Personal Finance Study Guide Final Exam

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Financial Institution
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is a process of setting goals, developing a plan to achieve them, and putting the paln into action.
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Debit card
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A card, issued by a financial institution, that allows people to withdraw money or to pay for purchases from their checking or savings accounts. In addition, the card allows access to an automatic teller machine for other purposes; also known as a cash card.
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Credit card
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Some types of cards can be used just about anywhere, some only at a specific place. no payoff deadline. monthly minimum payments vary, based on the balance. usually has the highest rate of these four types of credit.
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Interest
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is the amount you pay to use someone else’s money.
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Three variables that affect saving
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saving account, checking account, and trust fund
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Credit
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someone is willing to loan you money.
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Taxes
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Federal Income Taxes, the fee to support federal programs; State Income Taxes, the fee to support state programs;
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Social Security
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helps pay for disabled, elderly, and orphaned minors.
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Deductions
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taxes on your money
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Gross annual income
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the money you earn before deductions
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Net annual income
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the money you have after deductions
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Gross monthly income
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the money you earn before deductions
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Net monthly income
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the money you have after deductions
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Budget
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it is a plan for managing money for a given period of time.
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Fixed expenses
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the same amount every time
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Variable expenses
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can change
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Wants
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Things that are not necessary for survival
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Needs
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Things that are essential to life
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Short Term
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is a short term goal or payment. (1) year
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Long Term
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is the length of time you have to pay off the loan. (3 to 5) Years
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Intermediate Term
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is a mid term goal or payment. (1 to 3) Years
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Income
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the money you receive,
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W-2 Form
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keep copies of all teh forms you receive , as well as tax documents for any checking, savings, and investment accounts.
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W-4 Form
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for you fill out when you start your job. you have some control over how much taxes you have to pay. the lower number of allowances the higher the taxes. you can change this form when ever you want.
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P.Y.F. (Pay Yourself First)
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Pay Yourself First. helps to meet a long term financal goal.
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Payroll Deductions
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a list of employees and the payments due to each employee for a specific period of time.
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Time value of money
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long time means more interest. short means less money.
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Compounding
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the process in which interest is earned on both the principal-the amount that was deposited-and any previously earned interest.
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Diversification
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the preocess of spreading one’s assets amoung several different types of investments to lessen risk.
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Investments
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The ability to buy or sell an investment quickly without substantially affecting its value.
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Rate of return
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The percentage of increase in the value of your savings from earned interest.
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Rule of 72
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Mathematicians say that you can see how long it will take you to double your money simply by dividing 72 by the interest rate.
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Stock
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a process in which the shares of stock owned by existing stockholders are divided into a larger number of shares.
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Savings account
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holds money and adds interest to your money.
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Fair Debt Collection Act
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Its purposes are to eliminate abusive practices in the collection of consumer debts, to promote fair debt collection and to provide consumers with an avenue for disputing and obtaining validation of debt information in order to ensure the information’s accuracy.
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Truth In Lending Act
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designed to protect consumers in credit transactions, by requiring clear disclosure of key terms of the lending arrangement and all costs.
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Credit rating
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is a number that reflects your creditworthiness.
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Identity Theft
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occurs when someone uses your name. Social Security number, credit card number, or other personal information without your permission. It is a very serious crime.
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Online Banking
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means you can view your savings and checking account activity, transfer money between accounts, and even pay bills with just a few clicks of the mouse.
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Types of insurance
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in law and economics, is a form of risk management primarily used to hedge against the risk of a contingent loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for a premium, and can be thought of a guaranteed small loss to prevent a large, possibly devastating loss.
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Claim
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Request for payment from an insurance company to cover a financial loss
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Conditions
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terms to agree to in order
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Coverage limit
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the maximum amount an insurance company will pay if you file a claim.
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Insurance Policy
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protection against possible financial loss
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Premium
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a fee paid by a policy holder to an insurer
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Risk
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the chance of loss or injury
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Assets
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Any items of value that people own, including cash, property, personal possessions, and investments.
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Entrepreneur
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an individual who follows his or her dreams by assuming the risk of starting a new business.
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Annual Fee
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is a yearly charge you pay the privilege of using credit.

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