Ch 1- Savings Flashcards

1
Q

Define amoral

A

has no morals

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2
Q

Define baby steps

A

the 7 steps to a healthy financial plan

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3
Q

Define compound interest

A

interest paid on interest previously earned

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4
Q

Define emergency fund

A

3-6 months of expenses in readily available cash for emergencies

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5
Q

Define interest rate.

A

percentage paid to a lender for the use of borrowed money

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6
Q

Define money market

A

mutual fund that seeks to maintain a stable share price to earn current income by investing in interest

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7
Q

Define Murphy’s Law.

A

anything that can happen will happen

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8
Q

Define Pre-Authorized Checking (PAC).

A

system of automatic payment processing

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9
Q

Define priority

A

level of high importance or urgency

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10
Q

Define sinking fund.

A

saving money in order to make interest work for you not against you

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11
Q

For most people a fully-funded emergency fund will be about…?

A

$10,000-$15,000

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12
Q

What are 3 reasons you should save money?

A

emergency fund, purchases, wealth building

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13
Q

How many baby steps are there?

A

7

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14
Q

What is saving about?

A

contentment & emotion

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15
Q

What does Pre-Authorized Checking (PAC) do?

A

helps build discipline when saving

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16
Q

What does Dave’s 80/20 rule say?

A

when it comes to money, 80% is behavior and 20% is head knowledge

17
Q

What is the correct order for using your money?

A

save, pay bills, give

18
Q

What is the formula for calculating interest?

A

Present Value(1+r/m)^mt
r=annual interest rate (as a decimal)
m= # of times money is compounded
t=# of years invested

19
Q

How does compound interest differ from simple interest?

A

compound- interest on interest

simple- interest only on value invested

20
Q

What is the United States’ savings rate?

A

-0.6%

21
Q

What country has the highest savings rate?

A

France

22
Q

Where is a good place to keep your emergency fund?

A

money market

23
Q

What is the key ingredient when it comes to wealth building?

A

discipline

24
Q

List 2 things that are a key for saving in general.

A

discipline and focused emotion

25
Q

What are the 7 baby steps?

A

1) $1,000 in emergency fund
2) pay off all debt except house
3) 3-6 months in emergency fund
4) invest 15% of house into Roth IRAs and pre-tax retirement plans
5) college funding
6) pay off home early
7) build wealth and give!