and 50% by the employer (1.45%) and there is no salary "cap" -Under the Health Care Reform Act, high-income earners have to pay more on medicare and also they have to pay taxes on the unearned income(only applies to the employee not the employer)
How can you get medicare?
-65+ years old -Disability (After 2 years of getting Social Security Disability Insurance) -Insurance for people with end-stage renal disease (Kidneys)
Tax rates and brackets?
-7 tax brackets -10%, 12%, 22%, 24%, 32%, 35%, 37% → based on filing status -37% only applied to incomes of single (above $500,000) and married(above $600,000)
The legislation guarantees that interest rates will not exceed:
-8.25% for undergraduates -9.50% for graduate students -10.50% for Plus loans
What are some guidelines, most lenders would believe you can afford?
-A mortgage amount up to about three times your annual gross income -A monthly mortgage payments, including principal, interest, insurance, and property taxes, not to exceed about 28% of your gross monthly income -Total debt payments not to exceed about 43% of gross income
Types of corporations?
-Charter corporations (C - Corp) -Subchapter S Corporation (S-Corp) -Limited Liability Corporation (LLC)
Tips about buying foreclosure properties?
-Advertised foreclosure and short sale discounts of 30% to 40% are, in reality more like 10% to 15% when compared to existing market values and not previous high prices -Property might have deferred maintenance and repairs -There can be hidden liens on the property -Check the comps of similar properties in the area
What factors does a FICO score not consider when determining your score?
-Age -Race -Sex -Marital status -Where you live -Occupation -Salary -Medical debts -Collections which have been paid
What are the basic requirements to receive retirement benefits?
-Age (above 62) -The required number of quarters you have paid into the system (minimum of 40 quarters = 10 years) -The minimal amount of income earned over those quarters (at least $2,800) -You must be a citizen or lawful alien to receive benefits
PPO (Preferred Provider Organization)
-Allow you to choose from a group of providers who have their own contracts with your insurance company to provide services at a predetermined price -The medical provider must accept these amounts as full payment, which is usually significantly discounted from what you or I could get on our own -You do pay some amount for care when it is received -Co-pays, co-insurance, and deductibles are part of the plan and help to determine the monthly premium -Important: The large discount affordable to you by the contracts between the insurer and the medical provider. -More flexibility selecting your doctor
No-fault medical coverage
-Amount between $1,000 and $5,000 if a guest is injured in your home
What do landlords may require before you move in?
-An application fee -First and last month's rent -Security deposit
Everything about FSAs
-An employer only sponsored plan -Money is deducted from your paycheck on a pretax basis to pay for out-of-pocket health care expenses -contributions are not subject to federal income taxes, social security or medicare taxes, or most state taxes -Funds can be used to pay for co-payments, co-insurance, deductible, and other qualified medical expenses that are not covered by insurance -At the beginning of the year, you need to estimate the amount you want to contribute into the plan, up to a maximum of $2650, money deducted monthly from you paycheck -Money not spent by the end of the year is forfeited
What should you look when purchasing a condominium or apartment?
-Are common areas such as hallways, elevators, pools, exercise rooms, and laundry facilities kept clean and operational? -Are the walls and ceilings soundproof? -What are the monthly fees to cover repairs, maintenance, and other shared expenses? -Are all the units owner occupied? -Are any units in foreclosure? -Is there a right to sublet units? -Is there a reserve fund for major repairs? -Are there any upcoming special assessments?
What are the minimum criteria required for a score?
-At least one reported "account" which has been open for at least six months -At least one account that has been reported by a lender in the last six months -Nothing that indicates you're deceased
What are some protections built in when buying a home?
-Banks must carefully document and verify a person's income and not allow a borrower's total debt payments to exceed about 43% of their pretax income. Some banks are more conservative than this. -Interest-only loans and negative amortization(not paying enough to cover the interest) loans should be eliminated -ARM (Adjustable-rate mortgage) loans with low "teaser" interest rate can only qualify if judged on the highest payment that will apply in the first year of the adjusted market rate - 30 year fixed rate mortgages are now more common
Negotiating your lease
-Be prepared to bargain and negotiate for the car as though you were planning to buy it -The less a car depreciates, the lower the relative lease payment because at the end of the lease the car is worth more(favors luxury and high demand cars)
Why is it recommended to take benefits when you reach full retirement age than taking them at 62 and still working?
-By taking early retirement at age 62, the monthly retirement benefit is reduced by around 30%. -If you are still working, Social Security deducts $1 from the benefit payment for every $2 earned above an annual limit (around $17,040). -Upon reaching full retirement age, qualified seniors will receive their full benefits regardless of income, but they would still be taxable. -Born in 1960, full retirement is at age 67
What to do in the case of an accident?
-Call for assistance if necessary -keep auto insurance information with the car -Get the names and badge numbers of the police officer and get the accident report -Exchange names, addresses, driver's license, and insurance information with the other drivers -Do not admit guilt -Take pictures -Contact your insurance company as soon as possible
Limited Liability Corporation (LLC)
-Chartered by a state -Shareholders have limited liability -Does not pay dividends -Profits and losses are passed through to the owners individually and accounted for on their individual tax returns -Corporate structure suited to companies with a single owner
General Recommendations for saving are as follows
-Contribute enough money to your 401(k) through payroll deductions to maximize the employer match -Select and diversify your investments -Focus on growth -If a 401(k) has no matching employer contributions , considered an IRA or Roth IRA of your own. It will give you more investment options with lower fees -pay off high interest rate credit card balances -Build and emergency fund -Fund continuing education that will enhance your career opportunities -Begin a program of individual investing in ETFs, sector funds, stocks, real estate, or starting a business -Seek professional advice along the way
Everything about HSA
-Contributions to your HSA is tax deductible and there is no FICA nor Medicare tax on your contribution -Employer can also contribute to your HSA -Tax-sheltered accounts -Money is used to pay qualified out-of-pocket medical expenses, this not covered by insurance -Tax deduct contributions up to $3,450 for an individual and $6,900 for a family -Any money in an HSA you do not use stays in the account, can be invested, and can grow tax-sheltered, like an IRA -Money is usually invested in fixed rate assets, ETFS, REITS, or mutual funds -You can roll over money from an IRA to an HSA up to the annual maximum, tax free for medical expenses -If you leave your employer, you can take your hSA and transfer it to a new administrator without losing any tax benefits, you can not make additional contributions -If you die money is passed to your spouse tax free to be used for medical care or passed to beneficiary and be taxed
Subchapter Corporations (S-Corp)
-Corporation chartered by a state -Own by its shareholders -Shareholders have limited liability & lower taxes -Pay no dividends -Profits and losses are passed through to the shareholders and reported on their individual tax returns (Like Partnership)
What have credit reporting agencies recently been looking for in individuals when applying for a credit card?
-Debit & prepaid card use -Length of employment -Utility bill payments -Frequency of address changes
What should you consider when electing a coverage for healthcare?
-Deductible -Co payment or co-insurance -Stipulated Maximum (or cap) -High Deductible Health Plan
Examples of tax credits
-Dependent tax credit: -$500 non-child dependent(elderly parents, children 17+ including college students, adult children with disability) -Child tax credit: Children under 17 years of age -Child and dependent care credit: Tax credits for children under 13 -Alternative energy credit: Electric cars, solar, wind, etc. -Earned income credit: Low income earners -Education credits: American Opportunity credit, lifetime learning credit, Hope Scholarship credit
Advice when signing a contract
-Do not be pressured into signing a contract -Do not agree on a handshake or a promise -Always read the contract before signing it, and make sure you understand all of its terms and conditions -Always get a copy of the contract you sign
What are some Don't when purchasing a home?
-Do not sign blank documents -Do not overstate your income -Do not overstate your length of employment -Do not overstate your assets -Do not change your income tax returns -Do not list fake co-borrowers on your loan application -Do not provide false documentation or permit someone to provide false documents about you
Tips when leasing a car
-Do your homework -Line up your credit source/loan before shopping -know your credit score in advance -test drive different cars -shop the last two days of the month -waste salesperson time -Warranties, extended warranties, and maintenance contracts are high profits, so dealers will negotitate their price
What happens if you have a roommate?
-Each of you should sign the lease and understand your financial obligations -Decide how you will pay bills for utilities, cable, internet, phone, garbage, etc. -Decide who would do the cleaning and purchase the cleaning supplies -Decide who would pay for food -Agree on rules for overnight guests, smoking, and other lifestyle choices
Good debt
-Education -Car -Mortgage -Starting a well thought out business When you invest in these items they help you on your path to financial independence.
What are other deductions before adjusted gross income?
-Educator Expenses: For K-12 teacher's classroom supplies up to $250 -Student Loan Interest: deduction up to $2,500 -Health(HSA) and flexible (FSA): Healthcare savings account contributions -Self-Employed: Health insurance deductions -IRA, 401(k) and 403(b) retirement account contributions -Self-Employed: Contributions to SEP, and other retirement plans -Personal Moving Expense: Deduction only for eligible military personnel -Self-Employment: Tax deduction related to Social Security payments
What are some trends you should look at when buying a stock?
-Emerging market growth -Rising Inflation and rising interest rates -The world is getting older -Raw materials are in more remote and hard to reach areas -More people have higher incomes -Environmental needs
What can a credit report include?
-Employment history Lawsuits, judgments, arrests, DUIs, Bankruptcies -Record of all loans -Credit limit, account number,balance, credit usage, monthly payment records, past due amounts, late payments, delinquencies, items turned over for collection -Number of accounts you have applied, and number of request which have been made to see your report -Checking & Saving accounts
What is the attractiveness of REITs?
-Enables investors to participate in real estate without having the hassle of being a landlord, but with the advantage of liquidity -Companies that operate as a REIT pay no tax on corporate income if they pay at least 90% of their income to shareholders in the form of a dividend. These dividends are taxed to the shareholder as short term ordinary income. -Dividends are higher than the 10-year treasury rate and have the potential to grow. -Dividends from REITs may be eligible for the 20% pass-through tax treatment -REITs are best held in a tax-sheltered account like an IRA or 401(k), where dividends are allowed to compound tax-free
External Sources of funds? Examples
-Entrepreneur -his or her extended family -Partners, either active or passive -Contributions or donations of money, equipment, or inventory -Investors or institutions providing loans -Governemtn loans or subsidies, such as small business administration (SBA) loans -Crowdfunding -Proceeds from the sale of stock if a corporation is formed -Grants and the wards
Disciplines for selling a stock
-Establish your sell price when you buy a stock -Be smart about tax strategies → buy stocks in the right account and don't worry much about paying taxes. Remember of short and long-term capital losses and their brackets -Sell if the reason you bought the stock or fund no longer exist -Sell if the stock declines by a preset percentage (like 10%, 15%) and consider selling in stages -Do not panic out of either winners or losers (sell stock in stages) -Be cautious of companies that buy back large amounts of their own stock
Gift tax
-Everyone has a lifetime gift tax exemption of $1* million, taxable gifts above that amount will be subject to the gift tax and an unused portion of the lifetime gift tax can be used as a deduction to the estate tax -The gift tax is paid by the giver -In addition, you are allowed to give up to $15,000 to as many people as you you like free of gift tax *Not sure if it is $1 million or $11 million
What is another word for budgeting?
-Financial Planning -Spending Plan
Who typically make the jumbo loans?
-Financial institutions -Investors(banks, pensions funds)
What are certain factors that may void the entire contract?
-Fraud -Misrepresentation (false statement) -Mental incompetence -Duress(stress) including violence or coercion
Part A of Medicare (Hospital Insurance)
-Free for seniors financed by the 2.9% payroll tax -Cover major items such as hospital, skilled nursing, home health care, hospice, and blood transfusion, though not at 100% -For high income earners it increased by an additional 0.9% of income over $200,000 for singles and $250,000 for couples
What should you do when buying from an unknown third party?
-Get the Vin and check the car's history at www.carfax.com -get the car inspected
How can you impress a landlord?
-Having good credit score -Facebook Profile -Bringing a letter to verify employment and your pay
What are the two types of healthcare insurance providers?
-Health Maintenance Organizations (HMO) -Preferred Provider Organizations (PPO)
What can create needs for more cash?
-High vacancy rates -Unexpected maintenance -natural disasters
What are some risk on REITs?
-Hotel REITs may wake up to very high vacant rates on any given day -Apartment REITs may have declining rents and vacancies in a soft economy or a highly competitive overbuilt environment -Retail REITs can face cyclical and consumer slumps -Office building REITs may suffer from vacancies, including the effects of unemployment -Storage REITs face overbuilding -Healthcare REITs may reflect the growing financial despair of a large aging population
Who is responsible for your IRA account?
-IRAs are self-directed accounts you are ultimately responsible for managing the assets in your IRA account, whether you do it yourself or designate someone else.
How can you might reduce the cost of insurance?
-Increasing deductibles where appropriate -Consolidating all your personal lines with one or two insurance companies, including homeowner's, auto, life, health, and disability coverage
What percent of taxes do the government get for each tax you pay?
-Individual income taxes (46%) -Social Security/Medicare taxes (34%) -Corporate Income taxes (11%) -Excise and other taxes/fees (8%) -Estate taxes (1%)
What are some requirements your insurance, law, or lender might ask you to put in your house?
-Install smoke alarms -Install carbon monoxide detectors -Install sprinkler systems -Install a burglar alarm connected by phone to the police station -Bring roofing material up to code -Are solar panels required? -Clear vegetation around the property -Put a fence around your pool
The structure of your home Insurance
-Insurance pays to repair or rebuild your home it is damaged or destroyed by fire, hail, lightning, or other disasters listed in the policy
Why would the market price of a bond with a face value of $1,000 be worth either $1,050 or $950 in the open market?
-Interest rates (if interest rates increase to 5% and you had a bond that paid 3%, the bond would be more unattractive, thus you would want to decrease its price, which would make it a discount.) -Credit quality (the bond quality had been downgraded or upgraded)
Treasury bond interest?
-Issued with a fix rate of interest and a fixed term -Free from state and local taxes, but subject to federal income taxes
Why does buying real estate as an investment can be risky?
-It takes large amounts of capital and is subject to interest rates and the availability of financing. -Limit an individual's liquidity
Why would you want to refinance a mortgage?
-It would lower the interest rate or monthly payment or change the term of the loan. -consolidate the first and second mortgages -Borrow money using your equity in the house to fund remodeling, education, a business venture, or other need -Take money out of an otherwise illiquid asset
Where can you find the dealer's net price?
-Kelly Blue Book -Edmunds.com -Consumer Reports -www.truecar.com
Steps when you are in the F&I?
-Know your credit score -Do not let them charge you a fee for just handling the paperwork or financing elsewhere -interest can increase 0.5 to 1% if financing through the dealer as a commission to the dealership -Make certain the loan's interest rate is the same in writing as was verbally quoted -You may be offered a choice between a cash rebate and low rate financing
What happens if your downpayment is less than 20%?
-Less cash you need at closing -Higher interest rate -Higher monthly payments -Need to provide PMI -Greater leverage -If the market value declines, you might quickly find your equity is zero
Strategies to buying a home?
-Live in it for at least two years as a primary residence, and then sell it for a tax-free profit due to rising home prices in the area, with little maintenance or expense -Buying and financing a fixer-upper and when completed it may be rented and refinanced for a down payment on another property -Buying a small residential rental property, living in one unit, and renting out the other unit(s) without major repairs -Purchasing rental property, living in one unit, and over time making capital and cosmetic improvements, increasing rents, then selling it and using tax deferred profits as a down payment on a large piece of rental property
How can strangers get your personal information?
-Loss of theft of a purse or wallet -Dumpster diving -Stealing from mailbox -Postal forwarding to another address -Phishing: via email or over the phone with fake messages, sometimes enticing you to validate or update your personal information -Hacking: stealing information from other computers or data centers
Why are Real Estate Investment Trust usually best if held in IRA accounts?
-Real Estate Investment Trusts (REIT) and other types of investment trusts are usually best held in IRA Accounts because their typically higher dividends are tax sheltered within the account
What did the financial institutions did during the housing crisis?
-Made fraudulent loans with defective paperwork, and loans to poor quality borrowers who were owned or guaranteed by governmental agencies (Fannie Mae & Freddie Mac) -Made high-risk loans to borrowers and bundle them together with good quality loans into packages for sale to "sophisticated" investors -These bundles were rated as high-quality AAA funds -The institutions who actually underwrote the loans were not very careful either since they didn't plan on sticking around for long. Their immediate goal was to collect fees, sell the loans to a third party, and use the proceeds of the sale to start the process all over again by making new home loans with new fees and repeating the cycle. -Losses ultimately absorbed by the taxpayers
What are some eligible itemize deductions?
-Medical expense deductions -State and local taxes -Home Mortgage Interest -Interest on Home Equity Loan (HELOC) -Charitable Deductions -Casualty and Theft Loss Deduction
What were the results of faulty lending?
-Monthly payments started soaring when the teaser rate period ended -Monthly payments couldn't afford, leading to default, eviction, and foreclosure -Dozens of houses went for sale, depressing the value of everything else -Few buyers, the market was frozenn, and losses soared into hundreds of billions of dollars -Unemployment started to spread across the country -Massive losses to homeowners, home builders, contractors, construction workers, appliance and furniture manufacturers, real estate and mortgage brokers, financial institutions, federal, state, and local government agencies, pension plans, retirement savings, and sophisticated investors around the world
What happens if your downpayment is more than 20%?
-Need more cash at closing -Monthly payments will be less -Lower interest rates -No PMI expense -Less leverage -Take very sharp slump in market values to wipe out your equity
What are some conditions to qualify for conforming loans if secondary market buyers (Fannie Mae and Freddy Mac) want to purchase them?
-No Negative amortization -Points and fees cannot exceed 3% of the loan (1 point is equal to 1% of the loan amount and is tac deductible as interest.) -The term of the loan cannot be longer than 30 years -The annual percentage rate cannot exceed 1.5% of the prime offer rate -Special low down payment loans may be available if at least one of the borrowers is a first-time buyer
What does liability insurance usually provides?
-No fault medical coverage in the amount between $1,000 - $5,000 if a guest is injured in your home -Some policies now offer identity theft coverage
What are some common errors in starting to invest?
