Personal Budget Flashcards
Risk tolerance
The ability to balance risk with potential reward
Any amount of money is worth more the sooner it’s received because of
interest
Core principle of finance
Provided that money can earn interest, any amount of money is worth more the sooner it’s received
Income retirement
need 60-70% of pre-retirement income to maintain standard of living
Estimate rate of return at
5-6%
Traditional IRAs
may lower current taxable income through deductible contributions
Roth IRAs
Don’t permit tax-deductible contributions
-withdrawals in retirement are tax free
Paying financial advisors
- Flat fee based on amount of money managed
- Hourly fees for personal advice (% of transaction)
- Ask how they are being paid
Budgeting
- Examine financial goals
- Identify current monthly income/expenses
- Evaluate the budget
- Monitor budget but be flexible
- Periodic expenses-consider separate account to handle irregular expenses, set up automatic transfer to extra account
- Emergency fund-3-6 months of expenses
3 primary credit agencies
- Equifax
- Experion
- Transunion
Credit decisions based on
Score and income, employment history and previous loan history
FICO scores based on
35% based on payment history
15% based on age/length of credit history
10% new credit/inquiries
10% types of accounts (mortgages/car loans/revolving debt/personal loans/payday loans)
30% what you owe
Credit Scores impact
- Availability of credit
2. Interest rate charged by lender
If turned down for credit a lender must
provide info about why they rejected
Negative info remains on report for
7 years
