Dave Ramsey Flashcards
0
Q
What is the first baby step
A
- $1000 emergency fund/ 500 if less then 20,000 a year
1
Q
List the 7 baby steps
A
- 1,000 emergency fund/500
- Debt snowball
- Fully funded emergency fund
- 15% invested in Roths/retirement
- Collage funding
- Pay off home early
- Build wealth and give
2
Q
What is the second baby step
A
- Pay off debt w/ debt snowball
3
Q
What is the third baby step
A
- Fully funded emergency fund
3-6 months in expenses
4
Q
What is the fourth baby step
A
- Invest 15% of household into Roth IRAs and retirement plans
5
Q
What is the fifth baby step
A
- Collage savings w/ ESAs
6
Q
What is the sixth baby step
A
- Pay off home early
7
Q
What is the seventh baby step
A
- Wealth build and give
8
Q
What are the three basics of saving money?
A
- Emergency fund
- Purchases
- Wealth build
9
Q
What are the benefits of having an emergency fund?
A
Bad things will happen, you are prepared for them
Makes big problems into an inconvenience
10
Q
What is Murphy’s law?
A
If it can go wrong it will
11
Q
What is amoral?
A
Neither good nor bad
12
Q
What is a great place to keep emergency fund?
A
Money market account from a mutual fund company
13
Q
What does Dave Ramsey say about borrowing?
A
Don’t do it, use sinking fund approach
14
Q
What is the sinking fund approach?
A
Saving a fixed amount of money each month so that when the time of purchase comes, you can pay cash and negotiate
15
Q
What is compound interest?
A
Is like a snowball effect where the interest starts to build up in a Roth IRA.
Based on amount of time put in and the rate of return
16
Q
What is the rate of return/interest rate?
A
It affects how much interest you gain, the bigger the better
17
Q
What are the two compound interest formulas?
A
FV=PV(1+r/m)^mt
A=P(1+i)^n
18
Q
What are the values of FV=PV(1+r/m)^mt
A
FV= future value PV= present value r= annual rate of interest(decimal) m= # of times per year the interest is compounded t=# of years left invested
19
Q
What are the values of A=P(1+i)^n
A
A= amount of money in the account P= principal; amount of $ originally invested i= interest rate expressed as decimal n= # of years compounded
20
Q
What is the rule of 72?
A
Helps configure the # of years or the % of an amount needed to save $
200 and needs to save 400 at 6%
72/6= 12 years
200 and needs to save for 4 years
72/4= 18%
21
Q
What are the baby steps?
A
Steps you should take to get out of a financial crisis
22
Q
What is they key to saving?
A
Discipline and focused emotion
23
Q
What is the 80/20 rule?
A
Handling money is 80% behavior, 20% head knowledge
24
Saving money for a purchase and letting the interest work for you rather then against you is what?
A sinking fund
25
For most people, a fully funded emergency fund will be about what?
$10,000-15,000
26
Ben and Arthur illustrate which principal?
Compound interest
27
Saving is about emotion and what?
Contentment
28
What is a good way to build discipline?
Pre-authorized checking (PAC)
29
True or false, interest is money paid to a saver by a financial institution?
True
30
What is the correct order for using your money?
Save, pay bills, give
31
How much should you invest in a single stock?
No more then 10% in a single stock
32
What is the KISS rule of investing?
- keep it simple stupid
- NEVER invest purely for tax savings
- NEVER invest using borrowed money
33
What is diversification?
Spreading around money to lower risk
34
What is the risk return ratio?
As the risk goes up, the return rate goes up
35
What is liquidity?
Availability of money
36
What is a rule with liquidity?
More liquidity, less return
37
What is a C. D?
Certificate of deposits at a bank that has a low return but ranges from 6 months to 10 years
38
What are mutual funds?
Money market mutual funds are low risk w/ check writing privileges
Great for emergency funds
39
What is the risk w/ single stocks?
Extremely high risk due to fluctuations
40
What is a share?
Piece of a company
41
What is a dividend?
When a company pays their partners some profits
42
What is a bond?
Debt instrument by which the company owes you money
| Return is the fluctuation of price and the interest rate paid
43
When investors pool in their money, it is called a what?
Mutual fund
44
How do you choose a stock?
5-10 year track record
45
Mutual funds are good for what?
Long term investments
46
What is the problem w/ real estate?
Least liquid consumer investment
| Have lots of cash before investing
47
What are annuities?
Savings accounts w/ an annuities company
48
What are fixed annuities?
Low interest rates around 5% that are a bad investment
49
What are commodities and futures?
Horrible investments like gold and oil
50
What are some terrible investments?
Commodities and futures
Day trading
Viaticals
51
What are aggressive growths?
Small cap
| Young companies that are growing
52
What are growth and income?
Large cap
| Stable funds
53
What are growth funds?
Mid-cap funds
| Are still growing
54
Long term investments properly diversified include what?