-Not getting started, thus reducing the magic of compounding -Not having a coherent and workable investment plan or strategy -Not taking time to be informed -Not checking up on your broker, advisor, or money management group -Investing money in stocks which should go elsewhere, such as paying off high interest credit card debt -Buying on hot tips and rumors. Tips are for waiters, not investors -Becoming emotionally attached to a company or a stock -Thinking a low-priced stock will make you more money or have a greater percentage gain than a high price stock. Focused on the percentage gain or loss
What are the two basic types of mutual funds?
-Open-end funds -Closed-end funds
Part B of Medicare (Medical Insurance)
-Optional and means tested (eligible or not) -Financed by monthly premium paid by the insured ($134-$428) -Cover doctor, outpatient medical services, lab work, outpatient hospital services, physical exams, and cardiovascular and diabetes screening -A 3.8% surtax applies to high-income earners
Part D of Medicare
-Optional and means-tested -It is a prescription drug plan currently provided only by private insurance companies -Financed 25% by monthly premiums from the insured and 75% by taxes -There is a surcharge for individuals with an adjusted gross income (AGI) exceeding about $85,000 -Covers prescription drugs only
How to improve your FICO score?
-Pay at least the minimum balance due (2.5% to 3%, but as high as 5% of outstanding balance) -Mail payments 5 days before the due date or 2 days if doing it online. You will avoid a late payment -Manage your total debt/credit ratio (below 50%, 30% is best) -Preserve history. Cancel newer cards first, but can increase your overall debt-to-credit ratio -Create the right credit mix. -Do not apply for a lot of additional credit at once. Might indicate financial stress and could impact your score.
What are some exceptions for early withdrawals without penalty of your traditional IRA?
-Permanent disability -Medical bills that exceed a certain percentage of your AGI -Higher education expenses for yourself or your immediate family -Up to $10,000 for the first time purchase of a home, to build or buy a home
What to do if you are getting divorced?
-Privately, open checking and savings account in your own name. Fund them with as much money as you can. -Make sure you have a credit card in your own name to establish you good credit -Gather as much information as you can -Make copies of bank and credit card statements, tax returns, and information on investments -Store copies in a safe place (post-office box for private mail) -If you change your name, remember to change it on all of the documents mentioned above
What determines your FICO score (FICO formula)?
-Record of paying bills on time over time (35%) -Debt-to-credit ratio, which is the total balance on your credit cards and other loans compared to your total credit limit (30%) -Keep ratio near 30% -Length of credit history (15%) -Older credit the better -New accounts and recent applications for credit (10%) -Mix of credit cards and loans (10%) -Card, home, etc.
Would the investment pay off? 5 tips
-Rental income will cover out-of-pocket costs such as mortgage payments, taxes, insurance, maintenance, repairs, with at least 5% to 10% vacancy rate. -Know the terms and conditions of existing leases on the property so the ability to raise rents is not overestimated -Factor in repairs, maintenance, mortgage interest, depreciation, insurance, and other items which are tax deductible -Factor in capital improvements, which may be depreciated in the future -Be aware that the $250k - $500K primary residence tax exemption does not apply to residential rental property
What are the advantages of renting?
-Renters are not tied to a particular location beyond the time horizon of their rental agreement -Not tying their money in a downpayment or a long-term mortgage contract -Don't have a large-debt obligations, or directly pay property taxes, private mortgage insurance, homeowner's insurance, or maintenance and repairs
Do's when buying a home
-Shop for your loan -Interview real state agents, mortgage brokers, lenders, and other settlement service providers to find the best professional for your loan and settlement needs -Be sure to read and understand everything before you sign anything -Accurately report your debts -Be honest about all sources of funds you will use to purchase your home -Be upfront about any credit problems you have had in the past -Be wary of unsolicited loan or refinance offers that you receive in the main or through email -Always pay your mortgage payment on time, even if you are having a dispute with your loan servicer -If you are having problems paying your mortgage, contact your loan service immediately
What are the two types of capital gains and losses and why are they important?
-Short term capital gains & Long term capital gains -They are taxed differently depending on how long you have owned them
What should you do if you were to cohabit with another person?
-Signed and notarized cohabitation agreement covering what happens to property, assets, and medical decisions if there is death, illness, separation or termination of the relationship - Get legal advice
Contributions for a Traditional IRA Plan
-Single and not covered by a retirement plan at work, you can take a deduction up to the amount of your contribution, but not exceed $6,000 -If you are covered by a retirement plan at work through your employer's pension, profit-sharing, 401(k), or 403(b) retirement plan you can take a tax deduction up to the amount of your contribution, but not exceed $6,000 subject to -If a single AGI is more than $63,000 but less than $73,000 your tax deduction will be proportionally reduced and phased out -if married the range is $101,000-$121,000
What are the 3 systems that are a pay-as-you-go system?
-Social Security -Medicare -Federal Income Tax
Tips when buying an insurance
-Some insurance give discounts to college grads, teachers, military personnel, and those who take defensive or senior driving classes -Driving less than 35 miles a day may give you a discount -Don't buy comprehensive and collision insurance if you have an older car -Insuring all cars and personal lines, might earn you a discount -good driver status can earn large discounts (no tickets or accidents for three years could be worth a 20% reduction in your premiums
What does Social Security also offer besides benefits for workers?
-Spousal (Entitled to the higher of their own benefit or half of their ex-spouse's benefit only if they were married for 10+ years) -widow, orphan, disability, and death benefits.
What should you do before moving in to an apartment?
-Take pictures and time stamp anything that might be damaged or worn so no one later claims you did the damage and do the same when you move out -You are not responsible for normal wear and tear -Get your deposit back
Are tax credits worth more than tax deductions? Explain.
-Tax credits are worth more than tax deductions -Tax deductions reduce taxable income -Tax credits reduce the amount of tax you owe dollar for dollar
Deducting "tuition and fees"
-The American Opportunity Tax Credit -The lifetime Learning Credit -The Hope Scholarship Credit
Two useful ways to use compounding and the Rule of 72
-The danger of inflation: If inflation averages 3% per year compounded, using the Rule of 72, in 24 years the prices of goods and services, on average, will double. -The time value of money: Receiving $1 today is better than receiving $1 tomorrow.
How can you retain the tax shelter benefit in a 401(k)?
-The employer's plan may not discriminate against lower-paid employees -Employee contributions to a 401(k) are tax deductible -Growth within the 401(k) is tax-sheltered and tax-deferred until the funds are withdrawn -When withdrawals are made they become taxable income subject to ordinary tax rates in the year of withdrawal -You generally cannot withdraw funds without penalty before age 59.5 except under special circumstances
Liability Coverage
-The most important part of the automobile insurance policy. -If you are at fault, liability coverage protects you from claims resulting from injuries caused to another person or damage to another party's property. -Protects you when another person driving your car, with your permission is at fault -covers the cost of your insurance company defending you in legal actions
Characteristics of a subprime borrower?
-They lived in lower-income neighborhoods, and were more likely to be part of a minority group -They purchased homes in areas of rising prices that were ultimately overbuilt by developers and speculators -They had less formal education or did not understand the transaction or its complex legal paperwork -They were more likely to have substantial credit card debt -They believed or were told that when the interest rate adjust, they would have higher income, or interest rates would be lower, and they could refinance the loan with even lower monthly payments. -They were also convinced the value of the house would substantially increase and they could sell it for a nice profit -They wanted more house than they could afford and didn't seem to consider having to pay far more each month sometime in the future
Why do individuals and business enterprises invest in real estate?
-To speculate on land appreciation -To diversify an investment portfolio -To take advantage of financial leverage and tax benefits -To manage property as a business -To become a broker or agent assisting in the purchase and sale of real estate as a career or part-time employment -To provide financing for the purchase, development, construction, and remodeling of property -To buy property, increase its value, and sell it fro a short-term profit, otherwise known as flipping -To form real estate investment trust (REITs)
What are the two types of IRAs?
-Traditional IRA -Roth IRA
What are the three major reporting agencies?
-Transunion(Empirical score) -Equifax(Beacon score) -Experian(Experian model)
Who are some issuers of bonds?
-US government -Agencies of the federal government -States, counties, cities -Municipalities such as school, water, and transit districts -Corporations -Nonprofit organizations such as universities and hospitals -Similar entities in foreign countries
Earned Income
-Wages, salary, bonuses, commissions, royalties, tips, and other money you have received for your persona services -Evidenced by a W-2 forms
What other things should be important when selecting a healthcare coverage?
-What are the eligible medical services provided under the plan? -What is required in terms of co-payments and co-insurance? -What is the deductible? -What is the stipulated maximum? -How does the policy treat prescriptions? -Is the network of providers broad enough to meet needs?
Questions you should ask when creating a business?
-What is the business? -Can you explain your idea to a spouse or friend in 60 seconds? -Who will be your customer? -What will create value for the customer? -How big is the market for the product or service? -Does demand for this product already exist? -How much do you think it would cost to create, deliver, and support this product or service? -What are the innovations? -Where and how will someone expect to purchase this product or service? -Who is the competition? -What will distinguish you from the competition? -Who will you need to hire? -How important is attitude? -How will the work flow through the organization? -Who will be in charge of selling the organization? -Who will be in charge of selling the product or service? -Who will keep the books and records? -Who will handle administrative issues such as insurance, legal, personnel, and purchasing? -What are the governmental and regulatory issues? -Who will be the boss? -How will you prepare for what is coming?
Questions asked after knowing who will fund your business?
-What kind of property, plant, and equipment is needed? -What is the best way to purchase it on a budget? -What kind of information technology(IT) software and hardware is needed? -Who will supply you with inventory? -Do you have alternative materials or sources of materials? -What will you outsource? -What are your standards of quality? -What about shipping and receiving? -What about late deliveries, defects, returns, and complaints? -What will be your terms of payment? -What are the safety and environmental issues?
What happens when a stock option is exercised?
-When the option is exercised, there is ordinary income tax due immediately based upon the difference between the exercised price and the market price at the time of exercise. It may also be subject to Social Security, Medicare, and other deductions, and being subjected to the alternative minimum tax (AMT). -When the shares are eventually sold, there may be a capital gain tax to pay and depending on how long you held the shares after they were exercised, the gain may be taxed as a long term capital gain or a short term capital gain.
Steps before buying a car
-Write down the make, model, and color that appeals to you -Compare the new car model to a 2 to the 3-year old version of the same car -Go online to search for used and new cars -Check the safety records and compare standard and optional safety equipment -Check the warranty, repair records, and consumer satisfaction -Affordability is key. Put together a budget with monthly payments including down payment, sales tax, insurance, registration fee, and maintenance -If financing ask your bank, dealers might finance with higher interest -test drive the car -always have the car inspected unless certified by a qualified dealer
Where can you research a stock?
-Yahoo Finance -Moneyshow.com (read and listen to securities analyst discussing the global economy and specific stocks and industries) -Bloomberg and CNBC -Kiplinger -Marketwatch -Go to a companies one website and find the annual report and 10-k or 10-Q reports fuled with the securities and exchange commission and you can find the investors conference calls
Can the score lenders, employers, landlords get be different from what you get?
-Yes, they may be more interested in how you handle specific areas such as rent, utilities, insurance, phone, day car, and other payment in calculating your score -Lenders can look more carefully at where you spend your money (bar, pawn shops, massage parlors, tire retread shops)
What are some important rules when opening an IRA?
-You can contribute only up to a fixed amount -Current maximum you can contribute is $6,000 (plus $1,000 additional if you are age 50 or more) -You can contribute to more than one IRA account, but your combined annual contributions cannot exceed the maximum allowed for a single account -You cannot contribute more than your earned income
Advice for starting and managing your IRA?
-You can open an IRA with sponsors such as a bank, savings and loan, credit union, brokerage firm, or mutual fund -You can have more than one IRA account and you can invest in most kinds of assets -Know what the fees are for account maintenance and brokerage services -Stock, bonds, mutual funds, ETFs, sector funds, and CDs are all eligible investments. There are no annual taxes due on dividends, interest or capital gains within the IRA account -Investments in limited partnerships are best held in regular accounts, not IRAs, due to complicated tax reporting -Direct transfers and rollovers let you add or switch sponsors (Direct transfers from trustee to the trustee are the best way to go) -Recommendation: Make investments into your account early in the year to take advantage of compounding
Are 401(k) plans portable?
-You can roll it tax free into a traditional IRA, sponsor to sponsor, where the fees may be less, and many more investment choices become available -You can roll it tax free into a new employer's 401(k) plan if the new plan allows you to do this, sponsor to sponsor -you may be able to leave your account with your old employer if you have more than $5,000 invested, but you cannot add to the plan -You can withdraw the funds, but if you are under 59.5 taxes will be withheld and you will have to pay a 10% penalty for early withdrawal
What are the regulations when performing a 1031 Exchange?
-You must invest at least as much equity in the new property as was in the old property because you are trading your equity -You must assume at least as much debt in the new property as was in the old property. Any shortfall of debt is subject to tax. -Investing excess equity or debt in a qualified new property is okay -An independent third party may provide a safe harbor by taking title to the property during the exchange period. -The period of time in which the exchange must take place is about 180 days, the time limit being set by IRS regulations
Comparing the traditional 401(k) with the Roth 401(k)
-Your contributions to a 401(k) are tax-deductible, but contributions to a Roth 401(k) -In both plans, all earnings are tax-sheltered and allowed to grow tax-free as long as the account exists -Distribution from a 401(k) is taxable. Distribution from a Roth 401(k) is tax-free -Upon termination of employment you can rollover a 401(k) into a new employer's 401(k) or into a traditional IRA -A Roth 401(k) can be rolled over into a new emplyoer's Roth 401(k) or into a Roth IRA without regard to the Roth IRA contribution limits or phase outs -If you decide to roll over your 401(k) plans into those of a new employer, you may have to sell the old investments and purchase the eligible investments in the new employer's plan, since they are not likely to be the same -Both traditional 401(k) and Roth 401(k) plans have a required minimum distribution at age 70.5 or retirement if you continue working
What are premiums based on?
-age -sex -occupation -health and the amount of income you are protecting -Longer waiting periods, a lower percentage of income replacement, and shorter benefit periods will also reduce your cost
How are premiums for term insurance based?
-age -health -gender - lifestyle(smoking) - occupation
Trading in a car?
-attempt to negotiate new car's price and the figure out the best way to sell the old car.
What are some risks that homeowner's insurance doesn't pay and you have to pay separately?
-floods -hurricanes -tornadoes -earthquakes
How can you reduce the cost of auto insurance?
-get quotes from at least three carriers and benchmark the same coverage at each insurance company
Card Act: Cardholder STATEMENTS...
-must show how many months it will take to pay your balance if only the minimum payment is made, show principal and interest over that time -show how much will have to be paid each month to pay the entire balance in 36 months, show principal and interest rate
What can a landlord not discriminate against?
-race -religion -color -creed -sex -sexual orientation -age -This is guaranteed by both state and federal laws, but the only exception is taking a boarder into one's primary residence
What are some lender fees that can include?
-running credit reports -appraisals -filing fees -mailing costs
What happens if you miss a few loan payments?
-servicer will report that fact to the credit bureaus -government can get their wages, seize their income tax refunds, or reduce their social security benefits -Credit scores are damaged -Penalties are assessed
6 ways on how to eliminate your credit card debt?
-stop using it -save first and then make your purchases -Take and extra job -PAY OFF THE CREDIT CARD WITH THE HIGHEST INTEREST RATE CHARGES FIRST -MAKE THE MINIMUM PAYMENT if you have many credit cards -call credit card issuer and ask for a lower rate
HMO's (Health Maintenance Org)
-structured as nonprofit organizations -Members, the insured, pay a flat monthly fee to the HMO for coverage, regardless of usage, with little or no deductible or co-payment at the time of service -If member goes to a provider outside the plan they may have to pay all or a large part of the bill -Kaiser Permanente is a HMO -Doctros are paid a salary -coverage outside of the geographical area may be limited or nonexistent
What depends on the cost of insurance?
-the type of car -where you lived -age -marital status -driving record -credit history
3 Facts about divorces
-⅔ divorces are filed by women -About 25% involve people over 50 -Divorce are filed in the state of residency
What is the current cost of state disability insurance?
1% pf payroll up to about $100,000 of annual earned income. Benefits are based upon quarterly wages with a maximum weekly benefit of $840 if you earn about $20,000 a quarter. It has a waiting period of seven days before benefits can begin and a benefit period of up to a maximum of 52 weeks.
Supposed you borrow $500,000 to buy a house with a 30-year-fixed-rate loan. What is the monthly payment and total interest if you buy it at a 6% interest rate? What is the monthly payment and total interest if you buy it at a 8% interest rate?
1. $579,191 2. $820,776
At least how many quotes should you get from different insurance policies?
At least 3, but make sure you compare the cost and the coverage.
Name 12 fees and penalties that your financial institution may charge ?
1. Annual membership fees including extra fees for status cards 2. Fees when using another bank automated teller machine (ATM), up to 5% per transaction with a minimum charge 3. Foreign exchange transaction fees, sometimes even if they are in dollars 3% to 5% 4. Overdraft fees for charging more than your credit limit 5. Late payment fees 6. Returned check fees from payment not honored by your bank 7. Miscellaneous services, like receiving paper statements 8. Duplicate card fees for lost cards 9. Cash advance fees even from your own bank 10. Balance transfers fees (moving your debt to another loaner to decrease the interest rates) of 2% to 5% if you move your account 11. Account closing fees 12. Interests can be charged on penalties and fees
What to do if your credit card is stolen?
1. Contact the credit card issuer 2. Close account immediately 3. Ask for a new card on a new account 4. Check credit card statement
What is the purchasing timeline (12 steps)?
1. Determine what you can afford 2. Find a real estate agent 3. Find a house and negotiate contract terms 4. Shop for your loan-compare multiple GFEs 5. Choose best loan for you 6. Loan originator processes loan 7. Have house inspected 8. Shop for other service providers (title agent, attorney, escrow agent) 9. Loan is approved 10. Get insurance and do final walk through 11. Go to settlement 12. Move-in
What happens if you are unable to make your payments?
1. Forbearance: Put total payments on hold for a number of months, but the unpaid interest is added to the loan principal 2. Interest-only loans: defer principal payments until a later date, but continue to pay the interest 3. increase the borrowing period: Lower your monthly payments by stretching out the payment period, though you will end up paying more interest
How many people in America still have no medical insurance?
20 million
How many states have some form of estate or inheritance tax?
20 states
What is the most common downpayment of a house?
20%
What are 14 laws for health care in the united states?
