89 terms

GFL State Exam Review

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short term goal
The end result of something you intend to acquire or accomplish within 6 months.
long-term goal
The end result of something you intend to acquire or accomplish that will take longer than 6 months to achieve.
smart goal
A goal that is Specific, Measurable, Attainable, Realistic, Time-Bound.
scarcity
People have unlimited wants but resources are limited so they must choose how to allocate scarce resources.
opportunity cost
The value of the next best alternative you don't choose--aka the "missed" opportunity.
delayed gratification
The maturity to put off something mildly fun now in order to wait for something that is greatly rewarding later.
impulse buying
Seeking instant satisfaction when purchasing due to peer pressure and marketing strategies; the opposite of delayed gratification
rational decision-making process
Identify the problem
Gather information
List possible alternatives
Consider the consequences of each alternative
Select the best course of action
Evaluate the results
financial Plan
Goals, Net Worth Statement, Spending Plan, Insurance Plan, Savings Plan, Investment Plan
net worth
What you own (assets) minus what you owe (liabilities)
types of income
Money earned from a job or other sources such as salary, commissions, investments, inheritance or gifts
wages
A fixed amount of money paid to an employee for each pay period
inheritance
Property passing to the owner's heirs at his/her death
benefits
Non-cash compensation an employer offers in addition to wages such as insurance, paid leave, profit sharing, employer contributions to a retirement account, pension plan
income factors
Depend on your education and training, the supply of competing workers in your career choice, and demand for your skills
career
Profession or field of employment for which one trains
entrepreneurship/self employment
Taking the initiative and risks to start your own business and become your "own" boss: no guaranteed paycheck, but you control your own profits
taxes
A percentage or income, profits or purchases used to pay for government programs and services to benefit citizens
payroll deductions
Employers must deduct and without required federal and state taxes from employee paychecks
voluntary payroll deductions
Retirement savings--401(k), 403(b), IRA, etc
Union dues
Charitable contributions
gross income
Total amount a worker is paid before any withholding or voluntary deductions are made
net income
Amount remaining after payroll deductions are taken; aka "take home pay"
cost of living
Price of food, transportation, housing and other expenses varies according to location and impacts purchasing power
FICA tax
Social Security taxes provide retirement, disability and survivor benefits to retirees and their dependents
W-4 Form
Employee's Withholding Allowance Certificate which tells your employer how much to withhold for federal income taxes
W-2 Form
Shows all taxable wages you received and all taxes withheld from those wages in a calendar year so you can file y our personal income tax return with the IRS
1040 EZ Form
People with less than $50,000 in income may file their federal income taxes using this form
ROI (Return on Investment)
Formula used to determine if an investment was truly worth the resources you spent