Growth, aggressive growth, growth and income, and international
55
What is the best type of person to go to about financial problems?
Someone who will teach you
56
What is tax-favored?
The investment is in a qualified plan or has special treatment
57
Why is a qualified plan?
Individual retirement arrangment (IRA)
Simplified employee pension plan (SEPP)
401K, 403b, 457
58
For a Roth IRA, who is elegible?
Anyone with an earned income
Singles- 100% contribution w/ income less then 95,000. Not eligible over 110,000
Married filed jointly- 100% contribution w/ income less then 150,000. Not eligible over 160,000
59
What is a Simplified Employee Pension Plan?
A self- employed person may deduct up to 15% of thief net profit on the business.
60
What is the maximum deductible amount of a SEPP
45,000, all employees who've been with the firm for three years must recurve the same percentage into a retirement plan
61
What are 401ks available at?
Most companies
62
Whaler is a 403b available at?
Non-profit organizations like schools and churches
63
Where are 457 available at?
Government jobs
64
What is Defted compensation
Deferring or putting off compensation
65
What kind of plans should you not fund?
GIC guaranteed investment contract
| It bonds
66
What is an educational savings account?
Like a Roth IRA for education, if saved after tax, will grow tax-free
67
What is a UTMA/UGMA
Uniform gift to minors account
| Account is listed in the child's name and a custodian is named
68
What is a 529 plan?
Any plan that is for education
69
How many Americans are living paycheck to paycheck?
70%
70
What is paradigm?
Change in view
71
What happened in the early 1900s?
Sears started their follies
| and jc penny stores did not except credit,
72
What happened in 1950
First credit card, the diners club
73
What happened in 1958
Bank of America started, which was the precursor to Visa
| American Express was born
74
What happened in 1970?
Only 15% of Americans owned credit cards
75
What happened in 1976?
"Bank americard" became "visa"
76
What happened in 1986?
"Discover" was born
77
What happened in today's world?
Credit is a way of life
78
By consigning a loan what happens?
The bank, if the person does not pay, makes you pay
79
Myth: Cash advances, rent to own, title pawning, and tote the notes lots are needed to severed to get lower income people ahead.
Truth: horrible ripoffs that only benefit the owners
80
What amount of money do certain people spend in the lottery?
$173- no high school diploma
| $49- collage graduates
81
What is the average car payment now?
464 a month for 64 months
82
What is the most expensive way to finance your vehicle?
Leasing the car
83
What is an unsecured loan?
Nothing secures the loan
Based on the ability to to repay the loan
Personal loans, student loans
84
What is a secured loan?
Usually needed when borrowing a large amount of money
A collateral is needed
Lower interest rates longer repayment terms
85
Never take how long long of a fixed rate mortgage?
No more then 15 years
86
What's an adjustable rate mortgage?
A horrible mortgage whoms payment fluctuates with the worth of the home.
87
When you spend with cash, how much less do you spend?
12-18% less
88
Myth; the home equity loan is good for consolidation and a substitute for the er fund
Truth: you don't go into debt for emergencies
89
What are the 5 steps out of debt?
1. Quit borrowing money
2. Save some money
3. Sale something
4. Part time job or overtime
5. Debt snowball
90
How does the debt snowball work?
By rolling over debt payments so that over time you start paying more
91
How is money active?
It moves around and needs tracking
92
What is a cash flow plan?
Shows where money goes too
93
What are overdrafts a sign of?
Crisis living, sloppy, lazy money habits
94
Why do cash flow plans/ budgets not work?
Bc people leave things out
Over complicate plan
Don't do it
Don't live on it
95
What is liability?
You're responsible for it
96
What is the state minimum for auto insurance?
30/60/25
97
What does 30/60/25 mean?
30- 30,000 1 bodily injured
60- 60,000 2 bodily injured peeps
25- 25,000 property damage
98
What is a Coverdale?
K/PhDs
| Any educational needs
99
What is NEFE
National Endowment Financial Education
| When you give money to an organization and they get the interest
100
What is collateral?
Asset of value that lenders can take
101
What is Capitol
Items if value that lenders want to know you have incase you can't pay the loan
102
What is capacity
Amount you can borrow
103
What is compensative coverage collision?
Coverage for your car
104
What is a premium?
Money sent to insurance company. Higher deductible, lower premium
105
What is PIP
Personal injury protector
| Reimburses medical expenses for yourself
106
What happens if someone does not have insurance, underinsured, or is a hit and run?
Then your 30/60/25 will go to you
107
What is covered in Auto insurance?
1. Liability
2. Comprehensive coverage collision
3. Personal injury protector
4. Towing and rental
5 uninsured/underinsured
108
What is covered in Home insurance?
1. Dwelling
2. Personal property
3. Medical
4. Liability
109
Why is personal articles policy?
Anything insured that has to be appraised
110
the true cost of something in terms of what you give up
opportunity cost
111
court action that allows a lender to take wages directly from a pay
check garnishment