1. It is mandated that all US citizens and legal residents buy medical insurance 2. Insurance may not cancel a policy because an insured person gets sick 3. Insurers are prohibited from denying or excluding coverage to anyone, including children, with pre-existing conditions 5. Insurance may not impose annual or lifetime limits on coverage 6. Parents can keep children up to age 26 covered on their policy 7. Consumers have access to an appeals process to appeal decisions by their health insurance plan 8. The law places strict limits on how much a premium can vary among people taking out the same coverage (premiums can be different for age but not for sex) 9. Free preventive care services not subject to a deductible or co-payment include annual physical exams, vaccinations, screening for high blood pressures, diabetes, human immunodeficiency virus (HIV), cholesterol, obesity, depression, colorectal cancer, 10. The minimum mandated coverage established by the government must include emergency services, maternity and newborn care, mental health and drug abuse treatments, rehabilitation, chronic disease management, and pediatric services 11.Employers must disclose the value of health benefits on worker's W-2 forms 12. Funds from HSA and FSAs may not be used for over the counter medications unless they are prescribed by a physician. The penalty for nonqualified distributions from HSAs is doubled to 20% 13. The Medicaid federal state insurance program covering low-income people is expanded 14. Payments to primary care physician under Medicaid are to be increased 15. Abortion coverage is a very sensitive and controversial issue, especially when it involves state or federal funds
10 basic negotiating principles
1. Know what you want before you start ... and do not be afraid to ask for it 2. Do your homework 3. Know what motivates the person or people on the other side of the table 4. Do not get caught up in jargon 5. Do not get talked into something you do not want 6. be patient 7. You do not have to pay all your cards at once 8. Pay attention to details. 9. Terms and conditions are as important as price 10. You are not done until the deal is signed, sealed, and delivered
What are the four low down payment approaches?
1. Lenders in certain "hot" markets may finance 100% of the price with a combination of a first mortgage, a second mortgage, and mortgage insurance. 2. Ask the seller to "take back a second" mortgage or a note to cover the shortfall in the down payment. Some will do this to facilitate a sale. 3. Consider a family loan or gift to help with the down payment 4. Look for a cheaper house
Steps to budgeting
1. List and total all sources of income after all payroll deductions -Interests, dividends, and capital gains, should not be included because those are to be reinvested. 2.List and total all the expense categories
7 words to the wise when it came to health care coverage
1. Make sure the medical provider is covered by your insurance 2. Know which hospitals, clinics, labs, and emergency centers in your area are covered under your policy 3. Watch your medical charges 4. Bring to purchase your own prescriptions, prescriptions at hospitals are very expensive 5. Never pay your bill before leaving the hospital 6. Always make sure you have medical coverage 7.Make sure to always have medical insurance to cover major expenses
What are the three definitions of disability insurance?
1. The inability to do your jobs or a similar job 2. Inability to do any job for which you may be qualified 3. Inability to do any job It all depends how your policy sees it
What does private mortgage insurance do?
Protects the lender from loss in the event of a default for the amount of the loan in excess of 80%
Card Act: Statements must be mailed at least...
21 days before the payment due dat, and various finance charges, penalties, and fees cannot be charged prior to the 21st day
What have credit reporting agencies have been looking more closely on individuals?
1. debit and pre-paid card use 2. Length of employment 3. Utility bill payments 4. Frequency of address changes
What may be included in your credit report?
1. employment history 2. lawsuits, Judgements, arrests, DUIs, bankruptcies 3. Record of all loans 4. Credit limits, credit usage, monthly payment records 5. Delinquencies, items turned over for collection 6. Checking and savings accounts 7. Account number, balance, credit limit, monthly payment, past due amounts, late payments for each account 8. The number of accounts you have applied for recently
How does bankruptcy affect you?
1. impact credit score for up to 10 years 2.Increased rates of interest 3. Hard to rent an apartment or buy a car
Why was the Federal Estate tax created?
1.Discourage the formation of an aristocracy whereby total wealth was passed grom generation to generation upon death 2.As a means to collect additional taxes from wealthy individuals and families
What you don't want to focus on when you buy a mutual fund
1.Diversification 2.Fees 3.Asset Allocation
What are the two ways that the pay-as-yo-go system operates in Federal Income Tax?
1.Employer withhold and pay to the Treasury on your behalf, a tax based upon your filing status (single, married filing jointly, or head of household) and your payroll amount 2.You may be required to pay an additional quarterly estimated tax based income for which no tax has been withheld (dividends, interest, capital gains, rents, royalties)
What are the three basic categories of investors?
1.Growth investors 2.Value Investors 3.Dividend Investors
What are the steps to take if your identity has been stolen?
1.Immediately contact the 3 major credit bureaus and put a "fraud alert" on your account which requires all creditors contact you directly before granting any credit 2.Close all of your accounts (ASAP) a.Bank accounts b.Amazon c.Itunes 3.Contact all of your creditors 4.File a police report and keep the number of the report 5.Keep a detailed record of who you contact and when
What percent of borrowers that took out subprime loans had credit scores high enough to qualify to conforming loans with lower rates and better terms.
60%
Plan to saving
1.Start saving 15% of your earned income -Pay off any high interest credit card balances and other debts with 12% - 25% annual interest rates 2.Establish a 3-6 month emergency fund -Money might be in a saving account, certificate of deposit, or a money market deposit fund where you can get quickly to it 3.Contribute the most you can to an employer sponsored retirement plan to get the biggest possible employer contribution -You can count any employer contribution toward your 15% saving goal 4.Open a cash account at a bank, brokerage, or money management firm, and deposit funds 5.Work with your account representative, discuss your financial goals, and your level of risk tolerance -Invest the first $10,000 to $20,000 in ETFs, sector funds, and mutual funds -DO NOT invest it all at once -Get to a 8%-10% annual rate of return No strategy will work all the time
How does social security calculate your social security income?
1.Take your top 35 earning years and adjust them for inflation 2.Divide that number by 420(months), the number you get is the monthly pay you are currently getting 3.Then there is a tax bracket
What fraction of households have no life insurance?
1/3
What percent of students loans are in default?
1/6
What percentage of people receive checks from the government?
10%
What are the three types of vesting?
100% Vesting - you own 100% of the contributions Cliff Vesting - you own a year's annual matching funds at once, but only after you work for a period of time (maximum 3 years) Graded vesting - you own a percentage of the employer's match each year (usually 1/3 per year for three years)
When did Medicare start and by who?
1965 by the Johnson administration
What percent of states have opted not to form an exchange?
2/3 and they accept the risk of losing control over the healthcare of their residents and voters
Card Act: Activation fees, annual fees, and other penalty fees may not exceed...
25% of the credit limit during the first year of use. After one year, there is NO LIMIT OR 'CAP' ON FEES.
What is the rule of thumb, that rent should be in the range of?
25% to 35% of your gross monthly pay
How long does it take to depreciate a residential rental property? AKA straight line depreciation
27.5 years at the rate of 3.6364% of the purchase price each year
Card Act: Customers must be notified ...
30 days in advance before their account is closed
The "benchmark" home loan is 20% down payment and a:
30-year loan with a fixed rate of interest
What is the highest default rate?
35%
When financing a new car, the loan should not be for more than:
36 months
What is the depreciation time on commercial and industrial property? (straight line)
39 years equal to 1/39th or 2.5641% of the purchase price each year
How much does the top 1% who earn $400,000 plus pay in income taxes?
40%
What percent does the federal government pays in medical car through Medicare and Medicaid.
40%, but it can reach up to 70% as boomers reach age 65
What percentage of all the money the federal government currently budgets is for senior citizens?
42%
What percentage of people don't pay no federal taxes?
47%
Filing Status
5 basic categories -Single -Married filing jointly -Married filing separately -Head of household -Widow(er) with dependent child
What percent of people become financially independent?
5%
What percent of divorces is due to money?
50%
How much does and individual disability income Insurance policy cover?
50% to 70% of your income up to a stated maximum. It is so it incentivizes people to go back to work.
Card Act: Payments are "on time" if received by ...
5pm at the location of the payment office on the due date or the next business day after a holdout or weekend
How many days do you have if you personally transfer or rollover to complete the process without taxes on penalty?
60 days
How much does the top 5% who earn $160,000 plus pay in income taxes?
60%
How far do credit reports cover?
7 to 10 years
How much does the top 10% who earn $113,000 plus pay in income taxes?
70%
Ranges and cutoffs for FICO score
780 - 850 (Best) 720 - 779 (Good) 661 - 719 (OK) 620 - 660 (Subprime) 560 - 619 (Bad) 500 - 559 (Worst) 300 - 499 (Toxic)
How many people are cohabitating in America?
8 million
About what percentage of subprime borrowers took out ________?
80%, adjustable rate mortgages (ARM)
What percent of Social security benefits are taxable?
85% of social security benefits if income is above $34,000 50% if income is above $25,000 - $34,000 0% if income is below $25,000
What is a cooling-off period when signing a contract?
A 3 day period that allows you to legally reject certain types of contracts without penalty.
What is an emergency fund?
A 3-6 month fund that is saved in a saving account, certificate of deposit, or a money market deposit fund where you can get to quickly if needed.
Contract
A binding agreement entered into voluntarily by two or more competent parties that create a legal obligations between the parties.
Pass-through deduction
A brand new 20% tax deduction of business income from a proprietorship, partnership, limited liability corporation (LLC), or s-corporation
Prepayment penalty
A charge imposed on a borrower who pays off the loan principal early. This penalty compensates the lender for interest and other charges that would otherwise be lost. -It equals to a certain number of months of interest, or a percentage of the outstanding loan
Social Security Disability Insurance (SSDI)
A disability program created in 1957, and its Disability Trust Fund is designed to pay benefits to eligible American who are unable to work due to a disability which has been or is expected to last at least 12 months.
Independent Appraisal
A document executed by an Independent Appraiser setting forth the Appraised Value of the item of equipment being appraised and the data and explanation, all in reasonable detail, supporting such Appraised Value
Real Estate Settlement Procedures Act (RESPA)
A federal law requiring mortgage lenders to give potential borrowers a government publication describing the closing process and providing clear, advance disclosure of all closing costs to home buyers. -It is called GOOD FAITH ESTIMATE (GFE) form -www.hud.gov/respa
Mortgage
A legal document which pledges a piece of property to a lender as security for repayment of the loan by the borrower. Repayments are compromised of principal interest.
Alimony
A legal obligation to pay one's spouse or ex-spouse after separation or divorce
What should you arrange for major repairs and maintenances?
A line of credit
Adjustable Rate Mortgage (ARM)
A loan that begins with a teaser interest rate, which is lower than the fixed rate. After 1-5 years introductory period, the interest would be adjusted, and payments would increase.
Interest Only Loan
A loan that only requires the payment of interest for a stated period of time (periods up to five years) with the principal due at the end of the term, after the "interest only" period expires. The loan converts to a fixed rate mortgage, the monthly payment may be unaffordable, rates might be higher, and the entire principal must now be paid over a shorter period of time.
Conforming loan
A loan under a certain size. They have a lower interest rates because they represent a smaller risk. They may also have substantially lower down payment loans of only 3% to 5%.
Escrow
A neutral third party holds the documentation and money involved in the transaction until the transaction is completed and then distributes the funds and executed the instructions. The escrow company charges a fee for service. -Holds taxes and insurance
Home Equity Line of Credit (HELOC)
A revolving line of credit to reborrow funds up to a maximum amount, like a credit card. However, HELOC is secured by the property.
Debit card
A secured bank card that takes money out of your bank account immediately to pay for purchases you have made. Does not help establish credit, as bank is not taking no risk.
Common Stock
A share of ownership in a corporation which entitles its owner to all the risks and rewards of the enterprise.
Short Sale
A short sale is what happens if the value of the house declines to the point where the amount of the loan(s) is greater than the market value of the house. Even if the house is sold the proceeds will not be enough to repay the loan(s).
Excise tax
A tax on purchases of specific products or certain activities. -Ex: highway yse, fuels, airline tickets, archery equipment, wagering
Capital Gains Tax
A tax on the profit(or loss) from the sale of an asset, which is something you own. -Reported in form 1040 -Stocks -Bonds -Real estate -Art collection -Does not include taxes on profits from the sale of a house which is reported elsewhere and taxed differently
Rapid rescore
A technique available only through mortgage lenders and brokers. Enables borrower to pay down debt or correct errors and get accurate information updated in their credit files in just a few days rather than months. -There might be a fee, but it is worth it
Medicare
A three-part health care entitlement program available to most people at age 65, unless they are covered by some other plan.
Sale-Leaseback
A transaction in which the owner sells improved property and, as part of the same transaction, signs a long term lease to remain in possession of the premises.
What is a typical match a employer contributes to a 401(k)?
A typical match might be 50 cents or $1 for every dollar the employee contributes up to percentage of salary, usually 3% to 6%. -An employee should always make a contribution large enough to attract the maximum employer match
IRS Code 1031 Exchange
A unique real estate opportunity available to both commercial and residential property owners, which allows you to trade a property and defer taxes on capital gains by exchanging or replacing that property with another property, instead of selling it outright and paying the capital gains taxes
What does a certified vehicle comes with?
A warranty covering at least the major parts for a year or more
Insurance
A way to protect yourself and your family from catastrophic losses. It protects you and your assets from financial disaster.
When contributing to an IRA, which of the following do you need to consider? A."Traditional" or "Roth" B.Whether you're covered by an employer plan C.Your earned income
A."Traditional" or "Roth" B.Whether you're covered by an employer plan C.Your earned income
Which of the following does not apply to both the 401(k) and the Roth 401(K)? A.Contributions by the employee and the employer are tax deductible B.The maximum annual contribution C.The employer must establish the plans D.Investments are tax sheltered
A.Contributions by the employee and the employer are tax deductible
Video: Which of the following is not a good way to keep auto insurance premiums low? A.Don't get uninsured and underinsured motorist coverage. B.Get quotes from at least four insurance companies. C.Avoid getting speeding tickets. D.Choose a higher deductible on your collision and comprehensive coverage.
A.Don't get uninsured and underinsured motorist coverage.
Depreciation in real estate results in the following except: A.It increases the operating profit for tax purposes B.It decreases the cost basis C.It reflects a loss of value D.It creates a non-cash expense for tax purposes
A.It increases the operating profit for tax purposes
Which of the following is provided by a 401(k) plan? A.It is portable B.You can select investments the same way as in an IRA C.It includes a guaranteed lifetime monthly benefit in retirement D.It provides an economic way to borrow money from the plan
A.It is portable
Which of these items does not apply to Real Estate Investment Trusts ("REIT")? A.Tend to pay very low dividends to shareholders B.Do not pay taxes if they distribute 90% of profits C.Best owned in tax sheltered accounts D.Shares can trade like stocks in the marketplace
A.Tend to pay very low dividends to shareholders
How many individual stocks does it take to diversify?
At least five stock in five very different industries -No more than 20% of your portfolio should be in any single stock for a prolonged period of time
With a 401(k) plan, which of the following is not true A.You must contribute the same amount each year B.Participation may be required unless you opt out C.Your employer may contribute matching funds D.Your employer may not have a Roth 401(k) plan
A.You must contribute the same amount each year
The difference between annual rate and annual percentage rate (APR)?
APR includes fees that you are required to pay and the annual rate doesn't. The APR is what you actually pay, which is higher than the annual rate.
One common trait of millionaires?
Ability to communicate and sell their ideas because communication skills are important to success.
What is "modified" adjusted gross income (AGI)?
Adding back to AGI items such as -tax exempt interest -foreign income -student loan deductions -portions of Social Security benefits
Medi-gap
Additional insurance that often cover Medicare deductibles, co-payments, and co-insurance
Why should you not try to defer interest on student loans?
After graduation, deferred interest folds into the principal so borrowers end up paying interest on interest.
Secondary Offering
After the IPO, corporations may issue and sell more shares to raise more money -This new shares are prices at or about the current price of the stock, which might be higher or lower than the prior IPO
If you are healthy what age should you probably wait to collect social security to maximize your benefits?
Age 70
Who is the Consumer Financial Protection AGENCY (CFPA)?
Agency to protect the consumer by eliminating "unfair, abusive, and deceptive" practices.
Is alimony taxable?
Alimony payments made under pre-2019 divorce agreements remain tax deductibles to the payer and taxable income for the recipient. After 2019, they are not tax deductible or tax credit.
IRA accounts are "tax sheltered" which means
All gains accumulate tax free within the account
Commissioned brokers
Allowed to recommend investment products that are "suitable", a lower standard, which gives them far more latitude to suggest products that provide them with the biggest payouts such as those found in actively managed funds
Professional inspection
Always get a professional inspection before closing on a transaction. Make sure the inspection covers roof, gutters, exterior finish, furnace, electrical, plumbing, foundation, termites, soil assessment, leaks, dry rot, mold, water stains, and cracks in walls concrete. The seller should pay for repairs or you can negotiate a reduction in the price of the house equal to the cost of repairs.
What percentage should you ensure your home?
Always insure at least 80% of the value, otherwise you may be only partially covered if a loss occurs. Recommendation: Insuring 100% of the estimated replacement value, and periodically adjusting that figure for inflation.
Default rate and what are the 2 charges for?
An accelerated rate of interest (28%-35%) charged for: - Not paying the minimum by the due date and time -Payment not honored by your bank
Second Mortgage
An additional loan taken against the same property which is considered riskier that a first mortgage since the first mortgage must be paid off first in the even of a default or sale of the property before the second mortgage is repaid. The second mortgage usually has a higher rate of interest and a shorter term of 3 to 5 years.
Rate Lock
An agreement between a borrower and a lender that allows the borrower to lock in the interest rate on a mortgage over a specified time period at the prevailing market interest rate.
prenuptial agreement
An agreement is made before marriage that defines each partner's ownership rights in the other partner's property. Prenuptial agreements must be in writing to be enforceable. -becoming more common with 50% of marriages
NASDAQ/ Over-the-Counter (OTC)
An electronic exchange conducted by some 500 private market making firms that provide quotes, and transact the trading of the shares -24/7 marketplace for securities trading
appraisal
An estimate of the current value of the property.
What is a new scam involving rental housing?
An imposter posing as the landlord gains access to a vacant apartment or house and advertises it at a below-market rate, attracting several anxious renters. Once they have the deposit and the first and last month's payment, they are long gone. Alway verify you are making the deal with the correct person.
