Chapter One Flashcards
Personal Finance:
all the financial decisions an individual or family must make in order to earn, budget, save, spend, and give money over time
Consumer:
a person or organization that uses a product or service
Debt:
money owed to another person or company
Paycheck to Paycheck:
an expression used to describe a person or household whose monthly income is devoted to expenses and has little to no savings
Personal finance is only ___ head knowledge and ___ behavior
20%, 80%
Almost ___ of Americans use all of the money they get from one paycheck just to make it to the next.
80%
Once you understand how _____, _____, _____, ______, and _____ affect your money, you’ll have all the tools you need to make the right choices.
earning, budgeting, saving, spending, and giving
In America, 72% of people say they‘re burdened by consumer debt. The average borrower has over $_______ of debt—not including a mortgage!
34,000
Credit:
the granting of a loan and the creation of debt; any form of deferred payment
Interest Rate:
the percentage of principal charged by the lender for use of its money
Loan Shark:
person or entity that charges borrowers interest rates above an established legal rate
Interest:
the additional cost a lender charges for borrowing their money
__% of American adults have at least one credit card
83
Prior to 1920, the only way for banks to make money by loaning money was to charge sky-high interest rates. But that was illegal, so most banks stayed out of the credit business. T/F
T
Before World War 1 the average person could get credit without turning to loan sharks, so buying on credit became more socially accepted T/F
F, after
the national student loan debt has ballooned to over $________
1.5 Trillion
Financial Plan:
a plan of action that allows a person to meet not only their immediate needs but also their long-term goals
Net Worth:
the amount by which the value of a person’s assets exceeds or falls behind the value of their liabilities
Asset:
anything that is owned by an individual, including money in the bank or investments
Liability:
financial debts or obligations
Positive Net Worth:
the dollar value of a person’s assets is greater than the dollar value of their liabilities
Negative Net Worth:
the dollar value of a person’s liabilities is larger than the value of their assets
Net Income:
what a person earns after payroll taxes and other deductions are taken out; often referred to as take-home pay
Expense:
the cost of goods or services; money paid out
To calculate your net worth
simply subtract what you owe (liabilities) from what you own (assets).
Calculate your net income
That’s the money you bring home after taxes are taken out. This includes all sources of income and ways you get money.
Financial Literacy:
the knowledge and skill base necessary for people to be informed consumers and manage their finances effectively
The five foundations:
- Have a $500 emergency fund, 2. Stay out of debt, 3. Pay cash for your car, 4. Pay cash for College, 5. Be outrageously generous
