Final Flashcards
What are the different educational curriculums that Bank On Louisville offers?
Start Smart!, Start Fresh, Credit as an Asset
What is the Cliff Effect?
When a person headed towards financial security is give a wage raise, however, the raise prevents them from receiving their benefits but does not equal the ‘cost’ of their benefits
Minimum Wage
The lowest wage an employer can pay an employee based on their state or federal regulations
Living Wage
How much a person working full time needs to make in order to fully support them and their families and fall above the federal poverty level
What does underbanked mean?
When a person prefers cash transactions rather than using financial services. They typically only use financial services twice a month to cash checks
What does unbanked mean?
Unbanked households have no bank relationship whatsoever
What is Bank On 2.0
A program that was created to get all Bank On locations to follow the same procedures. It also created the National Account Standards and the National Data Hub
What are reasons that people do not have bank accounts/Why do payday lenders thrive?
generational trauma, feeling unwelcomed in financial institutions, or being in the ChexSystems. Payday lenders thrive because they dont require credit checks, cash checks and get money that day, very few regulations they have to follow
What does Nudge mean?
When you push somebody in a direction by making the process easier. For example, automatically signing employees up for a 401K but giving them the option to opt out.
This system is used by Banks and Credit Unions to check whether a person has had a bank account closed on them by a financial institution
ChexSystem
This is a resource that can produce value to the owner
Asset
Is considered one of the founders of the Financial Empowerment and Asset building field
Michael Sherraden
This city gave birth to the Bank On Movement
San Francisco
Was a piece of legislation to help correct the errors of the Great Recession and create the CFPB
Dodd-Frank Act
The activities that lead to an increased understanding of financial and personal tools, resources, and services
Financial Education
Having enough resources to pay for food, healthcare, housing and other basic needs, naviagate short term rises, and begin to build personal assets
Financial Stability
A process of accumulating, developing, and preserving financial human, and social resources to increase economic stability
Asset Building
A person’s knowledge about his/her own personal finances
Financial Literacy
Being able to take effective action to pursue financial stability and weather downturns
Financial Capability
A form of financial empowerment support that offers a relationship-based approach to encourage goal setting and self-accountability
Financial Coaching
Nationwide campaign to save money using social marketing
America Saves
Only Financial Empowerment Regulator at Federal Level
CFPB
Known for a yearly scorecard and organizing the Assets & Opportunity Network
Prosperity Now
Works with mayoral administrators to implement innovative programs and policies
CFE Fund
BOL
Bank On Louisville
OFE
Office of Financial Empowerment
LADDER
Louisville Alliance for Development through Diversity, Empowerment, and Resources
LABC
Louisville Asset Building Coalition
CFPB
Consumer Financial Protection Bureau
FDIC
Federal Deposit Insurance Corporation
CFE Fund
Cities for Financial Empowerment
What is bounded rationality?
is inherent in the population, people have limited time and capacity to think deeply before acting. We underestimate the risk and overestimate others
What is a Financial Coach?
A person that helps consumers set goals, establish a plan of action, and change behaviors
Kentucky Payday Lending Interest Rate
469%
Community Reinvestment Act
Encouraged banks to help meet the needs of borrowers in all segments in their community, makes banks offer credit services to anywhere they take deposits, cant just offer to wealthy communities
CFPB Your Money, Your Goals
The CFPB educational curriculum
FDIC Money Smart
The FDIC educational curriculum
CRA
Community Reinvestment Act
What is the difference between banks and credit unions?
Banks are for profit whereas credit unions are not for profit
PIN
Personal Identification Number
Frank McNamara
Created the “Diners Club Card”. Diners all over would accept this card and card carriers would pay off their debt once a month. This was the birth of the credit card.
What are the Three Credit Bureaus?
Experion, Equifax, and Transunion
What is the difference between installment vs revolving credit?
Installment- you are approved for a specific loan amount taken out for a specific period of time. You pay back the total amount over that period of time. VS Revolving Credit- You are approved for a credit limit and you can spend any amount up to that credit limit. What you pay back each month varies depending on how much you borrow at the end of each month
FICO
Fair Isaac Corporation
JC Penney
JC stands for James Cash because, while he was alive, he never allowed for credit to be offered
What are the 5 C’s of Credit?
Character (Payment History), Capacity (Income), Capital (Assets/Networth), Collateral (Loan security), Conditions (Of borrower and the economy)
What are the Four Walls?
Food, Clothing, Shelter, and Transportation
50/30/20 Budget?
50 towards necessities, 30 towards wants, 20 towards savings and debt
What is the difference between snowball vs high interest rate?
Snowball is when you start with the smallest amount but still make your minimums. When the debt is gone you throw all that money to the next debt. High interest rate is when you start with the largest interest debt and still make your minimums. When that debt is gone you throw all that money to the next debt
What are Dave Ramsey’s 7 Baby Steps?
- Have 1000 in emergency fund
- Pay off all debt using debt snowball
- 3 to 6 months of expenses in savings as a full emergency fund
- Invest 15% of household income into retirement plan
- Begin college fund for your kids
- Pay off your home early
- Build wealth and give
What are the 7 areas of Insurance?
Life, medical, home, auto, disability, long-term care, identity theft
What is the Brain Drain?
When the best and the brightest of a local area go elsewhere
What is outsourcing?
When a company turns control over to a cheaper company in a cheaper country
What is offshoring?
When a company moves manufacturing to a cheaper country
What are the 8 belts?
Rust, Sun, Energy, Wind, Wheat, Tech, Northeast corridor, research triangle
What’s the difference between asset building and traditional benefit programs?