Federal Deposit Insurance Corporation (FDIC)
An independent agency of the federal government which insures and guarantees the safety of the money held in various accounts of its member banks -Provides coverage up to $250,000 per account
Who said, "If you're born poor, it's not your mistake. But if you die poor, it is your mistake."
Bill Gates
How to calculate the dividend percentage/yield?
Annual dividend/current share price = dividend percentage/yield
What is SEP-IRA?
Another type of plan for self-employed or owner of your own small business that will allow you to save much more than the traditional or Roth IRAs.
What happens if you put more than $6,000 in your IRA?
Any excess contributions above the maximum allowed are hit with a 65% penalty plus taxes.
Who can open an IRA (Traditional or Roth) account?
Anyone who is younger than 70 1/2 and has "earned income"
When should you pay your taxes?
April 15
When renting an apartment it is important to know:
Are utilities included? What happens if you move due to employment? Can you sublet the apartment?
Proponents of subprime mortgages
Argue that the practice extended credit to people who would otherwise not be able to get a loan, and thus not be able to own a home, missing out on the American dream
What is a pay-as-you-go system?
As cost rises, taxes must also rise because you are working to pay for older generations.
How does the interest rate affect the price of properties?
As interest rates rise, prices tend to decline. As rates fall, prices tend to escalate.
Long Term Capital Gains
Asset owned over 12 months. -Profit is subject to a max tax of 20% for singles (above $425,800) or married (above $479,000) -Maximum of 15% with income below these amounts -0% capital gains tax rate for singles (below $38,800) or married joint filers (below $77,200)
What is the best way to ensure you won't be late on your student loan payments?
Authorize automatic payments. Lenders will even reduce the interest rate by a quarter to half a percentage point.
A home equity line of credit is: A.Secured by the mortgage on the property B.A revolving line of credit C.All the above D.Unsecured, which is why it's so popular
B.A revolving line of credit
Which of the following may be a risk to the value of a REIT? A.As a stock, losses can be used to offset gains B.Cyclical and consumer slumps in the economy C.Lower vacancy rates D.Rising rents
B.Cyclical and consumer slumps in the economy
To reduce the cost of homeowner's insurance, which one of the following is not necessary to consider? A.Increase the deductible amount B.Reduce the size of your mortgage C.Bring the structure up to code D.Consolidate all your personal insurance with one company
B.Reduce the size of your mortgage
An additional loan taken against a property is called: A.All of the above B.Second mortgage C.Equity D.Collateral E.First mortgage:
B.Second mortgage
Which of the following is not related to longevity planning? A.403(b) B.W-2 C.Roth IRA D.401(k)
B.W-2
What should you bargain for when buying a car and a discount up to?
Bargain for an extended warranty or maintenance contract. Deep discount up to 50% off the asking price.
What is the cost of a lease?
Based upon the amount the vehicle will depreciate in value during the period of the lease, combines with the number of miles driven.
When did Social Security become a thing and by who?
Became a law in 1935 under President Roosevelt
Why have these programs become so large and indebted?
Because these programs were not designed for the demographics of today's workforce.
If you compare two different vehicles with the same capitalized cost, the one with the highest residual value will lease for less money? Why
Because you are financing less in depreciation. You will pay less for the one that loses the least value during the lease term.
Why is it important to worry about Social Security (FICA) and medicare?
Because you will be paying for it, and most people pay more in FICA and Medicare taxes than they do in federal income tax.
What must the two parties offer before a contract can be binding? And what it is?
Before a contractcan be binding, all parties to the contract must offer consideration, which means there is a mutual obligationto perform, and that something of value is to be exchanged. It must be deemed adequate or sufficient when tested in court of law. -Consideration can be: -Money, services, physical objects, future actions, promised actions
When is the best time to get legal advice when signing a contract?
Before the contract is signed.
Opponents of subprime mortgages
Believed many subprime lenders knowingly engaged in predatory lending practices with borrowers who could never meet the payment terms of their loans, ultimately leading to default, eviction, and foreclosure. They took advantage of people and should have known better
What is the range of closing costs?
Between $1,000 and $5,000
What doe lenders prefer when buying rental property vs, buying a house?
Bigger downpayment, higher interest rates, and stronger finances, and sometimes personal guarantees from the borrower.
Municipal Bonds (muni bonds)
Bonds issued by state and local governmental agencies. Used to finance schools, roads, and other public projects. -Interest and principal are paid to investors from taxes on income, sales, and property: and revenues from tolls and various fees.
US government bonds
Bonds issued by the federal government and backed by the full faith and credit of the US government
Corporate bonds
Bonds that represent loans to corporations. - consider safe when issued by strong companies - Interest on corporate bond is fully taxable, both state and federal - Usually maturity of 30 years, and pay interest twice per year
Investment Grade
Bonds with ratings of AAA through BBB-
High Yield (Junk bonds)
Bonds with ratings of BB+ or lower
Budgeting
Budgeting will help you establish your priorities, live within your means, and set financial goals and ensure that there is something left over [Savings]. A budget enables you to manage your money instead of letting your money manage you.
If the car is to be used for ______ _______, there may be tax advantages for leasing rather than purchasing a vehicle.
Business purposes
Key man insurance
Businesses also use life insurance, sometimes called key man insurance to reimburse the company for the cost of having to hire and train a new person to replace a deceased employee, presumably a key member of the management group.
collection agency
Businesses hired by lenders to pursue payments on debts that borrowers have not paid back according to the terms of the credit contract
Conventional wisdom is you make your profit in real estate when you
Buy a property
What should you do with your money if you want to save for the long run?
Buy and hold mutual funds, and particular index funds
What are your two options at the end of the lease?
Buy the car at the residual value or return it. There might be a small fee for returning the car.
What is the safest way to buy? Foreclosure, lender, etc.
Buying from a lender because there are no taxes or liens to pay, or tenants to evict. The lender has already gone through that process.
Another way of wash sale
Buying more of a stock that you already own at a loss, and then selling the original shares within 30 days to create a tax loss is also a wash sale
How are registered investment advisors compensated?
By fees which are a percentage of your assets (0.5%-1.5% per year)
Rapid Rescore can help achieve the following: a.Group of answer choices b.Reduce property taxes c.Update your credit file d.Get a longer term mortgage e.None of the above
C. Update your credit file
Video: Which of the following does not increase the appeal of buying versus renting a house? A.A higher federal income tax bracket B.Lower real estate commissions C.Higher interest rates D.Lower property taxes
C.Higher interest rates
Which of the following is true regarding federal student loans? A.Plus loans are lower than the 10-year Treasury rate B.Interest rates for grad students are less than those for undergrads C.Interest rates are linked to the 10-year Treasury rate D.Congress determines the interest rate each year
C.Interest rates are linked to the 10-year Treasury rate
Which of the following is not true? A.A Roth 401(k)plan can be rolled over into a Roth IRA without regard to the Roth IRA contribution limits B.Any matching contribution by an employer must go into a traditional 401(k)plan C.One of the best ways to borrow money is to take out a loan from your 401(k)plan D.A traditional 401(k)plan can be rolled over into a traditional IRA, tax and penalty free
C.One of the best ways to borrow money is to take out a loan from your 401(k)plan
Your last online stop when purchasing a used car should be "Carfax" to find out if: A.Monthly payments are affordable B.You think you are paying too much C.The car has been stolen or salvaged D.The vehicle has been inspected
C.The car has been stolen or salvaged
Which of these items is not covered by a homeowner's insurance policy? A.Additional living expenses B.Personal liability C.The land D.Personal belongings
C.The land
Subprime borrowers tended to have the following characteristics except A.They tended to have substantial credit card debt B.They lived in lower-income neighborhoods C.They were well informed of the risk they were taking Lenders required little or no down payment or equity
C.They were well informed of the risk they were taking
True/False: The card act and the Federal Reserve new rules apply to consumer credit cards and business credit cards.
False: ONLY to CONSUMER credit cards, NOT BUSINESS credit cards
Card Act: Stements must include a toll-free phone number you can call for ...
CREDIT-COUNSELING SERVICES
Simple interest
Calculated as a percentage of your initial investment on an annual basis. Example: 4% of $1,000 would earn $40 of interest each year. Formula: A = PV(1 + rt)
Compound interest
Calculated as interest on your initial investment + interest on the interest earned in the prior years. The magic of compounding. Example: If you earn 4% on $1,000 the first year, you end the year with $1,040. But by compounding the second year, you earn 4%on $1,040, and end with approximately $1,083, and do so, year after year. Formula: FV = PV(1+r)^T PV = FV/(1+r)^T
How does a state disability insurance work?Example.
California has a mandatory state disability plan for nonword-related disabilities, defined as any mental or physical illness or injury which prevents you from performing your regular or customary work. The plan is paid entirely b the employee through payroll deductions.
How can you correct an error from your credit report?
Call the customer service department of the business which reported the problem or call the credit bureau to correct the problem, depending on the source.
What happens if you don't pay a lien?
Can affect your ability to borrow against, refinance, or sell the property. So once the contractor, workman, or vendor has been paid, make sure thy sign a lien release.
Casualty & Theft Loss Deduction when itemizing taxes?
Can only applied to an official presidentially declared major disaster -Ex: (forest fire, hurrican, flood, etc.)
COBRA
Consolidated Omnibus Budget Reconciliation Act -Provides for the availability of medical insurance under certain circumstances after leaving an employer by allowing you to continue to participate in the employer's group plan for up to 18months. However, the cost of continuing insurance under COBRA may substantially increase since the employer's contribution cease upon termination.
What does the lease contract must explicitly list?
Capitalized cost of the vehicle, the down payment, registration fees, trade-in allowances or rebates, the interest cost, the monthly payment including taxes, and the residual value of the car at the end of the lease, and all extra charges.
How to get the gross capitalized cost?
Capitalized cost plus taxes, registration fees, and service contracts
Where is your last online stop for a used car? and why.
Carfax.com where for a very reasonable price, you can track a specific car by its vehicle identification number (VIN) -Tells you if the vehicle was ever reported stolen, salvage, or a total loss, odometer readings, the number of owners, accidents reported
Why does investing have an inheritance risk, but not investing does too?
Cash sitting in a saving account or a certificate of deposit earning less interest than the rate of inflation means you are losing purchasing power.
Why is the future value uncertain? and what can be impacted by?
Changes in interest rates, the neighborhoods, or the overall economy.
Frugality vs. Cheap
Cheap is buying only based on the lowest price without regard to quality or value, or not buying at all. Frugal means not spending freely or unnecessarily, but considering quality, value, needs and benefits along with price.
Qualified Stock dividends
Dividends that are received from stocks held for at least 61 days -Currently taxed at a maximum rate of 20% for singles ( above $425,800) or couples above ( above $479,000) -Maximum of 15% rate applies to those with income below these amounts -0% tax rate for singles (below $38,600) or married($77,200)
Whole life Insurance
Combines the cost of death or term insurance with a savings component called the cash value, and amount which is accumulated by you, managed and invested by the insurer. The cash value builds up tax-free and compounds in your account.
Financial intimacy
Coming up with a shared approach to spending, saving, and investing.
What should you always consider when evaluating the purchase of opened mutual funds, closed-end mutual funds, exchange-traded funds, and sector funds?
Commission and fees -Open end mutual funds charge the most -Exchange and sector funds charge the least
What is the value of an investment a function of?
Common sense -Don't look at the stock market as a casino, where quick profits are made Analysis -Look at trends and do research on the company Price you pay Goal you seek to achieve
Price/Earning ratio (P/E ratio)
Comparing the market price of a share to its earnings per share -If the price is 10x the earning, the P/E ratio is 10 -The P/E ratio tells you what the market is currently paying for each dollar earnings -What would it cost to buy a dollar of earnings
Equivalent Yield
Comparison between taxable interest vs. nontaxable interest -Help you answer the question as to whether you are better off owning a bond with taxable interest of 7% or a bond of equal quality with tax-free interest of 5%
What should you do if you don't qualify for an IRA plan?
Consider putting money into a personal investment account, such accounts are not tax sheltered, but money can be contributed and invested in a wide range of assets and you can still benefit from the magic of compounding.
Nonqualified Dividends
Dividends that are received from stocks held less than 61 days.
What are the two basic types of personalities in a relationship?
Consumers and savers
What can kill a relationship financially and emotionally?
Consumption of alcohol and drugs, and the addiction to gambling
Multilateral Contracts
Contracts with three or more parties
Charter Corporations (C-corp)
Corporations that are chartered by a state or in some cases by a foreign country. -Owned by shareholders who have right to vote on certain issues -Receive dividends -File their own tax returns and pay taxes at the corporation rate -Ex: Home Depot, IBM, Amazon, Apple
Cost Basis Calculation
Cost Basis = Purchase Price + Cash Improvements - Depreciation
Adjusted Cost Basis
Cost basis plus improvements, minus depreciation claimed during the years the property was owned. -If you sell the house for more than the adjusted cost bases, you have a profit.
Additional Living Expenses Insurance
Coverage pays the additional costs of living away from home if you cannot live in your home for a period of time due to damage from a covered disaster -Cover reasonable hotel bills, rental housing, meals, and incidentals -Coverage usually limited to about 20% of the amount of insurance on the structure -If you rent out part of your house, it might reimburse you for the rent that you would have collected
Medical Payment
Covers medical expenses for you and your family member if one or more are in an auto accident or injured by a car while bicycling or walking, regardless of fault. -covers guests in your car from $1,000 to $10,000
Comprehensive Insurance
Covers your car against damage from fire, theft, and forces of nature, but not from accidents. -the about of coverage is usually up to the car's cash value -Premiums may be reduced for installed antitheft systems
Revolving credit
Credit or funds made available to you for your use, at any time, subject to the terms of repayment. Think about credit card repaying and using that credit.
Debit/Credit Ratio and how to decrease it
Credit utilization rate. The amount of revolving credit you're using is divided by the total amount of credit available to you, or your credit limits. Credit balance / credit limit = Debt/Credit Ratio -Pay down what you owe -Increase your credit limit
Video: Which of the following is not true about leasing versus buying a car? A.At the end of a lease, if you return the car to the leasing company with more than the annual mile limit, you may be charged for extra miles. B.If you can't handle the monthly lease payments and return the car, you will have to pay an expensive early termination fee to end your lease contract. C.At the end of a lease if you return the car to the leasing company with dents or scratches the company deems more than ordinary, the company will charge you a repair fee. D. Your monthly payments are usually lower if you take out a loan to buy a car than if you lease the same car.
D. Your monthly payments are usually lower if you take out a loan to buy a car than if you lease the same car.
Which of the following does not enhance the value of rental property? A.Tax deferred profits B.Cosmetic improvements C.Rising rents D.A declining neighborhood
D.A declining neighborhood
In a IRA, the following item is not tax sheltered: A.Interest B.Dividends C.Capital gains D.Home equity loans
D.Home equity loans
A first mortgage is all of the following except A.It has first claim on the property B.It is secured by a piece of property C.A legal loan document D.It guarantees payment of a second mortgage
D.It guarantees payment of a second mortgage
Which of the following is not a potential benefit of real estate investing? A.Deferred capital gains B.Leverage C.Tax deductions D.Liquidity
D.Liquidity
403(b) plans are:
Defined contribution retirement plans established by non-profits -similar to 401(k) -Usually, the funds are used to purchase an annuity contract whereby one receives payments on an investment for a lifetime or a specified number of years
Section 457 Plans
Defines contribution plans established by governmental agencies -similar to 401(k), but are funded only by your contributions, the gov. does not match contributions
How much life insurance do you need?
Depends on a number of factors -Immediate needs might include mortgage payments, credit card and other debts and loans, children's educational costs, medical bill, funeral expenses, and estate taxes -Future needs might include family living expenses, inflation, and the survivors ability to work and learn -Sources of funds may include Social Security survivor's benefits, employer paid benefits, and other death benefits. -Other sources also may include interest income, dividends, real estate, and assets that can be sold
Website for counseling agency?
Dept of Housing and Urban Development -www.hud.gov
Growth
Determined by calculator the percentage rate of increase of earning over a period of time(quarter or a year- past or current).
When buying or selling a stock, what is more important than emotion?
Discipline Disciplines for buying a stock -Never borrow money to buy stocks -Market timing -It is best to invest in stocks with money you will not need for five years -Identify trends (areas of growth: energy, mining, agriculture, etc, Social trends: world's population) -Dollar-cost averaging is investing a set amount of money in shares of a stock on a regular time schedule, regardless of the price of the shares at that time. You will buy more shares at lower prices than at higher prices. -Diversify lowers your risk -Try not to buy your entire stock position at one time. Stage and stagger your purchases. (Ex: if you want to invest $100 in a stock, don't invest all $100 at one time, instead invest $50 at one time, $25 at another, and so on.) -Allocation of assets or rebalancing (Review the allocation of assets in your portfolio) -Market usually attempts to forecast the sales and earning attributable to an individual share of stock over the next 24 months, but a range of 6-18 months is better because anything beyond 18 becomes more unpredictable. -Do your homework. Don't trust what other people tell you. -Keep it simple and stay informed. (invest in ETFs or sector funds which don't require much research)
What are the two types of brokers you might want to consider when opening an account?
Discount broker: -Firms that help you buy and sell securities at low cost due primarily to electronic trading -Fees are around by phone $30 per trade or $7 online Full-Service Firms: -Full-service brokers provide a wide range of personal financial services for their clients. (Placing trades, independent research, financial guidance, and advice) -Fees of 1.0%-2.0%
Where should you start your bargain when buying a car?
Discounted offer that is below your budget
Who declares the dividends?
Dividends are declared by the corporations board of directors and paid out of the corporation's after-tax profits
Ordinary Dividends
Dividends from Real Estate Investment Trusts, employee stock options, and certain other dividends. These are reported on Form 1040 and are taxed as ordinary income at your individual tax rate.
When applying for a home loan
Do not overstate your income Do not alter your income tax returns Do not overstate your length of employment
What term insurance gives you the most protection for your money?
Dollar for dollar
In real estate, equity is: A. All of the above B. The amount of the outstanding loans C. The amount of the first mortgage D. The difference between the first mortgage and the second mortgage E.The difference between the value of the property less all debts against the property
E.The difference between the value of the property less all debts against the property
Tenants in Common
Each of you owns half of the house
What is the optimal percent return you should seek when buying a stock?
