Personal Finance Final Exam – Flashcards
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values
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beliefs and principles that a person considers important, correct, and desirable
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future value
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the amount that your original deposit will be worth in the future based on a specific interest rate over a specific period of time
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liquidity
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ability to easily convert financial resources into cash without loss of value
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time value of money
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increase in an amount of money as a result of interest or dividends earned
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demand
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amount of goods and services people are willing to buy
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personal financial planning
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the way you spend, save, and invest your money to have the kind of life you want as well as financial security
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principal
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amount of money deposited and on which interest is paid
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economics
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study of the decisions that go into making, distributing, and using goods and services
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inflation
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general rise in the level of prices for goods and services over time
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present value
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amount of money you need to deposit now to attain a desired amount in the future
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long-term goals
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Financial plans that are more than five years off are called ________________.
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opportunity cost
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The trade-off made by making one choice instead of another is commonly referred to as a(n) _______________.
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short-term goals
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Saving for vacation next summer or paying off small debts are examples of ______________.
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personal financial planning
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Spending, saving, and investing to have the kind of life you want and financial security can be achieved by _______________.
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the reason you want a particular job
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A cover letter gives a potential employer ______________.
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retirement plan funded in part by employers
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A pension plan is a ______________.
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Résumé
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a one- or two-page summary of your education, training, experience, and qualifications
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Potential earning power
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the amount of money you may earn over time
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standard of living
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a measure of the quality of life based on the amounts and kinds of goods and services a person can buy
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networking
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a way of making and using contacts to get job information and advice
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career
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a commitment to work in a field that you find interesting and fulfilling
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down payment
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a portion of the total cost of an item that must be paid at the time of purchase
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fraud
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dishonest business practices that is meant to deceive, trick, or gain an unfair advantage
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mediation
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the attempt by a neutral third party to resolve a conflict between a customer and a business through discussion and negotiation
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arbitration
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the process in which a conflict between a customer and a business is resolved by an impartial third party whose decision is legally binding
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class-action suit
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a legal action on behalf of all the people who have suffered the same injustice
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setting financial goals
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The first step in planning a budget is _______________.
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inaccessibility
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A good budget has all the following characteristics EXCEPT _________________.
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automobiles
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Products often purchased using price negotiation are _______________.
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quantity and quality are basically the same
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The lowest price is generally the wisest choice when ________________.
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impulse buying
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When shopping, avoid ______________.
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personal financial statements
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documents that provide information about your current financial position and present a summary of your income and spending
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net worth
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the difference between the amount you own and the debts you owe
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liquid assets
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cash and items that can be quickly converted to cash
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market value
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the price at which a property could be sold
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safe-deposit box
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a small, secure storage compartment that can be rented in a bank
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liabilities
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the debts that you owe
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certificate of deposit (CD)
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a savings alternative in which money is left on deposit for a stated amount of time to earn a specific rate of return
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surplus
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extra money that can be spent or saved
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annual percentage yield
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the percentage of increase in the value of savings from earned interest
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debit card
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a card issued by a financial institution that allows you to withdraw money from your account or pay for purchases by deducting funds directly from your account
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certificate of deposit
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What financial services is best suited for saving money over a period of years?
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borrow money for a short term
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Credit cards allow you to ______________.
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$106.18
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If you deposit $100 in an account with an annual interest rate of 6 percent compounded monthly, after 12 months you will have ____.
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comparing checks in the check record with those on the statement
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The first step in balancing a checkbook is ___________________________________.
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a credit card charge
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An example of open-end credit is a(n) ____________.
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Notify the creditor in writing.
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How should a cardholder begin to correct a mistake on a credit card bill?
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capital
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Which of the "five Cs of credit" require that a person's assets exceed his or her liabilities?
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policy
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A person joins an insurance company by purchasing a contract called _____.
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risk
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In insurance, anything that may possibly cause a loss is known as a ______.
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shifting
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Buying an insurance policy is an example of risk ______.
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depreciation
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Which term refers to loss in value as an item gets older?
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damage to the vehicle of the insured person no matter who is at fault
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Collision insurance covers ______________.
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receives several traffic tickets
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A driver's insurance premium will increase if he or she _______.
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documentation of personal belongings
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A household inventory is ________.
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Job
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A type of employment with a short term intentions and money as an end goal.