A process of accumulating, developing, and preserving financial, human, and social resources to increase the economic stability of individuals, families and the community VS Traditional approaches have emphasized increasing income
Dan Ariely
Wrote the book “predictably irrational’ and is one of the founders of behavioral economcis
Elizabeth Warren
She proposed the Consumer Financial Protection Bureau and was appointed as a Special Advisor to the new agency. Also appointed as the Secretary of the Treasury to set up the new agency
Richard Cordray
The former Attorney General of Ohio and was nominated as the first director of the CFPB in 2010
What was the Panic of 1907?
Triggered by the failed attempt in October 1907 to corner the market on stock of the United Copper Company. When the bid failed, banks that had lent money to the cornering scheme suffered runs, leading to the downfall of the Knickerbocker Trust Company. The collapse caused a panic, which led to a vast number of people withdrawing their deposits from the regional banks
Why are checks being phased out?
Age demographic, cost to consumer, it takes time to clear, security issues, and direct deposit
Emergency Funds (5 general types, beginner emergency fund, etc)
5 general types of emergencies: car, home, medical, job loss, family. Put 1000 in a beginner emergency fund, emergency fund is not an investment it is insurance. Keep your emergency fund liquid and seperate
Interest
The money financial institutions pay you for keeping money deposited with them, but normally only on savings accounts. Compounding means earning interest on interest
What are Credit Bureaus?
Collect consumers’ credit information from creditors and store it
What is credit?
The ability to borrow money or access goods or services with the understanding that you’ll pay later
Hard credit check
is when you are looking to access credit (financial institutions, credit card companies, and car lots)
Soft Credit Check
is when it has nothing to do with accessing credit (employers, cell phones, utility companies)
Secured Credit Cards
Consumer and creditor agree to a credit limit. The consumer deposits that amount in a savings account that no one can touch while the card is active. When the card is closed, if there is still a balance the consumer has agreed to have the card paid off through the money set aside. The consumer is given the full amount when the card is closed and there is no balance.
What is the biggest action to build credit?
Making an on-time monthly payment and building a track record of it
Credit under the age of 18
Should not have a credit profile unless their parents made them an authorized user
Who is checking credit?
Housing (mortgage and renting), transportation (car dealerships, car insurance, renting), Employment (run credit checks to test reliability and responsibility), Cell phones (bill and deposit), Utility companies (deposits and rates), access (ability to get credit cards, apply for loans, and receive lower rates and fees)
Annualcreditreport.com
The way to request your credit report
Reading a credit report
Should Include: name, current address, SS#, DOB and Place OB, Employment History, Financial public record information such as consumer bankruptcies, judgements, and state and federal tax liens, collections, trades. Should NOT Include: race or ethnicity, arrests or convictions, marriage or adoption records, civil suits
Dave Ramsey
If you cant pay cash, you don’t buy it, FICO score is the “I love debt score” and has nothing to do with wealth or success, there’s no good reason to have a credit card and responsible credit card se doesn’t exist
Which is worse, bad credit or no credit?
No credit is worse than bad credit. Bad credit they can see where your previous issues were but with no credit you are a wild card and a bigger risk
APR
Annual Percentage Rate
What CAN debt collectors do?
only contact the person who owes the debt and only contact you between 8 am and 9 pm
What CANT debt collectors do?
harass, oppress, or abuse you; call you at work, call third parties more than on time to obtain your location information, tell lies to collect debt, have you arrested
What are 7 reasons why people don’t budget?
Afraid, don’t want to feel restricted/pride, intimidating, don’t know how, past failure, time and effort, volatile financials
What is Good debt?
Good debt is an investment in your financial future that should leave you better off in the long-term and not have a negative impact on your overall financial position
What is bad debt?
Bad debt are those that drain your wealth, are not affordable and offer no real prospect of being paid off in the future
Student Loan Forgiveness Avenue?
Public Service Loan Forgiveness- make payments for 10 years (120), only for government and nonprofit workers
National debt?
National debt is over 31 Trillion
Debt Clock
A clock that constantly calculates our national debt
What are the five taxes that come out of your paycheck?
Federal income, State income, city income, Medicare, social security
What is a financial plan?
A document containing a person’s current money situation and long-term monetary goals, as well as strategies to achieve those goals
What is the Net Worth equation?
Net Worth=Assets-Liabilities
What is a deductible?
What you have to pay out of pocket before the insurance company kicks in any money
What is a progressive tax?
Progressive is a tax that is higher for taxpayers with more money (like the US federal income tax)
What is a regressive tax?
Regressive Tax could either mean that the tax decreases as income increases or that the tax is flat (everyone pays the same rate)
Is a car an asset?
One of the worst investments you can make because it depreciates. They are a “necessary sinkhole”
EITC
Earned Income Tax Credit
VITA
Volunteer Income Tax Assistance
Liquidity
the availability of liquid assets to a market or company
Pension
The employer does all the saving and the money’s just there for the employee at retirement
Roth
you invest after-tax dollars, and it gives you more flexibility when retrieving the money (no penalty withdraws after 5 years, 10000 for first time home purchase, can be taken out with no penalties for disability)
Non-Roth
invest pretax dollars, government will take roughly 25% when you withdraw the money
Diversification
The 90/10 rule- 90% goes into something safe like index funds or highly rated mutual funds, 10% will go towards higher risk investments (single stocks) or more aggressive mutual funds
What are six social security issues?
Social security is expected to exceed its total income by 2034, meaning that it can pay full benefits until 2034 and then 75% of benefits after that, money paid into social security system is invested in bonds and other securities that pay interest but rates have been low, baby boom, longer life expectancy, fewer workers per beneficiary, lower birthrate
IRA
Individual Retirement Arrangement
Clusters
Geographic concentrations of interconnected companies or institutions that manufacture products or deliver services to a particular field or industry
GDP
Gross Domestic Product