Gain from investment - Cost of investment
divided by Cost of Investment = ROI

Ex. If you invested $40,000 for a BA degree and you take a job with a starting salary of $50,000/year, your ROI is 25%
$50,000 - $40,000 divided by $40,000 = .25
Funding sources for post-high school education
Scholarships, grants, work-study earnings, federal student loans, private student loans
529 Plan
Nonprofit, tax-advantaged college savings plan
FAFSA
Free Application for Federal Student Aid
FAFSA 4caster
Free financial aid calculator that provides an early estimate of federal student aid eligibility
Types of Federal Student Loans
From highest to lowest interest rates:
Plus Loan
Direct Unsubsidized Stafford Loan
Direct Subsidized Stafford Loan
Federal Perkins Loan
resume sections
Objective
Education
Work Experience
Volunteer Experience
Certifications Earned
References
Federal Reserve
aka "The Fed"
central banking system of the U.S. formed to prevent future banking panics as in the Great Depression
Federal Deposit Insurance Corporation
(FDIC)
Provides insurance guaranteeing the safety of accounts up to $250,000
National Credit Union Administration
(NCUA)
Federal agency that regulates and supervises federal credit unions; insures deposits of account holders
Financial Institutions
Banks, credit unions, investment brokerages, insurance companies, loan agencies
Pay Yourself First (PYF)
Automatically contribute to savings first, before you pay your monthly expenses
Savings
Funds set aside later use for short-term goals
preserve principal
low risk (secure), low return, high liquidity
savings accounts
Savings = earns interest on principal (amount saved)
Money market accounts = tiered interest rates depending on account balance
CD (certificates of deposit) =fixed time period/less liquid
emergency fund
Account to set aside fund to used in an emergency such as loss of a job, an illness, or a major expense
liquidity
Cost (how easy is it?) in time and money to convert an account or investment into cash
non-sufficient funds (NSF)
Not enough money in an account to honor a check drawn on that account; aka "bounded check" or "bad check"
Chex-Systems
Shares info on checking and savings accounts among its member institutions to help them assess the risk of opening new accounts
Time Value of Money (TVM)
Money available today is worth more than the same amount in the future if it can earn interest
Rule of 72
Tells you how long it takes your money to double in value:
Divide 72 by the interest rate to determine the number of years it will take to double your money
Divide 72 by the number of years to determine the interest rate needed to double your money
interest
Money (usually a percentage) paid for using someone's money
Interest is paid to you by depository institutions
You pay interest as the cost of money that you borrow
simple interest
Interest paid on the original amount of a loan or on the amount of an account
compound interest
Interest paid both on the principal and on accumulated interest; "interest paid on interest"
investments
Assets purchased for long-term profits
put principles at risk
high risk, high reward, low liquidity
type of investments
From low risk/reward to high risk/reward:
bonds, mutual funds, stocks, real estate, collectibles (speculative)
Retirement accounts
IRA, Roth IRA, 401(k), 403(b)
principal
Amount of money save or invest or borrow;
a percentage of principal is paid in interest
risk/reward
The higher the risk, the great the potential reward; the lower the risk, the lower the potential reward
diversification
Spreading the risk among a wide variety of types of investments in a portfolio
inflation
Rapid rise in prices where money won't buy as much in the future as it will today; your rate of return should be higher than the rate of inflation
deflation
Rapid decrease in prices so that people wait to buy things in the future at lower prices; can cause unemployment
unemployment rate
The percentage of the total workforce that is unemployment but actively seeking employment and willing to work
recession
Scared consumers slow down spending/investing, so production slows down (GDP eclines for two consecutive quarters), so people lose jobs, so consumers are even more scared, so they spend/invest even less in a downward spiral
insurance policy
A contract between a company that guarantees that the owner receives financial protection (the value of property or a specific amount for injury or death) against financial losses
types of insurance
Automobile, health, home owner, renter, life, long-term care, disability
insurance coverage
The risks covered and the amount of money paid for losses under an insurance policy
premium
Money paid to purchase an insurance policy
insurance process
Loss occurs; policyholder makes a claim, insurance company determines if loss is covered; policyholder pays deductible; insured pays required co-insurance; the rest of the loss is paid by the insurance company
deductible
Out-of-pocket money paid by the policyholder before an insurance company will cover the remain costs attributed to the loss
co-insurance
Requires the insured individual to pay a fixed percentage of the loss after the deductible has been paid
beneficiary
The person who receives the insurance money when policy funds are paid
budget (spending plan)
An income and expense statement which records both planned and actual income and expenses over a period of time
variable expense
An expense that varies in amount from week to week or month to month such as food
fixed expense
An expense that remains the same from week to week or month to month such as a mortgage payment
periodic expense
Costs which occur on an irregular basis rather than monthly such as insurance premiums, taxes, auto maintenance costs
charitable contributions
Money given to an organization that benefits society as a whole, such as a non-profit, NGO or church, rather than an individual or shareholders of a company
budgeting tools
Envelop system, paper tracking (check register), online/software programs
comparison shopping
Checking out the prices and characteristics of different brands or models of a product before purchasing a a product or service
credit
Receiving goods or services or money today in exchange for a promise to pay back a definite sum at a future date
5 Cs of Credit
Character = trustworthiness
Capacity = debt to income ratio
Capital = net worth (what you own - what you owe)
Collateral = assets to guarantee repayment
Conditions = economic indicators
collateral
Security promised for the repayment of a loan
types of credit
Open-end (revolving) line of credit established in advance where borrower choose how much to pay = credit cards

Closed (installment) borrower repays a specified number of equal payments= auto payment; mortgage
late fee
A charge for making a required minimum payment on a credit card after the due date
3 major credit bureaus
Equifax
Experian
TransUnion
credit report
Shows derogatory remarks, late fees, missed payments, collection notice, bounced checks
AnnualCreditReport.com
Where you can get one free credit report per year
identify theft
Someone wrongfully acquires and uses a consumer's personal identification, credit or account information without permission
predatory lending
Knowingly lending more money than a borrower can afford to repay, or charging excessive rates and fees to a borrower (pay day loans)
Ponzi Scheme
Selling high return investments that aren't real
early investors get paid with other investors' money and "recruit" new investors who get nothing
Consumer Rights and Reponsibilities
Right to Safety/Responsibility to use products safely
Right to be informed/Responsibility to seek information
Right to choose/Responsibility to choose carefully
Right to be heard/Responsibility to speak up and report problems
government consumer protection acts and agencies
Truth in Lending Act
Fair Debt Collection Practices Act
Federal Trade Commission (FTC)
Consumer Product Safety Commission (CPSC) Food and Drug Administration )FDA)
bankruptcy
Legal process when a person can pay outstanding debts; usually results in a court-approved repayment plan; stays on credit report for 10 years