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Career
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A long term form of employment with the fulfillment of life long goals as a motivation
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Wages
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Hourly pay in exchange for labor
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Salary
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Weekly-monthly pay typically for someone in a career setting
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Degree
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A certification from a university or college in a specific field of study
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High School Diploma
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Certification of completion of high school- typically makes half of what a degree earner makes over time
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Associate's Degree
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Certification from a college or university that typically takes 2 years to earn
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Bachelor's Degree
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Certification from a college or university that typically takes 4 years to earn
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Master's Degree
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Certification that follows a Bachelor's and requires 2-7 years to complete
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Doctorate
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Highest degree that one can obtain that may require up to 10 years of study
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Grace Period
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Time period allowed for one to obtain employment following college graduation before one must begin repaying student loans
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Organized Financial Documents
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The first step in successful money management
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Budget
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A term used to describe a plan for spending and investing
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Needs
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Food, water, and shelter
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Wants
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Items or experience that are considered luxury and not necessarily mandatory for survival
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Fixed expenses
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Expenses that cost one the same amount each month
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Variable expenses
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Expenses that change month to month
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Gross Pay
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The total amount of money given to an individual by an employer before anything is deducted
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Net Pay
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The total amount of take home pay one is given after deductions are taken out
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Income Tax
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Taxes that are required to be taken out of a person's gross pay
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SMART goal
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Specific Measurable Attainable Realistic and Time Sensitive
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Deductions
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Anything from income tax, medicare, social security, insurance, and a retirement fund that is taken out of someone's paycheck
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Potential Earning Power
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The amount of money and opportunities that could be given to a person over a period of time in a specific career
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Direct Deposit
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Payment that is automatically placed in a person's bank account by their employer (no physical check)
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Cost of Living
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A variable that changes city to city depending on the cost of everyday items
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Cafeteria Style Benefits
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Benefits options that let an employee only take what they want or need
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401(k)
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Retirement plan for a private sector employee
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403(b)
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Retirement plan for a public sector employee
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Educational reimbursement
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Payment given to an employee in order for them to obtain a higher level of education
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Inflation
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Phenomenon that takes place every year and causes money to be worth less over time
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IRS
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Internal Revenue Service
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W-4
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Tax withholding paper work that is filled out at the beginning of a job
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W-2
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Tax and payment information sheet that must be given to em employee by January 31st
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1099
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Tax form that is given to employees that work on project based employment
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1040EZ
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A simplified tax form that citizens can file if they make under $100,000 and have no dependents
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FDIC
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Federal Deposit Insurance Corporation
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$250,000
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Amount of money that the FDIC insures
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Checking Account
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A bank account that can be accessed an unlimited number of times
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Debit Card
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Payment card that is linked with a checking account
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Automatic Draft Payment
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A bill that is automatically deducted from one's banking account every month
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Post-Date
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A check that is written for a future date- a form of check fraud
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Bounce a Check
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The practice of overdrafting a checking account
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Saving
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Putting money away over time in order to afford a tangible item or an experience
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Investing
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Putting money into business ventures with more money being the end goal
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Emergency Fund
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The minimum amount of savings that one should have put away in case unexpected emergencies arise
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Savings Account
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A bank account that can only be accessed a few times a month without penalty
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Credit Union
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A financial institution designed to serve its members and therefore provides the lowest interest rates to lenders
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Commercial Bank
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Financial institution that provides basic checking and savings accounts to its members
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Certificate of Deposit
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A savings account with a certificate that cannot be accessed for a certain number of years and has an average 1% return on investment
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Money Market Account
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A savings account and an investment with a higher return rate and the ability to withdraw money if necessary a very limited number of times
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Future Value
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The amount a given investment will be worth on a certain date after a certain amount of time
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Simple Interest
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Interest on a loan that only affects the principle amount
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Compound Interest
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Interest on a loan and interest that has accrued over time
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Rule of 72
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Rule stating that if you divide the interest rate for an investment by 72 then you will get how many years it will take the investment to double
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IRA
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Individual Retirement Arrangement
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Stock
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Shared ownership in a company
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Bonds
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Money lent to a company in the form of an investment
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Annuities
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Insurance policies that allow the policy holder to receive a fixed income after retirement until their death
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Credit Card
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A form of payment that reflects money owed to a financial institution
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Credit
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Money lent to a person for many small purchases or one large purchase
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Finance Charges
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Additional charges such as interest applied to a lender who is receiving money from a financial institution
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Convenience User
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A credit card user who avoids finance charges by paying their entire amount off each month
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Credit Score
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A rating between 300-850 that reflects how reliable a person is as a lender
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The 3 Credit Bureaus
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Equifax, Experian, Transunion- One free one per year
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20-30% Down Payment
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The proper amount of a value for a house that should be put down before financing
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Home Equity Loan
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A type of loan that can be taken out against the value of payments that have been made of one one's home. The home is used as collateral.
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Payday Lenders
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Predatory lenders that often charge very high interest rates
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Debt Consolidation
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Combining all debts into one to make for easier monthly payments
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Liability Auto Insurance
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The minimum insurance required by law in order to drive
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Bankruptcy
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A legal status showing that one cannot afford to pay off debts- does not forgive student loans
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Beneficiary
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The person who receives benefits once a life insurance policy pays out
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Transfer Risk
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The main purpose of insurance
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EPA
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Environmental Protection Agency- Agency responsible for the safety and health of the American people and the environment
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FCRA
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Fair Credit Reporting Act- Make its so that all information in ones credit report is accurate
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ECOP
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Equal Credit Opportunity Act- Makes it illegal discriminate access to credit based off of race, gender, marital status, disability level, etc.
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Liquid Asset
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Assets such as a saving account, checking account, or cash that can be easily spent if necessary
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Net Worth
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The value of all a person's assets that can be raised by adding assets or paying off debts.
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Win-Win
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Situation that should be created during any negotiation