Earn above average annual rate of return 8% to 10% or more, including dividends, and to compound the rate of return over time
Total Income
Earned income + unearned Income -Taxable interest, ordinary, and qualified dividends, business profits losses, capital gains or losses on investments, pension receipts, certain tax refunds, Social Security benefits, unemployment compensation, individual retirement account distribution, real state activities, and partnership income
Earned income vs Investment income
Earned: Income from a job or self-employment Investment: Dividends, interest, and capital gains
Medical Expense Deductions when itemizing taxes?
Eligible for uninsured medical expenses in excess of 7.5%-10% of adjusted gross income (AGI)
When planning the purchasing of rental real estate, always consider:
Emergency repairs Vacancy rates Tenant's rights
Who is not covered by the Pension Benefit Guaranty Corporation (PBGC)?
Employees of government agencies and nonprofit organizations.
Who is more likely to receive defined benefits plan?
Employees of governmental agencies
A good example of a defined benefit plan is a:
Employer's pension
How do employers pay for Healthcare?
Employers with 50 or more employees must provide health insurance or be subject to a nondeductible fine. Employers with less than 50 employees are exempt from the plane, but tax credits will be available for small businesses that do provide coverage.
Experience rated
Employers with a good safety record are eligible for reduced rates or refunds.
Partnership
Enterprise jointly owned by two or more entities. -Enterprise survives the death of partner -Partnership does not pay federal income taxes, but becomes the obligation of each individual partner for his or her share of the total profits or losses and they pay any taxes due or claim eligible losses on their individual tax returns even if there are no distributions (taxed as ordinary income) -May not make annual cash distributions to the partners even if there are profits, the general partner decides -Partners receive Form K-1 to tell them the profits or loss of their portion
True/False: The annual rate of interest is the same as the APR.
False, APR is the Annual Percentage Rate
Community property
Everything that is earned and acquired, and all debts incurred during the marital period are community property and are split about 50%-50% regardless of who earned the money, acquired the possessions, or incurred the debt
Tax deductions
Expenses you are permitted to subtract from your taxable income to reduce your taxes
Tru/False: Buying gold is the best protection against inflation.
False
True/False: "Named perils" homeowner's insurance policies have more expensive premiums than "all risks" policies because the conditions under which you are insured are named.
False
True/False: 401k plans are portable and can be rolled into a traditional IRA, but only if you pay all of the required taxes.
False
True/False: A prepayment penalty is when you send in your monthly mortgage payment before it is due.
False
True/False: Decreasing your deductible will lower your policy cost.
False
True/False: If you live in an earthquake zone your standard homeowner's policy will automatically cover you for a loss due to earthquake.
False
True/False: If you sell your house at a loss you can use that loss to offset ordinary income up to $3,000 a year.
False
True/False: In California, the legal minimum liability insurance coverage is more than adequate for most drivers.
False
True/False: Insurance companies prefer to insure risks such as earthquakes, rather than risks such as auto accidents, because earthquake insurance claims come all at once rather than every day.
False
True/False: Interest on a home mortgage may be tax deductible and increases taxable income.
False
True/False: No fault insurance enables you to sue your own insurance company if the other party is at fault and has no insurance.
False
True/False: One way to get the best deal on a new car is to tell the dealer you are prepared to pay cash.
False
True/False: Roth IRAs have a required RMD, whereas traditional IRAs do not.
False
True/False: Smart car buyers let the dealer know upfront they have a trade-in to sweeten the deal on a new car.
False
True/False: The cost of repairs and maintenance adds to the cost basis of your house for tax purposes.
False
True/False: Title search and title insurance companies hold the documentation and money involved in the sale of a house.
False
True/False: When a remodeling job is completed, any remaining mechanic's liens will automatically be canceled.
False
True/False: When purchasing a house, the seller pays for an inspection of the property, and the buyer pays for any repairs.
False
True/False: you legally take on the debt your partner amasses before you wed
False
FICA
Federal Insurance Contribution Act (aka Social Security), which is an entitlement(right) program and also a pay-as-you-go plan.
What are muni bonds exempt from?
Federal income taxes and may even be free from some state income taxes, if owed by resident of the state in which they are issued (California, New York, and others).
Fiduciary Duty
Financial advisors who are registered with the Securities and Exchange Commissions require that they put the best interest of their clients first, rather than just making recommendations that are deemed "suitable".
F&I
Financial and Insurance Department (F&I) is where the deal is closed.
What is one of the major causes of divorce?
Financial conflict
What does a eating relationship requires?
Financial intimacy
2 Rules of thumbs when investing in repairs:
Five year or less: Avoid major improvements unless they can be recovered 20 years of more: Assume roof, furnaces, appliances, and other major repairs, replacements, and improvements will be necessary
Short Term Capital Gains
For assets owned 12 months or less, the profit/loss is added to your income and is taxed at your individual tax rate with a maximum of 37%
How is interest in a bond seen in taxes?
For corporation the interest paid on bonds is tax deductible as an expense, but taxable to the bondholder as ordinary income
The Marriage tax penalty
For those who are married there may be additional taxes due if their income exceeds $400,000
Consumer Financial Protection Bureau (CFPB)
Formed by the federal government, reviews mortgage rules and regulations such as prepayment penalties, disclosure forms, credit scores, down payments, debt levels, and income requirements. Its main focus is to ensure that borrowers can repay their loans.
What is external sources of funds?
Funds in the form of either debt or equity
What are the two types of partners in a partnership?
General partner: Manages and runs the partnership -Has unlimited liability and would like to purchase insurance to cover the liability risk (if sued can lose everything, and if sued they are involved) Limited partners: Invest in the business and have limited liability, limited only to the amount of their investment. (Can lose all they money but if sued they are not involved)
What should you always do when doing major investments?
Get multiple bids, but keep in mind the lowest bid may not be the best bid.
Charitable Deductions when itemizing taxes?
Gifts to qualified public charities are tax deductible -Can not exceed 60% of the taxpayer's AGI
Stock Options
Give one right, but not an obligation, to buy a stock at a set price within a specified period of time. - Design to attract, retain and rewards mployees, and make them stakeholders, incentivized as part owners of the enterprise.
Growth Investors
Investors looking for strong companies to grow their sales and earnings. -Like a growth of 15% or more from year to year -Buying when the company is not as popular as you think but it can be more risky
What does the tax code do?
Government subsidizes and encourages homeownership through the tax code. With some limitations, homeowners can deduct mortgage interest, not principal, on federal and state tax returns with a mortgage currently as large as $750,000 on new loans, and up to $1,000,000 on loans in effect prior to December 16, 2017.
What would the law not allowed when signing a prenup?
Hasty signing under duress (stress)
What should you do before a car's warranty expires?
Have the car inspected by a dealer or other mechanic for defects, wear and tear, and engine and transmission functions.
Why did buyers took little to buy a house prior to the recession?
Home buyers were told the loan verification process would take so long that a house would be sold or the price bid higher by the time their loan application could be processed. They basically were signing blank papers.
Second liens on a piece of property include
Home equity loans A second mortgage Home equity lines of credit
What are some good news when you sell your house?
Homeowners who sell their house can exempt from taxes the profits they make up to $250,000 for a single person or $500,000 for a married couple if they I've in the house any two of the prior five years as their primary residence.
Website if you are worried of foreclosure?
Homeownership Preservation Foundation -www.995hope.com -888-99504673
Hospitals paying Healthcare?
Hospitals are servicing more insured patients, which helps them collect more of their bills. In return, they agreed to contribute about $155 billion over 10 years to the new plan by accepting lower payments under Medicare. The new law does not allow illegal immigrants to buy insurance exchanges, so they will continue to receive emergency care.
What happens to shareholders in the case of a liquidation or bankruptcy
The common stockholders are usually the last to get paid
Card Act: For an account in good standing...
INTEREST RATE INCREASES can only be applied to NEW CHARGES
Card Act: There is no LIMIT OR CAP ON ...
INTEREST RATES ON OUTSTANDING BALANCES
Federal Reserve Rules: If your credit card company increased your card's APR...
IT MUST TELL YOU WHY and reevaluate the rate increase every six months and if appropriate reduce your rate within 45 days after completing the evaluation
Whom was the first person to receive social security and how much did she put into the system and how much did she receive?
Ida Mae put $24.75 and received $22,888.92 before dying at 100
What do hotels do when they ask you for your credit card?
If the room is $250, they might put a hold on your credit card account for $350 to cover any damages or other purchases you make. It is only after you check out that they release the hold money if it not needed.
What is the biggest downside to prepaid cards?
If they are lost or stolen, the money is probably gone forever
What should you make sure it is in writing when renting an apartment?
If upgrades have been promised, such as carpeting, drapes, painting, or appliances, make sure it is in writing.
What is the con of cohabitating?
If you are not married to your partner, the benefits of joint property, inheritance, Social Security, or other retirement benefits may not be available to you.
Itemized deductions
If you believe your eligible deduction are more than the standard deduction you can itemize them on the designated schedule of Form 1040 and deduct them before calculating your tax.
What is one certain thing if you don't talk about money?
If you do not talk about money before you get married or move in together, you are just delaying inevitable problems.
Spousal IRA Account
If you have a job, but your spouse does not work during the year, you may contribute to your spouse's IRA account up to the same amount you contribute to your IRA. If you deduct you contribution, you can also deduct your spouses's contribution.
Who needs life insurance?
If you provide for one or more people who depend on your income for survival, you have a moral obligation to have sufficient life insurance to take care of their needs in case of your death
How can your property taxes may be tax deductible?
If, when combined with your state and local taxes, the total does not exceed $10,000.
Credit card fraud
Illegal use of someone's card or account, caused by a dishonest clerk, waiter, cashier, or thief
Triple Net Lease
In addition to rent, the tenant will be responsible for property taxes, insurance, maintenance, repairs, utilities, electricity, and other items
Auto Insurance
In some instances may provide coverage if a disability results from an auto accident, depending on the policy and who was to blame.
In the money vs. out of the money
In the money: If the stock increases in price, the options have value Out of the money: If the stock decreases in price, they have no value
Taxes on interest received
Includes interest from savings accounts, CDs, money market funds; and corporate, treasury, and certain other bonds (except certain municipal bonds), are reported on the appropriate schedule and taxed as ordinary income.
Bank Certificates of Deposit (CDs)
Interest earning deposits placed with a Federal Deposit -Insurance Corporation (FDIC) member bank Interest rate, length of deposit or term, and early withdrawal penalties will vary from bank to bank -Term are usually three months to five years
Interest on a home equity loan (HELOC) when itemizing taxes?
Interest is not tax deductible, but you may deduct the interest if the loan is used to "substantially" improve the home.
What are landlords require to pay you?
Interest on deposits they hold
How are bond prices impacted by changes in interest rates?
Interest rise → existing bonds decline in market value Interest fall → Existing bonds rise in market value
What is the added benefit of loan forgiveness with an Income-driven federal plan?
Income-driven federal plans may have the added benefit of loan forgiveness after 10 years if you work for the government or a non-profit agency. -incentivizing students to pursue careers in teaching, law enforcement, and other public sector jobs -the forgiven amount is not taxable under this plan, but it is taxable with another plan as ordinary income
Passive activities in real estate
Individual does not materially participate in the business but is a part-time participants or a silent partner. A person that spends less than 50% of their working hours involved in real estate activities. -deduct losses up to $25,000 from other actively managed rental estate. These losses is phased out as AGI rises above $100,000 and disappears at $150,000
Credit Report
Individual financial report card which tells whether you have been making your credit card and loan payments on time.
Credit Report
Individual financial report cards which tell whether you have been making your credit card and loan payments on time.
Home Mortgage Interest when itemizing taxes?
Individuals are allowed to deduct for mortgage interest on their primary residence and a secodn residence up to a combined mortgage total of $750,000. -Does not apply to mortgages taken before December 16,2017
Active activities in real estate
Individuals that spend at least 50% of his or her working hours a year, but not less than 750 hours actively involved in the business of real estate. -The tax code treats the business of real estate like a full-time for-profit operating enterprise
Brokers vs. advisors
Investment advisers are paid a flat fee or percentage of AUM to advise clients on securities and/or manage portfolios. Brokers are paid commissions to execute trades or buy and sell assets for clients.
Value Investor
Investors looking for stocks which have stumbled and whose shares are at "bargain" prices. -Buying broken stocks, not broken companies -Trading below of what they really are worth -Harder to research
How has the recommendation for age and savings for financial planning change over time?
Initially: age 85 as the target life span by saving 10% of one's income Now: age 95 and saving 15%
due diligence
Inspecting and verifying the condition and status of the property
Who pays inspection and repairs?
Inspection are paid by the buyer and repairs are paid by the seller.
The cost of homeowner's insurance may also be reduced by
Installing carbon monoxide alarms Installing a burglar alarm Installing smoke alarms
Which of the following is tax deductible to the owner of rental real estate?
Insurance Depreciation Maintenance and repair
Personal Belongings Insurance
Insurance covers furniture, clothes, sports equipment, and other personal items if they are stolen or destroyed by fire or other insured disasters -Coverage is typically limited to 50% to 70% of the amount of insurance you have on the structure of your home -You can buy extra coverage above this amount for specific items of higher value -Your off-premises belongings are also covered
Liability Protection
Insurance covers your worldwide against lawsuits for bodily injury or property damage that you or your family member cause to other people. It pays for both the cost of defending you in court and court awards up to the limit of your policy.
Workman's Compensation Insurance
Insurance paid entirely by the employer, and provide coverage, including disability, if an injury or illness is job-related. -The initial premium for workman's comp is based primarily on your job description and is quoted as a percentage of payroll for that job title.
What is credit life insurance when buying a car?
Insurance that they get paid if you die or disability if you can not work.
What are you responsible for during the term of the lease?
Insurance, regular maintenance, and repairs not covered by a warranty or maintenance contract.
What is the real of thumb of insuring liability?
Insure at least 10 times your gross household income.
What does the Federal Housing Authority (FHA) and Veteran's Administration (VA) do?
Insure or guarantee certain loans and you may need little or no down payment.
Dividend Investors
Investors want income more than growth, by buying stocks that pay above average dividends. -Look for companies with a history of raising dividends each year -"Good dividend"--> One that provides a current yield greater than the interest on a 10-year treasury bond -Companies who pay dividend will tend to hold their value better
What is the most important thing when considering investing in a business?
Is management doing a good job
Private mortgage insurance
Is required if your equity is less than 20% Costs about one percent of the loan amount per year May or may not be tax deductible
How does government raise money when it spends more money than it take sin?
Issuing bonds
Which one is better, a Roth IRA or a traditional IRA?
It all depends on your tax bracket. Is it higher now (traditional IRA better), or do you think it would be higher in the future (Roth IRA).
How much can a healthcare insurance plan for a family of four cost?
It can easily cost $15,000 to $20,000
Why is the filing status important when filing your taxes?
It determines the tax brackets that apply to your income.
When does disability insurance not covers you?
It does not cover you when you are not employed
What is the total rate of tax on all earned income that goes into social security?
It is 12.4%, but 50% or 6.2% is paid by the employer and 50% or 6.2% by the employee. There is also a maximum annual "salary cap" of $128,400 (2018) that has increased over the years due to cost of living adjustments. Anything above the cap is not taxed.
What is the cost of PMI? Is it tax deductible?
It is about 1% and is tax deductible as if it were additional mortgage interest.
What is the Pension Benefit Guaranty Corporation (PBGC)?
It is an agency of the federal government which takes over certain private pension plan payments when businesses go into bankruptcy and their retirement plans fail, but it is less than what they intended to get. -Airline -Auto workers -City workers
SEP IRA (simplified Employee Pension Plan)
It is for self-employed individual and small businesses with only a few employees. -Business owners can currently contribute up to the less of 25% of income or $55,000 to the plan -Contributions do not have to be made every year, but if you do choose to contribute you must contribute to your own SEP-IRA plan and make at least a modest contribution to the SEP-IRA plan of every eligible employee
Is health coverage from an employer tax deductible?
It is tax deductible to your employer, but not tax as income to you.
What does depreciation do?
It reduces the operating profit of a property. It also reduced, for tax purposes, the cost basis of the property the it is sold.
How much liability coverage should you purchase?
It should be more than adequate to protect your assets.
Why is it important to pay attention to the definition of disability ?
It will impact your ability to be paid under the policy.
Homeowners Insurance
It's a package policy providing financial protection against disasters, including both damage to your property and your liability or legal responsibility for injuries or property damage you, or members of your family, cause to other people
Financial infidelity
Lying to a partner about money
The government subsidizes home ownership through the tax code by allowing a tax deduction for:
Property Taxes
Card Act: statements must include a
LATE PAYMENT WARNING & MINIMUM PAYMENT WARNING
Corporations
Large businesses -American corporations are chartered by the state -Ability to raise large amounts of money by issuing stock -Provide limited liability to the owners/shareholders -Corporations file their own tax returns -Corporations survive the death of any shareholder
What happens when a default occurs in a mortgage?
Leads to a short sale or foreclosure, eviction, and forced sale by the lender
Prior to the recession, how much downpayment did borrowers made on the house?
Lenders often made loans of 100% or more of the purchase price of a house with little or no downpayment required from the borrower. They believe that housing prices, and thus their collateral would continue to rise.
What is a major attraction of leasing a car instead of buying?
Less cash up front and a lower monthly cost, in addition to the added flexibility of not having to bother selling the car at the end of the lease.
What is the purpose of Form W-4?
Let your employer know how much it is required by law to deduct or withhold from each paycheck for your personal income taxes, both federal and state.
The most important part of an auto insurance policy is:
Liability insurance
Bonds
Like loans that obligate the issuer to pay a specified amount of interest for a specified period of time, usually several years, and then repay the bond holder the face amount of the bond -Issue/Sell a bond → Borrow money and pay interest for the time you expect to need it -Sold in $1,000 -Payments are made twice a year
Money Market Funds (MMF)
Like mutual funds which invest in short-term corporate, government, or municipal debt -The FDIC does not insure or guarantee MMFs
What is an often overlooked source of information to know whether you should buy or sell the stock?
Listen to the quarterly or annual conference call for analysts given by the company's senior management via the internet or telephone.
Is the interest from some municipal bonds be exempt from the alternative minimum tax?
NO
Subprime mortgages
Loans given to borrowers with FICO scores of 660 or less
What are loans that are only interest-only?
