Final Exam Flashcards
What are the 7 baby steps?
- $1,000 in an emergency fund
- Pay off all debt except the house utilizing the debt snowball.
- Three to six months of expenses in savings.
- Invest 15% of your household income into Roth IRAs and pre-tax retirement plans.
- College funding for your kids.
- Pay off your home early.
- Build wealth and give.
Saving money is about?
Emotion and Contentment.
What are the three reasons you should save money?
- Emergency fund
- Purchases
- Wealth Building
Compound Interest:
Paid on interest previously earned. It can be awarded daily, monthly, quarterly, semiannually, or annually on both principal and previously credited interest.
What’s another term for budget?
Written cash flow plan.
What is the easiest, most powerful plan for a budget?
A zero-based plan using the envelope system.
Paradigm:
Your belief system; the way you see or perceive things.
Lease:
A long-term rental agreement; a form of secured long-term debt.
Tax Deduction:
Expense that a taxpayer is allowed to deduct from taxable income; examples include money paid as home mortgage interest and charitable donations.
Depreciation:
A decline in the value of property; the opposite of appreciation.
What will a $28,000 car be worth in 4 years?
$8,400
Adjustable Rate Mortgage (ARM):
Home loan secured by a deed of trust or mortgage in which the interest rate will change periodically.
Balloon Mortgage:
Home loan in which the sum of the monthly payments is insufficient to repay the entire loan; as a result, a final payment comes due, which is a lump sum of the remaining principal balance.
Foreclosure:
The holder of a mortgage sells the property of a homeowner who has not made payments on time.
Debit Card:
A card that often bears the seal of major credit card company, issued by a bank and used to make purchases; unlike a credit card, the money comes directly out of a checking account; also called a check card.
Grace Period:
Time period during which a borrower can pay the full balance of credit due with no finance charges.
Home Equity Loan (HEL):
Credit line offered by mortgage lenders that allows a homeowner to borrow money against the equity in their home.
Debt Consolidation:
Act of combining all debts into one monthly payment, typically extending the terms and the length of time required to repay the debt.
What are the 5 steps out of debt?
- Quit borrowing more money
- You must save money
- Sell something
- Part-time job or overtime (temporarily)
- Use the debt snowball.
What is never enough compensation for doing a job?
Money
DISC Personality Profile:
A behavior profile test that yields insights into how you process decisions and what your natural tendencies may be. (Dominant, Influencing, Steady/Stable, Compliant)
Dominant person:
A hard-charging driver that is task-oriented and first looks to problems.
Influencing person:
People oriented, fun, outgoing and generally concerned about pleasing people, so they first look to people.
Steady/Stable person:
Is amiable, loyal, does not like conflict, and is concerned about pace.
Compliant person:
Analytical, loves detail, is factual, can seem rigid, and loves procedures.
What 3 ways should you follow up for a job?
- Introduction letter
- Cover letter and Resume
- Phone follow up
Allowance:
Money given to a child, typically on a weekly basis.
Commission:
Money paid for providing a service.
Work Ethic:
How motivated, loyal and honest you are in your work.
What 3 envelopes should you use from ages 5-12?
- Giving
- Spending
- Saving
What should you open at 13-15 years old?
Checking account
What 2 types of people are there?
Nerd and Free Spirit
What can lead to poor money management?
Time poverty and fatigue
Caveat Emptor:
Buyer Beware
90-days-same-as-cash:
If you pay within 90 days, there are no finance fees. It’s as if you paid cash today. But if you pay late, you will be charged interest for the entire 90 days.
Rule of 78:
Prepayment penalty in a financing contract; the portion of a 90-days-same-as-cash that the entire loan amount plus the interest accumulated over the first 90 days becomes due immediately.
4 steps of product positioning
Brand Recognition, Color, Shelf Position, Packaging
What is a significant purchase?
Anything over $300
Opportunity Cost:
The true cost of something in terms of what you have to give up to get the item; the benefits you would have received by taking the other action.
It is proper to get a great deal if you:
- Have in no way misrepresented the truth.
- Have not set out to harm the other party.
- Have created a win-win deal.
