Personal Finance Final Exam Study Guide Pt. 1 – Flashcards
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Employment
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An agreement between an employer and an employee. Employer hires a person in exchange for compensation (wages/salary). An employee agrees to provide certain services at a job for an employer.
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Salary
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Fixed amount of money or compensation paid to an employee by an employer in returned for work performed. Not dependent on specific number of hours worked. Salary at fixed intervals. EX- weekly, bi-weekly, monthly, bi-monthly
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Hourly Wage
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Earn a specific rate for every hour worked.
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Commission
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A fee that a salesperson receives upon completion of a sale.
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Paper Paycheck
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Method of payment- access funds by cashing or depositing a check.
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Direct Deposit
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Method of payment- wages deposited directly into depository institution account
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Payroll Card
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Method of payment- wages electronically loaded each payday onto a plastic card kind of like a debit card.
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Payroll Deductions
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Gross Income-Deductions = Net Income
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Income Tax
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Tax on earned and unearned income; higher income=more tax paid
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Payroll tax
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Tax on earned income (only) that supports social security and medicare programs
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W-4 Form
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A form completed by an employee to indicate their tax situation (exemptions, martial status, how many dependents they have, etc) to the employer. It tells the employer the correct amount of tax to withhold from their paycheck.
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Employee Benefits
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Products/services that add extra value for employees beyond wages earned. EX: Workers' compensation, unemployment insurance, etc
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Workers' Compensation
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Helps pay medical expenses if injured on the job.
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Unemployment Insurance
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If you lose your job due to no fault of your own you can file for this. It provides income while seeking new employment. (Govt. Program)
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Pay Stub
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Outlines the deductions made to wages
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Job
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An activity through which an individual can earn money. Most have several throughout their lifetime.
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Career
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An occupation or profession requiring special training- lifetime journey of building and applying skills, knowledge, and experiences in paid employment positions.
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Human Capital
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Skills, knowledge, and experiences possessed by an individual. The result of investing in yourself.
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Transferable Skills
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Versatile skills that are applied to both personal and professional roles. (Listening, problem solving, etc;)
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Occupation
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Grouping of jobs that perform similar tasks
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Industry
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Group of establishments that produce similar products or provide similar services.
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Career Cluster
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Grouping of occupations and industries based on the knowledge and skills required- helps students prepare for employment.
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Cost of living
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Average cost of basic necessities of life
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Social Capital
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Access a person has to social relationships that can provide resources (a benefit of being in a community)
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In-Kind Income
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The provision of a product or service instead of money (a place to live for free, a ride if car breaks down, etc)
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Non-Profit Organization
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Organization that exists to benefit others through human service, conservation, religious, or other charitable purposes. (Ex girl/boy scouts, salvation army, etc)
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Government Programs
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Programs/activities sponsored or administered by local, state, or national governments.
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SNAP- Supplemental Nutrition Assistance program
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Designed for Low income families, funded by federal gov, purpose is to provide money to purchase nutritious food.
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TANF- Temporary Assistance to Needy Families
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Designed for low income families with children. Temporary program that provides money, job training, and other support to help achieve self-sufficiency.
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Medicare
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Helps pay for health care for seniors 65+
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Medicaid
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Provides insurance, especially medical care for low-income children, pregnant women, people with disabilities, elderly needing nursing home care, etc.
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Earned Income Tax Credit
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Designed for low and moderate income adults who have worked for pay- provides money to adults who file a tax return.
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Overdraft Fee
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If you withdraw more money from your account than is available you pay this.
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ATM Fee
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Charge for using an ATM that belongs to another depository institution.
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Maximum Balance Fee
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Fee charged if you go below minimum balance that can be in account.
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Contactless Payment
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Transaction completed with no physical connection between payment device and point of sale (POS)- wave a card in front of a sensor
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Online banking
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Complete transaction from secured internet site- access account anytime, anywhere online.
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Mobile Banking
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Apps that many depository institutions have developed that allow online banking access for devices like smartphones and tablets.
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Checking Account
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Provides quick access to funds for transactions. Use deposited money any time by writing checks, debit card, withdrawing cash, etc.
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Transaction/Savings tools, credit, safe deposit box, financial advice, special needs payment instruments.
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Services Offered by Depository Institutions
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NCUA (National Credit Union Administration)
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Provides insurance protection for CREDIT UNIONS. Each depository insured against loss up to max of $250,000
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FDIC (Federal Deposit Insurance)
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Govt agency- insures DEPOSITORY INSTITUTIONS that have been elected for their coverage loss. $250,000 per depositor, per insured institution, for each account ownership category.
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Credit Unions
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Depository Institution that is not for profit (owned by members) and all members share a "Common Bond"
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Commercial Bank
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Depository Institution that is for profit and open to anyone. Largest depository institution.
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Depository Institution
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Businesses that provide financial services. There are two types- commercial banks and credit unions.
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Gross Income
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Money Earned before tax deductions
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Net income
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Money left after deductions
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Liability
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Debt/Obligations owed to others- loans (mortgage, automobile, student, etc) and balances on credit card/$ owed to others
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Investment Assets
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Financial Assets purchased with the hope that they will appreciate in value and generate income to sell at a higher price in the future.
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Tangible Assets
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Personal property items (home, car, electronics, furniture, etc)
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Monetary Asset
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Quickly/easily converted to cash ($ in checking and savings accounts)
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Assets
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Items of monetary value that a person owns. 3 Categories- monetary, tangible, investment
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Statement of Financial Position
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Describes an individual/family's condition on specific date by showing assets, liabilities, and net worth. Shows what your financial position is today.
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Net Worth
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Measure of financial wealth. Assets- Liabilities= net worth
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Spending Plan
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Plan for future- allocate $ to each category- plan for how much to spend in next month. Helps you figure out what your future money management plan will be.
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Income and Expense Statement
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Lists/summarizes income/expense transactions in specific amount of time (usually 1 month or 1 year). Shows how you managed money in the past.
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SMART Goals
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Specific, measurable, attainable, realistic, and time bound- helps you create all parts of a goal.
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Financial Planning
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Managing $ continuously through life in order to reach financial goals.
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Financial Goals
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Specific objectives that are accomplished through financial planning. Help guide short/long term spending decisions.
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5 Well-Being Domains
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Physical Intellectual Social Emotional Financial
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Opportunity Cost
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The value of the next best alternative that must be forgone as a result of a decision... loss of potential gain from other alternatives when one alternative is chosen.
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Trade-Off
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Giving up one thing for another
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Wants
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Desire for goods and services that can increases quality of life but are not absolutely necessary for survival
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Needs
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Goods/Services required for survival
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Value
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Something desirable/important to an individual