Loans that require only the payment of the monthly interest on the loan for the first 1-5 years, with no money going toward the actual repayment of principal. At the end of the period, payment of the principal would begin or the entire loan would become due.
The most important factor when purchasing real estate is:
Location
What is the first thing to think about when renting an apartment?
Location, Location, Location
What is the most important factor when buying a house?
Location, specifically the neighborhood, and its ability to meet your needs. It's not just the price. Consider schools, neighbors, crime rates, transportations, zoning, and the general upkeep of the neighborhood.
What is one important thing when investing ?
Look at the fees, because the higher the expenses the lower the returns on your investment will be and due to compounding, it can make a big difference over a long period of time.
Are individual losses from businesses tax deductible?
Losses from a proprietorship, partnership, LLC, or s-corporation which exceed $250,000(single) or $500,000 (married) are not tax deductible but may be carried forward to offset future profits.
Refinancing a mortgage may be done to:
Lower interest rates Consolidate first and second mortgages Lower the monthly payment
Is there a minimum age for opening an IRA?
NO
Who want what from whom? Health Insurers?
Made money by controlling claims and trying no to insure high-risk individuals.
What can you find in www.truecar.com
Manufacturer and dealer options and incentives
Can I avoid the sales person all together?
Many large dealerships have an internet sales manager who usually gets a salary plus a bonus based on the number of units sold.
no-fault insurance
Medical coverage that comes into play when it is unclear who is to blame, is designed to lower the cost of auto insurance by having an accident victim's minor medical expenses paid by their own insurance company regardless of who was to blame. -may also eliminate the costs and delays of legal action -Covers medical bills, lost wages, household help, and funeral expenses up to the policy limit -Does not cover property damage
You have 100,000 of earned income for the year, figure out what is the total you have to pay for social security and medicare
Medicare: $1,450 Social Security: $6,250
What are the 6 market Caps?
Mega cap → Market cap over $200 billion Large cap → Market cap over $10-$200 billion (greater liquidity) Mid-cap → Market cap from $2-$10 billion Small cap → Market cap from $300 million to $2 billion Microcap → Market cap from $50 to $300 million Billion Nanocap → Market cap less than $50 million
Debt
Money borrowed from a person or a lending institution, backed by a promise to repay over a predetermined period of time and rate of interest. Interest payments are tax deductible, except for nonprofit organizations -liability guaranteed by the assets of the owner -Debt does not dilute ownership, it creates leverage
Why should you think of money after you have an idea of your business?
Money is necessary to fund the operations of any enterprise, but you need first the idea of your business.
Discretionary money to spend
Money to spend on whatever you want with your spouse knowing
Sole proprietorship vs. Partnership when it comes to skill
More skill, talent, and capital are usually available to a partnership than to a sole proprietorship.
Should you let them charge you hundred of dollars for a VIN check?
NO
Are federal agency bonds guaranteed by the US government?
NO, but held in high regard, since they are issued by government agencies.
Can you convert an inherited IRA into a Roth IRA?
NO, seek professional advice.
Are residual values negotiable when leasing?
NO, the residual value of a particular car set by a lender will be the same to all of its dealers
A triple net lease means the tenant pays for
Property taxes Insurance Maintenance
How can you determine the amount of insurance you need?
Multiply the square footage of the house by the approximate cost per square foot to build a new house in your are. ex: $250/square foot
Does the Income-Based Repayment Plan or the Pay As You Earn Repayment plan applies to private loans?
NO
Does the equipment and components inside a commercial property also depreciate at the same rate as the building itself?
NO
Federal Reserve Rules: Can your credit card company charge you for an INACTIVITY FEE?
NO
Are IPO shares sold to individuals?
NO, they are mainly sold to institutional investors, not individuals. Individuals can usually buy them on the first day of trading after some initial investors decide to sell their shares and quickly take their profits.
What is the Highway Safety Website?
National Highway Transport Safety Administration and Insurance Institute
Rider
Needing to purchase additional insurance to insure belongings to a greater value.
Forbearance of student loans means
Neither principal or interest is paid The amount of the loan increases Payments are put on hold
Federal Income-Driven Repayment Plans
Newest form of student loans that the monthly payment is based upon 10%, 15%, or 20% of disposable income and the loan may be forgiven after 10,15, or 25 years, depending on the plan.
Are Muni Bonds good idea if you are are in a low-tax bracket?
No
Stipulated maximum (or "cap")
No matter how high the bills, you pay no more out of pocket than the stipulated maximum amount in any one year.
How much should graduates borrow with a starting salary under $30,000?
No more than $18,000 over their college career, a $216 monthly payment
Do credit car auto insurance provide liability coverage?
No, but they provide some sort of collision insurance if you used their card to rent the vehicle
Is homeowners insurance tax deductible?
No, homeowners insurance is not tax deductible.
When making an extra payment to pay off a loan faster than required, what should you do?
Notify the lender that the additional amount is to be used to reduce the amount of loan, and not to pay interest or be put toward future payments.
How doe a negative amortization loan occur?
Occurs when below market teaser interest rates are used and the difference between the low teaser rate and the market rate of interest at the time the loan is made is added to the amount of the loan. When the teaser rate ends in two or three years, the interest rate increases to the prevailing market rate, sometimes DOUBLING OR TRIPLING THE MONTHLY PAYMENT. The owner has a much higher interest rate on a larger loan to be paid over a shorter period of time.
Examples of Commodity Exchanges
Oil Wheat Corn Soybeans Cotton Cattle Hogs Gold Silver Sugar Coffee
Drug and Medical Device Companies Health Reform Act
On the positive side for the drug companies, many more people are now insured for prescription drugs. Drug and biotech companies are absorbing some discounts to the Medicare Part D plan.
When can you terminate the PMI?
Once the loan accounts for 80% or less of the appraised value of the property, which means the equity is now 20% or more, the PMI is eligible for termination. This occurs when either the property has increased in value, or the owner has reduced the principal amount of the loan by monthly or additional payments.
Unilateral Contract
Only one party makes a promise or expresses an offer based upon another's party's performance. -Private party posts a reward for finding their dog
The following were characteristics of the Great Recession except
Originators and lenders carefully verified all information
Equity REITs
Own and operate income producing real estate
Property that is owner-operated
Owner of the commercial and industrial property actually uses the property in its business
What is one of life's biggest expenses?
Owning and operating cars
After ager 59 ½ if a Roth IRA has been open for at least 5 years you can
Pay no taxes on withdrawals Not be subject to any RMD Take out all you want without penalty
Balloon Payment
Paying only the interest on the loan for a period of time, with the entire loan due at the end of the term. This type of loan is no recommended because, if affordable refinancing is not available, the property might be lost.
Collision coverage
Pays for the damage to your car when the accident was your fault or you are unable to collect from the other party who was at fault. -optional coverage -deductible of $500 or more -The insurance company only pays for the loss above the amount of the deductible and up to the value of the car -You may get the cash value and insurance of the car if the estimated cost of repairs exceeds cash value
Why can you have three different FICO scores?
People you do business might not report your financial activity to one or more of the three major credit bureaus. Credit scores can change almost daily as new information is submitted.
Which of these is not a type of vesting? A.Cliff vesting B.Performance vesting C.100% vesting D.Graded vesting
Performance vesting
Collateral
Property you pledge as a guarantee you will repay the loan. If you default and do not repay the loan, the lender can legally take possession of the property and sell it to get its money back; or when you sell the property you must simultaneously pay back the unpaid balance of the loan.
What happens if you exceed the selected mileage allowance?
The charge is normally 10 to 25 cents per mile to be paid at the end of the lease when you return the car. There is no mileage charge if you purchase the car. There is no refund if you drive fewer miles than the allowance.
Commodity Exchanges
Physical places where commodity futures contracts trade. It is an auction market with high leverage, high volatility, and high risk.
Stock Exchanges
Places where investors buy or sell shares
Defined benefit plans
Plans in which an employer promises an employee a specific defined lifetime monthly benefit upon retirement -depends on the employee's age at retirement, their salary, and the number of years on the job -Sometimes, also provide for continuing benefits to a surviving spouse
Health Savings Accounts (HSA) and Flexible Savings Accounts (FSA)
Plans that allow you to set aside pretax dollars to pay out-of-pocket medical expenses, essentially making medical expenses tax deductible -Include co-payments, co-insurance, deductibles, and many uninsured services, but exclude medical insurance premiums
Open-end funds
Pooled investment portfolios open to any investor with the money to make a minimum initial purchase -It has sale fees, management dees, and administrative expenses -They must be sold with a prospectus: a document of disclosure which detail the fund's investment policy, strategy, expenses, and past performance -Buy shares from and sell shares to the fund price at NAV
Closed-end Funds
Pooled investment portfolios which raise money by issuing and selling a set number of shares in an initial public offering and then the share are listed on an exchange and publicly traded based upon supply and demand -Management fees and expenses tend to be much lower than those of open-end funds -Shares trade in the open market higher or lower than NAV -Sell a set number of shares to the public(and no more)
Is alimony tax-deductible?
Pre-2019 divorce agreement remain tax deductible, but after 2019 alimony payments are not tax deductible.
Why should you establish a cash reserve when investing in rental property?
Preparing for unexpected repairs and vacancies. have at least one month's rent for each residential unit to fix between tenants and to re-rent it. -Commercial and industrial properties might require larger reserves
What is not tax deductible when investing in real estate?
Principal payments
Private Student Loans vs. Federal Loans
Private: -Variable interest rates -require co-signer -may not be tax-deductible -seldom forgive -Consolidation or refinancing Federal: -Fixed rates -Not required a co-signer -May have tax deductible interest -Qualify for forgiveness programs -Eligible for consolidation, but not refinancing
Mutual Funds
Professionally managed portfolios which may consist of stocks, bonds, or other investments divided into shares -The minimum purchase may be less than $500 -Each fund must have a defined investment strategy -Pay out dividends and year-end distributions to their shareholders which is taxable to the individual investor -They do not repeat the performance year after year -Set prices daily
Department of Veterans Affairs
Provides coverage for members of the armed forces who suffer from military-related disabilities.
Individual Disability Income Insurance Policy
Provides you income in the event you are disabled. Because it provides income replacement, you must be employed to receive benefits.
Real Estate Investment Trusts (REITs)
Publicly traded managed pools of money like a mutual fund, which invest in real estate rather than stocks or bonds. They are liquid.
What is the first real estate investment people make?
Purchasing a home
State-based Exchanges
Purchasing pools of health insurance.
Who want what from whom? Politicians?
Raising money to get elected. They consider doctors, hospital organizations, insurance providers, and pharmaceutical companies as potential source of campaign funds. And voters want good medicare at affordable prices.
Is a rebate worth more or less if the financed amount is $15,000 or less
Rebate is worth more
What kinds of terms are best? and why
Recommendation not going longer than 36 months. If you decide to sell or trade within that time, you will probably get enough money to repay the remaining loan balance. Selling the car beyond 36 months could easily force you to come with additional cash as the car has depreciated.
Benefit Period
Refers to how long the policy will continue to pay. The longer the benefit period, the higher the cost of the policy.
Waiting Period
Refers to the period you will wait before collecting under the plan. The longer the waiting period, the lower the cost of the policy.
What happens when a bond is purchased?
Regardless of the price paid, the issuer still promises to pay back the face value on a specific date to whoever owns the bond.
A landlord may not discriminate against anyone on the basis of
Religion Race Sexual orientation
Refinancing a mortgage
Replacing an existing mortgage with a new mortgage, either by negotiating with your existing lender for a new loan or moving to a new lender and paying off the existing loan.
What are voluntary requests to see your credit report & who are those that make them?
Request to see your report only if authorized by you. People who request them have to have your written permission to do so. -Lender -Landlord -Employer -About 50% of employer do a credit check as part of hiring process
Stop payment
Requesting the bank to reject payment of a check when presented. Fee of about $30 every month if you don't cancel the stop payment
What are involuntary requests to see your report and who are those that make them?
Requests usually come from lenders soliciting you by mail for a pre approved credit offer. They have no bearing on your score. -Lenders of credit cards
Obamacare
Requires all US citizens to have healthcare and requires those who do not to pay a penalty.
Student Loan Bill
Requires all federal student loans originate directly with the federal government. They are now arranged through each campus's financial aid departement
Rich vs wealth
Rich has to do with money, wealth is a lifestyle(living the life you want and pursuing your passions
What is the greatest dangers for bond investors?
Rising interest rates and inflation
When you lease a car, you are responsible for:
Sales tax Registration fees Auto insurance
Exchange-Traded Funds (ETFs)
Securities that track an index, but trade on an exchange like a stock -Provide instant diversification within a industry, geographic area -Low expenses because it is run by a computer program which automatically does the tracking by continuously buying and selling the individual shares during market hours -Usually pay quarterly dividends which are taxable -Usually not actively managed, run by a computer -Not all ETFs are well diversified
What should you do if you have personal belongings coverage insurance?
Take pictures of each room, including furniture, wall hanging, carpeting, and drapes. Store photos somewhere safe outside of the house.
Exit strategy
Selling shares, selling the business, or merging the business. It will most likely be years away.
On average, how much do seniors take out compared to what they put into Social Security and Medicare?
Seniors take out 6 times what they individually put into the system
Who sets the interest rates on federal student loans? when does it start and when does it ends.
Set by congress for the academic year beginning on July 1st and ending the following June 30 and are linked to the interest rate on the 10-year Treasury notes. -Rates are fixed
When should you write a prenuptial agreement?
Sign it at least 60-90 days before the wedding to avoid the appearance of duress and to clarify issues.
Sector Funds
Similar to ETFs, but they track stocks in a specific industry, geography, emerging economy
Earning
Single most important factor in determining whether investors will pay more for a stock in the future
Buy-sell agreements
Small businesses use life insurance to fund buy-sell agreements to deal with the death of any owner, a partner or an executive of a company when he or she dies. Proceeds from the policy are used to purchase from the beneficiary of the deceased their inherited interest or shares in the business.
Social security Disability Benefit
Social Security also has disability benefits for workers of any age whose disability is expected to last at least 12 months. Its definition of disability is that no gainful employment can be performed
State Disability Insurance
Some states have their own disability program for workers who suffer a loss of wages when they are unable to work due to a nonwork related illness or injury. Ex: falling off a ladder while cleaning out the gutters at home
How many days would it take for money to be reimbursed into your account using a debit card as opposed to a credit card, in case of fraud or hacker?
Takes 2-3 months for debit cards and a few days for credit cards.
Who pays the estate tax?
Tax is paid out of the estate before distribution
Can 401(k) plans allowed loans?
Some, and if they do, you can borrow up to 50% of your vested balance, not to exceed $50,000 -Loans must be repaid over no more than five years unless used to purchase a first home -Interest is 1% to 3% over the prime rate -Principal and interest are usually repaid via payroll deduction
People may invest in real estate to
Speculate on land appreciation Seek long term tax deferred appreciation Generate income
State and Local Taxes when itemizing taxes?
State and local taxes + residential property tax when added together are deductible up to a combined total amount of $10,000.
What is a key difference between stocks and bonds?
Stocks make no promise to pay a dividend or guarantee the principal. Issuer of bonds guarantee to pay a set amount of interest each year in return for use of the money and to pay back the loan, in full, on the maturity date
Term Insurance
Strictly "death insurance" with rates actuarially calculated. The only time you or your family collect under the policy is if the insured person dies while the policy is in force, subject to any exclusion for suicide
How can you get the adjusted capitalized cost?
Subtract any trade-in value, manufacturer's rebate, and your down payment
Adjusted Gross Income
Subtract from total income-specific deductions... -Contributions to retirement plans -Student loan interest -Tuition and fees -Health saving accounts -Flexible saving accounts
How does stock options work?
Suppose an employee has an option to purchase 10,000 shares of stock at $5 per share any time over the next years, when the onion will expire if no exercised. However, five years later the stock is at $30 per share and is "in the money." The employer can exercise the option by arranging to put up $50,000 and in return receive 10,000 share of the stock with a market value of $30,000, which can immediately be sold.
Federal Reserve Rules: Your credit card company cannot charge a late payment fee...
THAT IS GREATER THAN YOUR MINIMUM PAYMENT
Who get the 401(k) account if the beneficiary dies?
The 401(k) plan is the spouse's, regardless of who is the named beneficiary. The only exception is if the spouse has waived, in writing, his or her right. If the plan owner is single, it goes to the named beneficiary regardless of a will.
Alternative Minimum Tax
The AMT was designed to impose taxes on high-income people who were paying little or no income tax by taking advantage of tax loopholes. It ignores certain tax deductions otherwise allowed individuals in the regular tax code, and applies special tax rates. -If your taxable income for single (above $70,300) of married (above $109,400) you must recalculate your tax using the AMT and pay the higher of the regular tax or the AMT, which is currently 26% to 28%
Quarterly Estimated Taxes
The IRS and many states require those who have a significant amount of income which is not subject to adequate withholding for tax purposes to file and pay quarterly estimates of additional federal taxes owed. -April 15, June 15, September 15, January 15
Depreciation
The gradual loss of value of the rental property as it wears out over its tax life, a cash expense
Bond Premium
The amount above the face value of the bond is valued in the marketplace. ($1,050 market price vs. $1,000 face value = $50 or at 5% premium) -Part of the premium you pay can be deducted each year you owed the bond for tax purposes since the amount you will receive on the maturity date will be lower than your cost and create a loss.
Bond Discount
The amount below face value the bond is valued at in the marketplace ($1,000 face value vs. $950 market price = $50 or a 5% discount) -Part of the discount is reportable as taxable income for each year you own the bond until maturity date since the amount you will receive on the maturity date will be higher than your cost and create a profit.
Loan-To-Value Ratio (LTV)
The amount of the loan divided by the market value of the property. -A higher interest LTV (bigger loan) may result in a higher interest rate because the lender is putting-more of the purchase price and has a greater risk if the property value declines.
Deductible (Health Insurance):
The amount you pay each year before the insurance company makes any payment at all. The higher the deductible, the lower the cost of your policy
Current Yield
The annual interest payment divided by the market price of the bond. The coupon (or interest paid) stays the same, but changes in the market price of the bond will change the current yield either up or down. Example: If the coupon yield is 4% and the bond is priced at $950, the current yield is 4.21%($40/$950 = 4.21%
Bid price?
The highest price a buyer is willing to pay at that very instant time
What is the art and science of buying a house?
