Finance Terms Flash Cards
Study these cards to be able to do well at "Financial Football" and in life!
Terms in this set (55)
Less Save Invest Pay Off
Of Financial Security
A.) Spend ____ than you earn.
B.) S___ and I_____the rest.
C.) ___-____ your credit cards every month.
Money we borrow (and promise to pay back)
A loan to purchase a home or other real estate
A charge made by a lender for the use of money.
The amount of money that you actually borrow (or invest).
(This does NOT include interest earned or interest owed)
Interest earned on both the principle amount as well as on any interest already earned.
Money we owe
Money we borrow for something that will probably go UP in value over time.
1.) A house we will own for many years
2.) Student Loan (student is going UP in value)
3.) Business Loan (if you have a solid business plan & know about the business you are starting)
When we borrow money for something that will very likely go DOWN in value over time.
1.) Credit Card spending
4.) Trendy items
5.) Household and personal items
The amount of money others are willing to loan to you.
A history (Record) of how well we pay off our debts (bills and obligations)
Building good credit score
1.) Pay your bills on time
2.) Never write bad checks
3.) Borrow money and pay it back with regular (on time) payments
Problems with Low Credit Score
1.) Difficult to borrow money
2.) Pay Higher interest rates when you borrow
3.) Difficult to rent an apartment or house
4.) Difficult to get a job
1.) A law of compassion (relief for borrowers who are struggling without hope)
2.) A court decision that declares that you do not have to pay all of your bills.
3.) Stays on your CREDIT RATING for TEN YEARS!
Make money, more than what you spend to make the product. (The amount left AFTER you pay all the expenses for making the product)
A reason to start a business that will make a profit for you.
A person who invests time and money to start and manage a business
Anything of value that is owned
Financial Responsibility (associated with ownership)
-Like if your car hurts someone
-Like if someone gets hurt at your house
-Like if someone gets bitten by your dog
-Like you owe money on the car you are driving
Something going UP in value as time goes by (a home or well run business, an educated person)
Something going DOWN in value as time goes by. (car, clothes, electronics, etc...)
assets in the form of cash (or easily convertible into cash)
A legal agreement that property (house, car, etc) can be taken away for failure to pay a debt (bill).
When property (house or business or land) is taken away by a lien holder due to failure to make agreed upon payments.
When a car of other personal property is taken away by a lien holder for failure to make payments on a debt (pay your bills)
The amount of money that would be left over if the property were sold and all of the loans paid off.
Upside Down loan
when we owe MORE money for something than it is worth.
The money a business needs to allow the business keep working.
Rule of 72
Simply divide the magic number (72) by the investor's compound interest rate. The answer tells the number of years it would take for the money to double.
@ 12% the money doubles in 6 years
@ 10% the money would double in 7 years
@ 8% the money doubles in 9 years
Long Term Savings
Money you won't need for several years.
Big House Repairs (painting, new roof)
A Big Vacation Someday
Short Term Savings
Money you are saving for expenses within the next year
Money that is invested that is for your Retirement
Start SMALL, but Start EARLY!
Individual Retirement Account
Pay taxes later (when you withdraw the money)
Special IRA where the taxes are paid before you put it in, but even though it pays interest over the years, there is NO tax when you withdraw the money.
The money you WOULD get IF you sold something (after you pay off any loans on that belonging)
6-8 months of money set aside that you could use to get by in an emergency if you had no income.
70 20 10 Plan
70% = Spend
20% = Save
10% = Give
25 45 20 10 Plan
25% = Housing costs
45% = Other monthly expenses
20% = Save
10% = Give
Credit Card Rules
1.) Pay off the balance every month
2.) ONLY charge if it is within your budget
3.) When an emergency charge goes over budget (can't pay it off), discontinue all discretionary spending until balance is paid off.
1.) ONLY use it for budgeted expenses.
2.) Do not use it to get "cash" and then just spend cash
Items on a budget that you don't "need" to get by, but that you want or could use. (Discretionary expenses)
Expenses that you MUST pay for in order to be able to manage your life effectively from month to month.
A PLAN for how to use your income
Expenses = Income
Things you do with your money (Saving, Spending, Giving)
Money that you get ($ you earn, rent you collect, interest you receive, dividends that are paid to you, etc..)
Benefits of Using a Credit Card
1.) Keep track of where your money goes
2.) Free Benefits (air miles, money back, etc...)
3.) Lost Card can be cancelled & replaced
4.) Emergency money available if you need it
Dangers of Using a Credit Card
1.) VERY easy to WAY overspend!
2.) Balances build up higher and higher
3.) Interest rates skyrocket with late payments
4.) Items going DOWN in value are going UP in cost monthly
Credit Card Company Tricks
1.) Zero interest to get you started (invites you to overspend and think you don't have to pay any interest ever)
2.) Raise interest rates when ANY payment is late (not just your credit card bills.)
3.) Raising interest rates from the FIRST day retroactively when any payment is late (as high as 25-30% per year!)
Your earnings AFTER taxes are taken out
Your total earnings (before taxes)
A reason to create a product, service, or business that is not related to profit.
Building value by work and creativity instead of monetary input.