Seven rules of negotiating:
- Always tell the absolute truth.
- Use the power of cash
- Understand and use “walk-away power.”
- Shut-up
- “That’s not good enough.”
- Good guy, bad guy.
- The “If I take-away” technique.
Estate Sales:
Type of yard sale with more items, usually the entire contents of a household.
Auction:
A public sale in which property or items of merchandise are sold to the highest bidder.
Foreclosures:
Process by which the holder of a mortgage sells the property of a homeowner who has not made interest and/or principal payments on time as stipulated in the mortgage contract.
Consignment Shop:
Retail store where people sell items and the owner of the shop gets a percentage of the sale.
Chapter 7 Bankruptcy:
Chapter of the Bankruptcy Code providing for liquidation of the debtor’s assets in order to repay the creditors; certain assets or aggregate value of assets of the debtor may be exempt based on state law.
Chapter 11 Bankruptcy:
Reorganization bankruptcy, usually involving a corporation or partnership; generally includes a plan of reorganization to keep a business alive and pay creditors over time.
Chapter 13 Bankruptcy:
Chapter of the Bankruptcy Code providing for an individual to repay debts over time, usually three to five years; debtor makes periodic payments to the bankruptcy trustee, who in turn pays the creditors; sometimes includes adjustments to debt balances within the bankruptcy.
What do you do if your identity is stolen?
- Place a fraud victim alert on your credit bureau report.
- Get a police report
- Remember, this is theft. You owe nothing.
- Contact the fraud victim division of each creditor and furnish documentation.
- Be persistent
Federal Fair Credit Reporting Act:
Federal law that regulates the collection, distribution and use of consumer information, including consumer credit information.
What 3 steps should you take to clean up your credit report of inaccurate information?
- Write a separate letter for each inaccuracy.
- Staple a copy of your credit report to each letter.
- Circle the account number.
Necessities:
Something that is necessary; a requirement or need for something.
Disposable Income:
Amount of money left over after all necessities and expenses are paid.
Federal Fair Debt Collection Practices Act:
Federal law that prohibits unfair debt collection practices, such as lying, harassing, misleading and otherwise abusing debtors, by debt collectors working for collection agencies.
Pro Rata Plan:
Debt repayment plan by which the borrower repays each lender a fair percentage of the total debt owed when one cannot make the minimum payments on one’s debt.
Garnishment:
A court-ordered attachment that allows a lender to take monies owed directly from a borrower’s paycheck; only allowed as part of a court judgement.
What is the KISS Rule of investing?
Keep it Simple Stupid!
Speculative:
Purchasing risky investments that present the possibility of large profits, but also post a higher-than-average possibility of loss.
Savings Account:
Accounts at financial institutions that allow regular deposits and withdrawals; the minimum required deposit, fees charged, and interest rate paid varies among providers.
Diversification:
To spread around
What are 6 types of investments?
- Money Markets
- Single Stocks
- Bonds
- Mutual Funds
- Real Estate
- Annuities
Certificate of Deposit (C.D.):
Usually at a bank; savings account with a slightly higher interest rate because of a longer savings commitment.
Money Market Mutual Fund:
Mutual fund that seeks to maintain stable share price and to earn current income by investing in interest-bearing instruments with short-term maturities.
Single Stocks:
An investment in one particular stock only.
Dividend:
Distribution of a portion of a company’s earnings, decided by the board of directors, to a class of its shareholders; generally distributed in the form of cash or stock.
Bond:
Debt tool where an issuer, such as a corporation, municipality or government agency, owes you money; a form of I.O.U.; the issuer makes regular interest payments on the bond and promises to pay back or redeem the face value of the bond at a specified point in the future.
Mutual Fund:
Pool of money managed by an investment company and invested in multiple companies, bonds, etc; offers investors a variety of goals depending on the fund and its investment charter; often used to generate income on a regular basis or to preserve an investor’s money; sometimes used to invest in companies that are growing at a rapid pace.
Aggressive Growth Stock Mutual Fund:
Fund that seeks to provide maximum long-term capital growth from stocks of primarily smaller companies; the most volatile fund; also referred to as a “small-cap” fund.