The art of buying a home is finding one you will be happy in. The science is getting the legal and financial aspects right.
Market Order?
The best available price at that instant in time for an immediate execution or filling of an order -If place a market order to buy → expect to buy at the ask price -If place a market order to sell → expect to sell at the bid price
Fees paid to loan originators
The fees that were paid to loan originators for arranging subprime loans were two to three times the fees paid on conforming loans, so there was a financial incentive for the originator to arrange a subprime loan regardless of a borrowers higher credit score.
Initial Public Offering (IPO)
The first time a corporation sells stock to the public
Coupon yield ('nominal" yield)
The fixed percentage rate of interest based upon the par value of the bond. The coupon rate does not vary with the price of the bond. Example: A bond with a coupon rate of 4% pays $40 a year to the owner. That does not change.
Phishing
The fraudulent practice of sending emails, calls purporting to be from reputable companies in order to induce individuals to reveal personal information, such as passwords and credit card numbers.
Government Health Care Reform Act
The government will provide subsidies to help purchase insurance for households earning up to four times the federal poverty level, which is about $46,000 for a single person and $95,000 for a family of 4. These numbers are adjusted annually for inflations.
Property owned by an investor
The investor can lease or rents to a single tenant or multiple tenants
What happens if a court issues a judgment on a contract?
The judgment would become a matter of public record and may be reflected in a person's credit report, especially when money is owed.
Last price?
The last price at which a stock actually traded. It occurs when both the buyer and the seller of a stock have agreed on a price and the number of shares.
In a foreclosure
The lender legally repossesses the house
What happens if your payment is 21 to 30 days late?
The loan becomes delinquent
What happens if your payment is over 270 days late?
The loan goes into default and you will be subject to possible wage garnishment and other serious penalties.
If you sell a house at a loss
The loss is not tax deductible
Ask or offer?
The lowest price a seller is willing to sell at that very instant in time.
Invoice price
The manufacturers price to the dealer before various rebates, allowances, discounts, and incentives awards.
FICO score
The mathematical number used by the lender to determine if you are a good or bad credit risk. How likely you are to pay the loan or credit card balance as agreed. -The higher the delinquency rate, the lower the score
Traditional IRA
The money you can contribute to your account is tax-deductible in the year it is contributed. But the money you withdraw is fully taxed as ordinary income. All income and earnings within the account are tax-sheltered. -You pay no taxes now, but you pay taxes when you withdraw the money in retirement
Roth IRA
The money you contribute to your account is with after-tax dollars(no tax deduction). But the money you withdraw is tax-free. Once contributed to the account this money, even after compounding for many years, may never again be subject to taxation. All income and earnings in the account are tax-sheltered. -You pay taxes now before contributing, but no more taxes will be due when you withdraw money in retirement
Why does the tax code enables the owner to deduct depreciation as an expense?
The owner will use the tax savings to reinvest back into the business or property to maintain its condition.
What should you be aware when signing up for a 401(k) plan?
They might have fees ranging from 0.60% to 0.75%, but can not exceed 1.00% of assets. Fees may be paid by the employer or passed on to the plan participants.
For those that are married and filing jointly, what is the current phase out?
The phase out begins at $101,000 and if AGI exceeds $121,000 you cannot tax deduct any of your contribution
Residual value
The predetermined value and purchase price of the car at the end of the lease. -The residual value is as important as the capitalized cost of the vehicle -determined by the cache, quality, reliability, and popularity of the car in the marketplace
Why is the premium higher for whole life insurance than term insurance?
The premium per thousand dollars of insurance is much higher due to the forced savings component and higher commissions. Once issued, the premium stays the same throughout the period of the policy, which may be for the rest of your life.
How many years does a credit report cover?
The previous 7 to 10 years
Capitalized cost("Cap" cost)
The price you and the dealer agree upon for the car to be valued at the time of the lease.
What does it mean if the capital expenditure = depreciation?
The property issuing appropriately updated and maintained.
What interest would be used when buying a house?
The rate of interest would be quoted based on the lowest credit score.
What happens after 2 years that you are on the Social Security Disability Insurance (SSDI)?
The recipient qualifies for Medicare regardless of age.
The cost of leasing a car is based upon:
The residual value of the car The interest rate on financing the depreciation How many miles you plan to drive per year
Yield and what are the three types?
The return earned by an investment in bonds. - Coupon yield (or "nominal" yield) -Current yield -yield to maturity
Would high income earners pay more on medicare?
The same high earners will pay a Medicare Part A tax of 2.35% (up from 1.45%) on earned income over the sample income thresholds. This incremental 0.9% Medicare surtax is paid entirely by the employee.
When the property is sold, the real estate commission is usually paid by:
The seller of the property
Explain a real estate transaction
The seller signs an exclusive agreement with a licensed real estate agent or broker to represent the seller. The selling agent usually list the property on a multiple listing service (MLS) online for all to see. When the property sells, it is usually the seller, not the buyer that pays the commissions.
Co-payment or co-insurance
The shares of the bill that you pay after you have met your deductible, with insurance paying the rest up to the policy's limits. -Usually the higher the co-payment or the co-insurance percentage, the lower the premium or policy cost
Sole Proprietorship
The simplest type of business to form. It is a business owned solely by one person. -If the owner dies, the business dies -The owner is the boss and owns it all and responsible for everything -The proprietorship has unlimited personal liability and may need to purchase liability insurance to protect his or her assets -They have limited ability to raise money -Sole proprietors have a separate schedule C to file along their individual Form 1040 tax return to report profit or loss -Profits are taxed at ordinary individual tax rates -Losses may be used to reduce taxable income -Responsible for social security and medicare
Limit Order
The specific price you set at which you are willing to either buy or sell a stock, no more/no less. A limit order does not limit losses. -If place a limit order to buy → you set the highest price you are willing to buy -If place a limit order to sell → you set the lowest price you are willing to sell
Market Cap and how is it calculated?
The total value investors are placing on the company at a moment in time. Market prices of a single share of stock x total number of shares outstanding = Market cap
Net Asset Value (NAV)
The total value of the fund's holdings (Including cash) / number of the fund's shares outstanding at that time -Market values/ how many are there
What should every cohabitating party do?
They should have a will or trust designating beneficiaries of assets, a durable power of attorney and nomination of a conservator, and a power of attorney for healthcare. An agreement should also address what happens if the couple chooses to separate.
What happens if the options are not exercised by the expiration date?
They terminate
The loan-to-value ratio ("LTV") is when the value of the loan is related to:
The value of the house
Roth IRA plan contributions
There are no tax deductions for contributions to Roth IRAs. Your contribution is made with after-tax dollars. -The right to contribute to a Roth IRA is currently phased out as modified AGI rises between $120,000 and $135,000 on a single return or between $189,000 and $199,000 on a joint return
Why should you be careful if the downpayment of a house is pretty low or near 0%?
There may be fees, a higher rate of interest, and PMI to pay.
Doctors in the Healthcare reform act?
There will be a big increase in the patient loads of many doctors, exacerbating the existing shortage.
Bonds issued by corporations?
These are bonds secured by corporate assets. If interest is not paid according to the agreement there is a default in which case the bondholders are entitled to those assets
Internally generated funds
These are funds generated by the operation of the enterprise itself, basically its cash flow from operations, and any asset sales.
Adjustable Rate Mortgage (ARM)
These loans start with a set rate of interest for a defined period of time, usually 1 to 5 years, after which the rate is "adjusted". This adjustment changes your monthly payment.
How are 401(k) funded?
They are funded with pre-tax salary contribution from the employee and some matching funds from the employer, thus shifting a large part of the cost from the employer to the employee.
How do millionaires work?
They are motivated by goals, not just pleasant activities. They allocate their time properly. They often do things that others do not like to do. They are disciplined. They work hard, but working 40hrs a week is rarely seen. To be a millionaire does not require one to compromise their integrity.
Money Market accounts (MMAs) and Money Market Deposit Accounts (MMDAs)
They are not MMFs, MMDAs are offered by banks and credit unions and they tend to pay higher rates of interest rates than saving accounts and are insured by the FDIC -Similar to a checking account, except that only a limited number of checks may be written, and withdrawals made each month
How and by who are bonds rated?
They are rated by quality (AAA, AA, A, BBB, BB, etc., D) by independent rating agencies (Moody's, Fitch, and Standard & Poor's) assessing the risk of default or failure to meet the terms of the bond.
What are the car lease payments and what are they based upon?
They are the monthly lease payments and are based upon the difference between the capitalized cost and the residual value
What did mortgage brokers did to borrowers to increase their own fees and commissions?
They falsified their clients income and financial status
How can corporations increase profits per share?
They may use excess cash to repurchase their own shares
Liability Protection Insurance
This insurance covers your worldwide against lawsuits for bodily injury or property damage that your family members cause to other people -It pays for the cost of defending you in court and court awards up to the limit of your policy -There could be exceptions to liability coverage for gross negligence on your part
First Mortgage
This is the mortgage that has first claim on the property in the even of a default or the sale of the property.
What does it mean when the stock grants are vested?
This means that the restrictions have been met and if your job is terminated, where you are fired, retired, or quiet, you can take those shares with you. - Subject to payroll deductions, withholding, and ordinary income tax rates -Capital gain or loss -The AMT may also enter into the picture
Yield to Maturity
This tells you how much you will receive in the future if you hold the bond to maturity. It is the sum of all cash flows from both coupon payments and repayment of the face value ($1,000). - If the bond was purchased for a premium the yield to maturity will be lower than the coupon -If the bond was purchased at a discount, the yield to a maturity will be higher than the coupon
What should you do when considering a house?
Tour the house, make several visits at different times of the day to any house you are seriously considering. Be sure to visit the area during the nighttime and on weekends. Check with the police regarding crime rate in the area.
Federal Agency Bonds
Those issued by federal agencies to help fund projects relevant to public policy. - Designed to provide low-interest rate financing to support sectors of the economy that might otherwise not be able to borrow at such low-interest rates. Example: - Federal National Mortgage Association (Fannie Mae) - Federal Home Loan Mortgage Assoc. (Freddie Mac) - Small Business Administration (SBA) - Student Loan Program (Sallie Mae)
Why should you check your medical insurance to make certain all the medical providers who treat you are covered by your insurance?
Those who are not covered are considered "out-of-network" and can bill whatever they want
What happens if a lien is not paid?
Title to the property may not be transferred until all liens are paid.
What is the goal?
To be wealthy and financially independent
PEG Rate
Tool used to decide if a stock is in a "buy" range or a "sell" range. It compares how much investors are currently willing to pay for each dollar of earnings, to the expected growth rate of future earnings. Formula: P/E Ratio/Earnings Growth Rate -A PEG rate of 1 indicates an attractive buying range because the growth rate is increasing at a faster rate than the market is currently valuing the stock -Low PEG → stock might be undervalued -High PEG → stock might be overvalued
Whta is the goal of a HMO?
To keep costs low by keeping members healthy and requiring fewer treatments and procedures
When there is a potential claim, what is the first thing that an insurance company might do?
To look up at the terms and conditions of the policy to see if this [articular loss or even is covered.
Why do insurance companies might inspect your property at the time of issue?
To make sure it is well maintained, up to code and there are no unusual hazards in the area that could cause a problem
What is one way to keep the proceeds of an insurance policy out of your estate, thus avoiding estate taxes?
To name someone else, such as your child, as the owner and beneficiary of the policy, and gift them the money to pay the premiums. -Upon death, the proceeds will not go to your estate, but directly to the named beneficiary, in this case your child, thus skipping a generation of potential taxation.
Why was the workman's compensation insurance was designed?
To pay a worker rather than having the worker sue his or her employer
Individuals paying for the Health Care Reform Act
To pay for the Health Care Reform Act, the Medicare payroll tax has been expanded to include a new 3.8% tax on all unearned income for those individuals making more than $250,000. It also applies to profits from the sale of primary residences in excess of $250,000(single) or $500,000 (married).
What is the goal in healthcare?
To provide better quality care more efficiently. Costs must come down and the allocation of medical services needs to be resolved.
How much did you had to pay in deductibles to qualify for the HDHP?
To qualify as an HDHP, the minimum deductible is $1,350 for singles and $2,700 for family coverage, and the maximum deductible is $6,550 for singles and $13,100 for families. These limits tend to change based on the cost of living.
What is the goal in real estates?
To use the rental income to help pay for the mortgage, insurance, taxes, and maintenance, while taking advantage of the tax benefits and the use of borrowed funds
What are the 3 major reporting agencies?
Transunion Equifax Experian
Can a personal belonging coverage include "accidental disappearance" (you lost it)?
True
Does the IRS recognize same-sex marriages?
True
One success is worth a hundred failure
True
True/False: 403b plans are defined contribution plans established by non-profit organizations.
True
True/False: A conforming home loan is a loan under a certain size.
True
True/False: A non-owner collision and liability policy is designed for those who rent cars, but do not own them.
True
True/False: Extended warranties on low cost electronic devices are rarely a good investment.
True
True/False: Homeowner's insurance can cover replacement cost, code changes, and your personal belongings such as clothing.
True
True/False: Homeowner's policies cover you worldwide against lawsuits for bodily injury or property damage.
True
True/False: If you are self-employed, you may be able to contribute and tax deduct over $50,000 put into a Solo 401k plan.
True
True/False: If your 15-year old roof is destroyed in a storm and needs to be replaced, your insurance company will pay more of the cost of replacing the roof if you have a replacement cost value homeowner's policy, rather than an actual cash value policy.
True
True/False: In real estate, cost basis equals the purchase price, plus capital improvements, less depreciation.
True
True/False: Leading up to the Great Recession, some loan originators falsified applicants' financial status to increase their fees and commissions.
True
True/False: Matching 401k employer contributions must always go into a traditional 401k, not a Roth 401k.
True
True/False: Mechanic's liens guarantee payment to a contractor, laborer, or material provider. It is the owner's responsibility to get a signed release when payment is made.
True
True/False: Only when you take a border into your primary residence, do the rules regarding discrimination not apply.
True
True/False: Private student loans may cost less than federal student loans.
True
True/False: Refinancing a home loan may be a good way to consolidate a first and second mortgage.
True
True/False: Tenants in Common is when you purchase a house jointly and each of you own half of the house.
True
True/False: The maximum one may contribute to an IRA is greater for those over age 50.
True
True/False: Three parties are eligible to contribute to a 401k plan.
True
True/False: Video: In general, the longer you plan to live somewhere, the better off you are buying rather than renting
True
Security Freeze
Used to deny access to your credit information so that a potential new creditor is not able to access your information in order to approve the request. -Individually contact each of the 3 major credit bureaus
Rule of 72
Used to estimate how long it will take for a sum of money to double at a given interest rate, assuming interest is compounded annually. Calculation #1: 72 / (Interest rate or expected rate of return) = number of years it will take to double your money Calculation #2: 72 / (Number of years it would take to double your money) = Interest rate you will need to earn
How can you be rewarded when investing in real estate?
Using rental income to pay off the mortgage, using leverage to increase your equity, and by taking advantage go the deferred tax benefits afforded real estate investors.
Who wants what from whom? Hospital?
Want higher fees from consumers, health insurers, and the government, along with lower liability and reduced malpractice insurance costs and awards.
Who wants what from whom? Doctors?
Want higher fees from consumers, insurers, and the government. They also want less interference in treating patients, and lower liability and malpractice insurance costs.
Who wants what from whom? Pharmaceutical companies?
Want to protect their patents on high priced drugs. They also want to preserve their current right to NOT negotiate with the government the price of drugs for medicare. Other want to produce and sell low cost generic drugs without having to spend money on research and development. Both want to maximize profits.
Who wants what from whom? Government?
Wants everyone to have good healthcare, but it does not have an unlimited budget or the desire to raise taxes. It already pays for most of Medicare and Medicaid and is facing enormous overall budget deficits.
Foreclosure
When a bank or other secured lender legally repossesses a house after the owner has failed to comply with the loan agreement. The lender can then sell the property and keep the proceeds to apply toward its loan and its legal costs and to satisfy liens on the property such as overdue property taxes. They will then distribute anything that might be left to the borrower.
Dual agency
When a broker or salesperson represents both parties (buyer and seller) in a transaction, AND all management level licensees at a brokerage. It is illegal unless it is properly disclosed to both buyer and seller.
Private Mortgage Insurance (PMI)
When buying a house, if your down payment is less than 20% of the purchase price, the lender may charge a higher rate of interest and require you to purchase private mortgage insurance.
When do you make your profits when buying a property?
When buying it, not when selling it.
Are the stock free or taxable?
When granted, the options are free and there is no taxable event as long as the options are not excercised (converted to stock).
What is a contact that is breached?
When one party does not adhere to the terms and conditions of the contract.
Can you have assets separated from being you spouses?
Yes, separately pwned property may be retained after marriage by the spouse who own the property. Individual inheritance and gifts may also be retained as separate property as long as they have not been co-mingled.
Are the benefits received from employer paid policies tax income?
Yes, they are subject to ordinary tax. If you pay the premium, the disability benefits are not taxed.
Are the prices for options negotiable?
Yes, they too have a MSRP and an invoice price
If the shares decline in price after the option has been exercised do you still have to pay taxes?
Yes, they would still owed the taxes on income created when they exercised the option in the first place.
Are IRAs protected from bankruptcy? If yes, up to what amount?
Yes, up to $1.3 million.
Identity theft
When someone gets hold of your personal information (Social security number, password, credit card number, phone number, address, bank account number)
How can compounding work against you?
When you borrow money instead of saving it, creditors calculate the compound interest more frequently on the money you borrow, rather than using the states or simple rate of interest, the cost you increase. -The more frequently the compounding takes place, the higher the effective rate of interest -Credit card balance is calculated daily because lenders earn more on its loan
What is when a stock grant is restricted?
When you have not qualified by length of service or meeting profitability goals, or your employment is terminated, it means the shares ar e not yours and you cannot take them with you.
What are some factors that influence the payment of a workman's compensation insurance?
Whether or not the accident or illness was work related, whether is is temporary or permanent, and whether it is total or partial.
Are HSA tax sheltered accounts for medical bills?
Yes. Plans may be set up through your employer or purchased individually with a qualified trustee such as a bank, investment firm, insurance company or Healthcare Exchange Plan. They must be used in conjunction with high deductible health plans.
Selling Short
You are hoping the price of the shares will decline. -It can lead to unexpected losses caused by electronic malfunctions or the unexpected volatility in a stock's price
How many free copies of your credit report can you get from the three major bureaus?
