class notes Flashcards
What is the time value of money?
Value of money over time which changes with inflation/deflation
This concept emphasizes that money available now is worth more than the same amount in the future due to its potential earning capacity.
What is a tax refund?
The money you give (lend) to the government is given back to you
This typically occurs when you have overpaid your taxes throughout the year.
What is one of the most expensive ways to borrow money?
Credit cards
High-interest rates can lead to significant debt if not managed properly.
What do credit bureaus do?
Record of my credit use
They compile information about your borrowing and repayment history.
What algorithm determines my credit rating?
Fair Isaac’s algorithm
This algorithm is used by credit bureaus to calculate credit scores.
What does FICO score stand for?
Fair Isaac score
It is a type of credit score used by lenders to assess creditworthiness.
What is a 401k?
Tax deferred retirement plan, replaced pension plans
Often includes employer matching contributions.
What is a pension?
A regular payment made by the government to people of or above the retirement age
This is typically based on years of service and salary history.
What is an IRA?
Individual retirement account-Form of pension provided by many financial institutions that provides tax advantages for retirement savings
Similar to 401k, retirement plan, tax deferred with one exception -> ROTH IRA
Roth IRA is the only kind of IRA that you do not pay taxes on.
What is a stock split?
Giving new shares to a shareholder who is currently investing in the company already.
This increases the number of shares while reducing the price per share.
What is an ETF?
Exchange traded fund, a managed investment fund that includes a basket of assets (stocks,bonds)-similar to mutual funds without trading amount limits
ETFs can be bought and sold throughout the trading day. Used for DAY TRADING
What does investing in real estate typically involve?
Being a landlord
This includes renting out properties for income.
What is the role of a brokerage firm?
Assist you in buying and selling stock for a fee
They provide access to stock markets and investment advice.
What is a Ponzi scheme?
An investment scam / fraud that pays existing investors with the earnings from new investors. Example: Bernie Madoff
Returns to earlier investors are paid using the capital from new investors.
What is an annuity?
Contract between and individual and an insurance company that provides a steady from of income in the future for the individual’s retirement—Insurance company holds the money for your retirement plan
Annuities can provide regular income during retirement.
What is COBRA?
A federal law that allows employers to use their employer-sponsored coverage after a qualifying event. (A qualifying event could be being fired from the job) Good for health insurance preservation
It allows individuals to continue their health insurance coverage after leaving employment.
What does workers’ compensation provide?
Health insurance from a workers’ compensation insurance company that your job must pay for
This is mandated by law if you are injured on the job.
What is disability insurance?
Will pay for the time that you cannot work
This insurance provides income replacement during periods of disability.
What does homeowners insurance cover?
Protects your home and belongings from damage or theft
It typically includes liability coverage as well.
What is renters insurance?
Covers personal property in a rented residence
It also provides liability coverage in case of accidents in the rented space.
What are commodities?
something you buy with the intention to sell it for a profit
Commodities include raw materials like oil, gold, and agricultural products.