Growth Stock Mutual Fund:
Fund that buys stock in medium-sized companies that have experienced some growth and are still expanding; also called a “mid-cap” fund.
Growth and income Stock Mutual Fund: Fund comprised of large, well established companies; also called a “large-cap” fund.
Fund comprised of large, well established companies; also called a “large-cap” fund.
International Stock Mutual Fund:
Fund that contains international or overseas companies.
Annuity:
Contract sold by an insurance company, designed to provide payments to the holder at specified intervals, usually after retirement; the holder is taxed at the time of distribution or withdrawal, making this a tax-deferred arrangement.
Commodity:
A food, metal or fixed physical substance that investors buy or sell usually via future contracts.
Futures:
A term to designate all contracts covering the sale of financial instruments or physical commodities for future delivery on a commodity exchange.
Tax-Favored Dollars:
Money that is working for you, either tax deferred or tax free, within a retirement plan.
What are some qualified plans for retirement?
- Individual Retirement Arrangement (IRA)
- Simplified Employee Pension Plan (SEPP)
- 401(k), 403(b), 457
Roth IRA:
An After-tax IRA that grows tax free.
Roth 401(k):
A retirement plan similar to a 401(k) which has after-tax contribution benefits.
Simplified Employee Pension Plan (SEPP):
Pension plan in which both the employee and the employer contribute to an individual retirement account.
403(b):
Retirement plan similar to a 401(k) plan, but one that is offered by non-profit organizations (rather than corporations); employees invest tax-deferred dollars.
457 Plan:
Non-qualified, deferred compensation plan established by state and local government for tax-exempt government agencies and tax-exempt employers:
T/F Never borrow on your retirement plan
True
Education Savings Account (ESA):
After-tax college fund that grows tax free for educational uses; eligibility based on parents’ annual income.
529 Plan:
College savings plan that allows individuals to save on a tax-deferred basis in order to fund future college and graduate school expenses of a child or beneficiary.
Custodian:
One who is responsible for an account listed in someone else’s name.
Uniform Transfers to Minors Act (UTMA):
Law similar to the Uniform Gifts to Minors Act that extends the definition of gifts to include real estate, paintings, royalties, and patents.
Uniform Gifts to Minors Act (UGMA):
Legislation that provides a tax-effective manner of transferring property to minors without the complications of trusts or guardianship restrictions.
Curb Appeal:
The appearance of a home from the street.
Home Warranty:
An agreement that ensures the structural soundness of a home.
Why is homeownership a great investment?
- It’s a forced savings plan.
- It’s an inflation hedge.
- It grows virtually tax free.
Land Survey:
A survey that shows where one’s property lines begin and end.
Appreciation:
An increase in value
Home Inspector:
An individual who inspects homes for defects prior to the closing of a home sale to protect the buyer or lender’s investment.
Timeshare:
Vacation property in which a company sells a small segment of time to a customer; the costs of running the property are shared among all of the owners who bought into the timeshare.
What are horrible Mortgage Options?
- ARM 2. Reverse Mortgages 3. Accelerated or Biweekly payoff 4. Tax advantages of a Mortgage.
Reverse Mortgage:
Used to release the home equity in a property. The homeowner either makes no payments and the interest is added to the lien of the property, or the homeowner receives monthly payments thereby increasing the debt each month.
Accelerated Payments:
Biweeklly mortgage payments that allow for one additional payment on your mortgage annually
4 basic ways to finance a home?
Conventional loan, FHA, VA (Veterans Administration), Owner Financing.
Conventional Loan:
Mortgage obtained through the Federal National Mortgage Association (FNMA), which insures against default; generally includes a down payment of 5-20% or more.
Private Mortgage Insurance (PMI):
Policy paid by the mortgage borrower that protects the lender against loss resulting from default on a mortgage loan.
Federal Housing Administration (FHA) Loan:
Type of loan that is issued by the Federal Housing Authority; geared toward providing a mortgage to moderate- and low-income families that would not otherwise be able to afford a mortgage.
Owner Financing:
Type of mortgage in which the existing owner acts as the mortgage holder; payments are made to the owner rater than to a mortgage company or bank