You can get 1 copy from each of the three major bureaus. Recommended to get 1 per 4 months.
Wash Sale Rule
You can not declare a loss on a security if you purchase the identical security within 30 days before or after the sale. Not a tax deductible loss.
Negative Amortization Loan
With a negative amortization loan the homeowner sends in monthly payments, but instead of the loan decreasing, the loan amount is actually increasing. Even when you pay, the amount you owe will still go up because you are not paying enough to cover the interest.
Can private loans be available for consolidation or refinancing?
Yes
Is there a tax break to employees who are saving primarily for retirement in a 401(k)?
Yes
Are off premises belongings covered worldwide?
Yes -It usually limited to a 10% of the amount of insurance you have for your possessions -it may even include up to $500 of coverage for unauthorized use of your credit cards, -It may also include baggage lost by an airline to the extent that it is not covered by the carrier
If you have whole life insurance, can you borrow your policy's accumulated cash value from the savings component?
Yes, but in some instances, you may need to pay interest.
Is interest on US government bond exempt from taxes?
Yes, but only from state and local taxes, but not from federal income taxes.
Is Part A of Medicare free for seniors?
Yes, but there are deductibles
Is there a surtax for medicare for high-income earners? And who pays the surtax.
Yes, for Part A an additional 0.9%on income above $200,000 and a 3.8% surtax to the investment income in part B. Only the employee pays for it, not the employers.
Is it possible for your employer to withhold more or less money than what is required for federal income taxes?
Yes, if the employer withholds more you might get a refund at the end, but if the employer withholds less than you might have to pay.
Can a contract be oral?
Yes, it can be written or oral, but have witnesses and documents with dated notes if done orally. Contracts such as home loans or insurance policies must be in writing.
Should you buy insurance if you travel a lot?
Yes, purchase a no owner collision and liability policy. ($300 per year)
What happens if your capital losses are greater than that of your gains?
You can reduce taxable ordinary income up to $3,000 per year, any remaining losses beyond $3,000 can be carried forward to offset future years capital gains and/or ordinary income until the loss is exhausted.
What is unsecured line of credit?
You do not have to provide any collateral for the money you borrow.
What happens if you leave your jobs or you no longer qualify for insurance and your insurance is thru your employer?
You may have to pay substantially more for individual health insurance
What happens if your income exceeds the limits to what you can contribute in an IRA?
You may still contribute to a separate taxable IRA, but you would not be able to take a tax deduction for the excess contribution, and the money would be better used elsewhere, such as an emergency fund, or to pay down a high interest loan, or invested in a personal investment account.
How to establish good credit?
You need to borrow money and pay it back on time according to its terms
What does The Rule of Fred mean?
You should always save before you spend because if you just spent it, the money is just between your employer and the merchant.
What happens if your payment is 22 to 37 days late?
You will be mailed a notice for collection
What happens if your payment is one day late?
You will lose any discount for paying on time
Why should you not buy a mutual fund share in December until after the year-end distribution for capital gains?
You would be require to pay taxes on the distribution and also because the cash distribution lower the NAV of the shares
What happens if you want to refinance your home, but your contract has a prepayment penalty?
You would have to pay the penalty because you are lowering the interests that the lender would otherwise earn.
Who are the three parties that contribute to your 401(k)?
You, your employer, and Uncle Sam
Life cycle funds
Younger people owning more stocks in their portfolio than bonds, and for older people owning more bonds than stocks. The ratio will adjust toward bonds as the investor ages, the goal being to provide more security and income later in life.
What does liability coverage does not cover?
Your car, property, or injuries
Why should you always contact your bank of your credit card is stolen?
Your credit card loss is limited to $50 if you contact issuer within 2 days, beyond 2 days you may be liable for $500, and after 60 days liable for full amount
Is your credit score part of your credit report?
Your credit score is not part of your credit report
What happens if your payment is 60 days late?
Your delinquency is reported to the major credit bureaus.
Why should you not borrow from 401(k) accounts?
Your repayments are not tax deductible. They are made with after-tax dollars and after other payroll deductions have been made. Worse, when you retire and take withdrawals, you will pay tax again on the same dollars.
Under current law, if you are married, the beneficiary of a 401(k)plan is
Your spouse
Card Act: Over draft fees as high as $39 are...
added to your balance. You will end up PAYING INTEREST ON THE INTEREST AND FEES.
Card Act: Credit cards cannot be issued to anyone under ....
age 21 unless applicant has a responsible cosigner, responsible to repay the debt
A 401(k) plan can only be established by:
an employer
401 (k)
an employer-sponsored retirement plan in which the employee, and usually the employer, make payments into a fund that the employee manages. It is a defined contribution plan as opposed to a defined benefit pension plan.
The lender may get a physical ______ of the property or just rely on online sites or drones. The lender must also give you an ________ ________ __ ____ ______ once you complete the loan application.
appraisal, itemized estimate of closing costs
Solo 401(k) plans
available for sole proprietor who has no employees, except possibly a spouse, and allows proprietor to save both as an employee and employer.
Card Act: Credit-limit increases for those under 21 must be subject to the ...
co-signer's permission. For along as the cosigner is on the account, the cosigner will be jointly responsible for repayment even after age 21.
Cost is a key factor, but the _________, ______ and ______ of care
cost is a key factor, but the quality, access and continuity of care are also very important
Uninsured motorist
covers you and your family members who live with you if hurt by an uninsured driver while in your car, walking or bicycling or are injured by a hit-and-run driver but the other driver must be at fault -other passangers are also covered -covers only bodily injury -for it to apply, the other driver must be at fault
Information in your _______ determine your ________
credit report, credit score
If you inherit an IRA or Roth IRA: a. Assume all withdrawals are tax free b.Assume all withdrawals are penalty free c.Combine the account with your personal account within 60 days d.Check current rules with a professional before touching the money
d.Check current rules with a professional before touching the money
When interest rise, bonds which were previously issued
decline in value.
A 401(k) Plan is a
defined contribution plan
Operating profits
derived from renting property at taxable but mortgage interest and depreciation are recorded as expenses and have the benefit of reducing those profits
Joint responsibility
everything you or your spouse accumulate during the marriage in a community property state is a community property -earnings -debts
Federal Reserve Rules: Your credit card company cannot charge you more than one...
fee for a SINGLE TRANSACTION OR EVENT that violates your cardholder agreement
Mortgage REITs
finance property
Bonds are _____ income securities
fixed
The _____ the costs basis, the lower your taxable profit will be upon sale.
higher
If you borrow money, you should know in advance...
how you're going to pay it back
Joint ownership with rights of Survival
if one dies the other automatically inherits the property
A cost of living increase
in benefits may be available to keep up with inflation.
Second Lien
include second mortgages, home equity loans and home equity lines of credit whose holders must approve any transaction to sell a house for less than the amount owned on it, a short sale, since they will be taking losses
Owners or landlords declare rent as ______ and deduct all the _______ _______ ______ such as repairs, maintenance, utilities, insurance, interest, and property taxes.
income, allowable operating expenses
When interest rates decline, previously issued bonds
increase in value.
Jumbo Loan
larger loans which do not conform to the size maximum set by Fannie and Freddie so they aren't eligible for purchase by government agencies in the secondary market so they have higher interest rates and larger down payments
When signing a rental or lease agreement remember it is a ______ ______.
legal document
How much does the bottom 50% pay in income taxes?
less than 3%
Ideas are free
let your mind soar. Look around. Be alert. Think, dream, create, and innovate.
The longer the term, the _____ the monthly payments, but the _____ in interest over time.
lower, more you will pay
What is the MSRP?
manufacturer's suggested retail price or manufacturer shocking retail price -what appears on the sticker in the car's window
Automobile rental insurance
many companies xtend your coverage to rental cars when not used for business
Card Act: An UNUSED CREDIT HOLD...
may not create an overdraft charge unless the hold is executed
Hybrid REITs
may own and finance property
Leases include a _____ _____ usually ____ to ____.
mileage allowance, 10,000 to 15,000 miles per year.
homepreneurs
millionaires who work for a large organization but also have a "second" business operating from their home which may account for 50% or more of their household income
Card Act: promotional rate periods...
must be for a minimum of 6 months
Card Act: After one year or the introductory rate expires, the card holder...
must be notified 45 days in advance of any rate change, and after that, the issuer MUST REVIEW ACCOUNT EVERY SIX MONTHS to determine if rate increase
Renting or leasing an apartment is a ___________.
negotiation
Earning per Share (EPS)
net income - preferred dividends / average outstanding common shares
Can you deduct taxes on alimony? Is the income the person receives it taxable income.
no and no
The best deal is to buy or re-lease a car ...
owned and previously leased by the manufacturer with a certified warranty.
Can you convert a traditional IRA into a Roth IRA?
pay the tax due on the withdrawal from the traditional IRA at your ordinary tax rate and then subsequent withdrawals from Roth IRA will not be taxed -money withdrawal can be tax free if held in the account for at least 5 years
Capital Improvements
permanent structural improvements which either increase the property's value or useful life -enlarging the property -raplacing major component -adding new addition -physical expanding -increasing its strength
Landlord can not discriminate on the basis of
race, religion, sex, gender, age, disability, or sexual orientation
401(k) plans are often used to ______ defined benefit pension plans.
replace
_____ tax is included in each monthly payment over the term of the lease.
sales
Card Act: The payment date should be the...
same day each month
Today's families seem to be functioning under more...
stress over money
Card Act: Issuers are not allowed to solicit ...
student on or "near" campuses and offer gifts or incentives for completing and application for credit
Card Act: OVERDRAFT FEES may not be charged unless...
the cardholder agrees to allow them
maturity date
the exact date the issuer of a bond must pay the principal to the bondholder
"Go-To" rate
the interest rate you are charged on unpaid balances in addition to the variable interest rate to determine the total rate of interest on your account.
Card Act: If you are more than 60 days LATE IN MAKING THE MINIMUM PAYMENT ...
the issuer may charge you the interest default rate (28% - 35%). If you make your payments on time for 6 consecutive months, the original rate must be restored.
Card Act: If you are notified 45 days in advance of a significant change in terms ...
the issuer must give you a chance to close the accounts and pay off the balance at the old interest rates.
You are financing the difference between the market value of the car at the time of the lease, and ...
the residual value of the car at the end of the lease term, adjusted for the downpayment, a mileage allowance, trade in, and sales tax
Debt
the state of owning something such as money
leverage
the use of borrowed money to supplement existing funds for purposes of investment. Created by the use of borrowed funds to buy a house because you would be increasing your equity if the market value of your house increases, but if the values decreases, your equity will decrease.
Card Act: When a new account is opened...
there can be no interest rates increase for the first 12 months unless an INTRODUCTORY RATE has come to an end, or you are more than 60 days late with a payment, or you are on a variable interest rate tied to an index
What is your go-to rate based on?
your credit history
Card Act: payments in excess of the minimum must be first applied...
to the balance with HIGHEST INTEREST RATE
Credit card theft
when credit card is missing or stolen
When a loss occurs, it is too late to change the ______ of the _______.
wording, policy
Mortgage Calculator website
www.bankrate.com
Website to best keep up to date about student loans?
www.studentaid.ed.gov, but best way is to contact the Student Aid Department at your institution
Are tax deductions for education available?
yes, student loan interest is a tax deductible and you may be able to take the deduction even if you do not itemize. -there is a phaseout for a single person at $65,000 - $80,000 AGI
Roth 401(k) plan
you make contributions with after-tax dollars, and qualified distributions at retirement are received income-tax free -no taxes are due on the withdrawals -Employer may only contribute to your regular 401(k) if you have both Roth 401(k) and regular 401(k) -Max is $18,500 or $24,500 if above the age 50
True/False: If legally married, same sex couples are considered by the Federal government and IRS to have the same right as heterosexual couples, regardless of where they are living.
True
True/False: Property owned prior to the wedding may be retained as separate property
True
True/False: When mailing, payment must be RECEIVED, not postmarked by due date
True
True/False: Inheritance and gifts may be separate property if not co-mingled
True if the person getting the inheritance don't put it in a joint account
child support
A payment made by a parent after separation or divorce to a custodial parent or guardian for the care and support of a child
Grace Period
A period in the billing cycle during which no penalty is due as long as payment is received on time by the lender
Debtor(or borrower)
A person or entity with debt which owes or has the obligation to repay the debt
Certified Check
A personal check that the bank guarantees as being supported by funds in your account + a service fee.
Deferred Interesp Plan
A plan that enables a consumer to purchase big-ticket items paying no interest or a low "teaser" rate of interest over a promotional period. (ex:cars, mattresses, furniture, appliances, and electronic devices)
What percent do credit cards charge for using an ATM to get cash?
-a fee of 3% to 4%
What is usually the minimum payment on a credit card required each month to avoid a penalty?
2.5% to 3% of the outstanding balance, but it can also be 5%
What are the 7 possible fees for prepaid cards?
-Activation fees of up to $39.95 -Inactivity fees -Fees to load money onto the card -Fees if you do not load any money, or at least minimum amount each month -Fees to check balance information -Fees to use an ATM for cash -Fees for using a check to close an account
What fees can credit card companies charge you?
-Annual membership fees including extra fees for 'status' cards -Fees using another bank's account automated teller machine (ATM), up to 5% per transaction with a minimum charge.
Bad debt
-Borrowing money to support a lifestyle beyond one's means -Shopping to feel good on a bad day -Borrowing more than you can repay -Shopping to kill time -Keeping up with, or ahead of, your peers It is sheer consumption, that in some cases you may still have the debt to repay along after you purchase is eaten, worn out, out of style, or just a fading memory
How are millionaires like?
-Tend to make accurate judgments about people -Tend to be honest with everyone -Try to get along with people -80% are married and recognize the importance of having a supportive spouse or life partner -They take great satisfaction in helping people -Willing to play for higher stakes to realize their goals -Do not follow the crowd -Learn from their mistakes and never give up -They are attracted to innovation
Why do couples don't talk about money?
-Too personal or revealing for some -A way to brag or show off for others
When the divorce date start and community property ends?
-When you get a court order that your spouse is divorcing you -when spouse tells the partner they are filling for divorce
Prepaid card
A card that allows you to spend only the amount you have pre-deposited into an account. Offered by banks and nonbank, but not linked to a bank account
Cashier's check
A check purchased by you from a bank, payable to a third party designated by you + a service fee. Since issued by the bank, it is consider a "good" check.
Convenience Checks
A check written from the line of credit associated with a credit card. Credit cards treat convenience checks like cash advances, so they often have very high interest rates.
Charge Card
A credit card is issued by a retailer allowing you to charge purchases made only with their store.
Payday loan
A high interest short term cash loan is intended to be repaid by future paychecks. Its principal is typically a portion of your next paycheck.
Fixed rate of interest
A loan with an interest rate that will remain at predetermined "fixed" rate for the life or term of the loan. It does not fluctuate.
What is an index fund?
A mutual fund that tracks an index
Credit card
An unsecured line of credit, which represents the fact that a bank or other lender is willing to lend you money. The loan is based upon your good faith and your credit history.
What is the APR, and what is the difference to a regular monthly interest rate?
Annual percentage rate, the interest rate for a whole year, instead of monthly. The more often the interested is calculated, the higher the interest becomes.
Rule of 72
Estimate how long it will take for a sum of money to double at a given interest rate, assuming interest is compounded annually
What is a downside of deferred interest plans?
If you are late in your payments or the debt is not paid off by the end of the period, you may be charged interest rate on the entire balance.
What is being frugal?
It means being value-oriented;Living within your means. Working towards your goals, budgeting, and controlling expenses. >not being cheap >not spending freely or unnecessarily
Adjustable rate of interest
Loan where the rate of interest is not fixed, but may change at various specific times (common in home loans)
Is retirement the biggest problem? If not, what it is?
Longevity, people are living longer, while the birthrate is declining.
What are the best investments for most investors?
Low cost index funds
Installment debt
Money that is borrowed to purchase large items such as a car or furniture, paying for them over time.
What is the biggest cause of divorce?
Money, financial stress
Can a credit card lender take money out of your bank account if you don't pay the loan?
No, but an exception is if your credit card is within the same bank as your checking or savings account. They might take the funds out of your account to offset your credit card debt if you are delinquent and just refuse to pay. Since the lender is unsecured, the debt might be difficult to collect even if it turned to a collection agency.
Is child support taxable income or tax deductible?
No, but it can be count as tax credit, if the child is under a certain age
What is credit dependent?
People who are controlled by someone else, some institution, or you are consumed by living beyond your means.
Millionaire
People who are financially able to take care of themselves throughout their adult lives and live the life they wanted to live without help from government programs such as welfare, Medicare, and Social Security.
Pros and cons of a charge card
Pros -store discounts Cons -carry high rates of interests(20%-30%) on unpaid balances -some might not have grace periods, so interest begins on the date of purchase
Gift cards
Store value cards, fees are limited. Loss of a gift card means lost all its value
What do people who succeed have?
Successful people know where they are going, even if they do not know exactly how they will get there. -They learned that one success can outweigh a hundred failures -They look for new ideas and are willing to try new things
Interest
THE COST OF MONEY paid by the borrower to obtain the use of the principal. aka APR(Annual Percentage Rate)
credit
The amount of money a lender is willing to lend subject to repayment and conditions such as interest, fees, and penalties.
Principal
The amount of money borrowed or loaned
What would happen as global population ages and birth rates decline?
The government will need to cut benefits to seniors and raise taxes on younger workers. The economic growth rate tend would slow down.
Why do businesses prefer customers to use a debit card instead of a credit card?
The interchange fees they pay are about 1/3 of the fees for processing credit cards
What can the lender of credit do if you don't pay back the loan according to its terms and conditions?
The lender can then alert other potential lenders, landlords, employers, etc. via your credit report that you are a poor credit risk
Where do rich people come from?
They come from poor people because what matters is where you finish
When is the best time to establish credit?
When you don't need it
Can your credit score get lower if you get a charge card, but cancel after getting the discount?
Yes
variable rate of interest
an interest rate that moves up and down based upon a benchmark interest rate which is not controlled by the lender
Banks will calculate your interest rate on a _______ basis.
daily
The burden of saving and investing for retirement and health care is shifting ever more from the ...
employer to employee
Interchange fees
fees paid by stores to credit companies to process credit card payments.
