Personal Finance Flashcards
Rate of Return
the net gain or loss of an investment over a specified time period
High-Yield Savings Account
higher APY, but often, you won’t earn enough over the long-term to account for inflation; rates fluctuate, withdrawal limits, minimum deposit requirements; there are better choices for long term investments
APY/Annual Percentage Yield
the total interest you earn on money in an account over one year
Compounding Period
the time intervals between when interest is added to the account (annually, semi-annually, quarterly, monthly, daily)
APY Vs. Interest Rate
APY is the total interest you earn on money in an account over one year, whereas interest rate is simply the percentage of interest you’d earn on a savings account, investment or loan. In other words, the interest rate of an account is just one component of the account’s APY, which also factors in how often your interests compounds.
Money Market Accounts
combine features of a regular savings account with features of a checking account
Fair Credit Reporting Act
regulate the collection of credit information, which is frequently used to determine mortgage and lending rates. The law limits who can access a consumer’s credit history, and prohibits lenders from providing outdated or inaccurate information. The law also allows consumers to read their own credit reports, and to contest any inaccurate information
Fair Debt Collection Practices Act (FDCPA)
limits the actions of third-party debt collectors when attempting to collect debts on behalf of another person or entity
CAN-SPAM Act
governs email communication; Recipients have the right to stop being contacted
Gramm-Leach-Bliley Act (GBLA)
requires all U.S. financial institutions to reveal in writing how they handle, share, and protect consumers’ information
Children’s Online Privacy Protection Act
governs what information websites directed to children under 13 years of age can collect from their visitors
Fair Housing Act
protects buyers and renters of housing from being discriminated against by sellers, landlords, or financial institutions
Dodd-Frank Act
sweeping reform of U.S. financial regulations
IRAs vs. 401(k)
401(k)s are offered through employers, whereas IRAs are opened by individuals through a broker or a bank
When should you receive your W-2 from your employer?
January 31
When is the deadline to file your taxes?
April 15; an extension will give you an extra 6 months to October
Form 1040
taxpayers use to file their annual income tax return; can report all types of income, deductions, and credits
Form 1040EZ
a simplified form used by taxpayers that do not require the complexity of the full 1040 tax form; Your filing status was single or married filing jointly. You did not claim anyone as your dependent. You (and your spouse, if you’re filing jointly) were under age 65 in the relevant tax year, and not blind. Your taxable income was less than $100,000.
Form 1040A
a simplified version of Form 1040 that limits the number of tax credits; income must be less than $100,000
1040 vs. 1040A vs. 1040EZ
The simplest IRS form is the Form 1040EZ. The 1040A covers several additional items not addressed by the EZ. And finally, the IRS Form 1040 should be used when itemizing deductions and reporting more complex investments and other income.
Form 1099
a tax form issued by interest-paying entities, such as banks, investment firms, and other financial institutions, to taxpayers who receive interest income of $10 or more.
How many federal income tax brackets are there? What is the range?
7 brackets ranging from 10% to 37%
Venture Capital
capital invested in a project in which there is a substantial element of risk, typically a new or expanding business
What is the 401(k) plan for public entities?
403(b)
Fiduciary
someone who manages money or property for someone else; must manage money for benefit of other party and not your own
Consumer Report
contain information on an individual that is not in their credit report, including their “character, general reputation, personal characteristics, or mode of living” and are most often used by employers to check on job applicants
Express Warranty
when a seller makes a guarantee to the buyer that the product/service being offered has certain qualities
Implied Warranty
a guarantee that is not written down or explicitly spoken
General Liability Insurance
property damage and/or injuries to another person caused by an accident in which you’re at fault
Property Insurance
provides financial reimbursement to the owner or renter of a structure and its contents in case there is damage or theft—and to a person other than the owner or renter if that person is injured on the property
Retail Bank
offer members of the general public financial products and services such as bank accounts, loans, credit cards and insurance
Commercial Banks
concentrate on supporting businesses
Cooperative Banks
typically local or community-based associations whose members help determine how the business is operated. They’re run democratically and they offer loans and banks accounts, among other things.
Bank vs. Credit Union
banks are typically for-profit institutions while credit unions are not-for-profit and distribute their profits among their members
Wealth Management
an investment advisory service that combines other financial services to address the needs of affluent clients
Check Register
used to record financial transactions in cash
Bank Statement
a list of all transactions for a bank account over a set period, usually monthly
Components of a Credit/FICO Score
payment history (35%), amounts owed (30%), length of credit history (15%), new credit (10%) and credit mix (10%)
Credit Bureau
companies that compile and sell credit reports; Equifax, Experian, and TransUnion
Debt Consolidation
a form of debt refinancing that entails taking out one loan to pay off many others
Debt Avalanche vs. Snowball
Avalanche: Pay off your highest-interest debt first; pay less overall
Snowball: Pay off your smallest balances first; builds motivation
Truth in Lending Act
ensures that creditors provide complete and honest information
Equal Credit Opportunity Act
prevents creditors from discriminating against individuals
Fair Debt Collection Practices Act
established rules for debt collectors
Credit Card Statement
A summary of the transactions on your account—your payments, credits, purchases, balance transfers, cash advances, fees, interest charges, and amounts past due
Credit Rating vs. Credit Score
Credit ratings are expressed as letter grades and used for businesses and governments. Credit scores are three-digit numbers used for individuals and some small businesses
Credit Rating
an evaluation of the credit risk of a prospective debtor;
Escrow
Funds or assets held in escrow are temporarily transferred to and held by a third party, usually on behalf of a buyer and seller to facilitate a transaction. “In escrow” is often used in real estate transactions whereby property, cash, and the title are held in escrow until predetermined conditions are met
How does credit availability change with the business cycle?
Peak=high availability
Trough=contractionary phase/low availability
Tax Deductions Vs. Credits
Deductions can reduce the amount of your income before you calculate the tax you owe. Credits can reduce the amount of tax you owe or increase your tax refund.
HMO/Health Maintenance Organization
delivers all health services through a network of healthcare providers and facilities; least freedom to choose providers; require referal to see a specialist
PPO/Preffered Provider Organization
A moderate amount of freedom to choose your health care providers – more than an HMO; you do not have to get a referral from a primary care doctor to see a specialist; Higher out-of-pocket costs if you see out-of-network doctors vs. in-network providers
POS/Point of Service Plan
blends features of an HMO with a PPO; requires referrals; You can see out-of-network doctors, but you’ll pay more.
Gated Vs. Non Gated
Refers to the need to obtain a referral from your primary care physician before seeing a specialist. With a “Gated” plan, you need a referral, with a “Non-Gated” plan, you don’t.
5 Cs of Credit
Most lenders use the five Cs—character, capacity, capital, collateral, and conditions—when analyzing individual or business credit applications
Exemption Vs. Deduction
both reduce your taxable income; The number of exemptions you can claim depends on your filing status and the number of dependents you have. The kinds of deductions you can claim, however, depend on your expenses.
Bonds Vs. Debentures
Bonds are debt financial instruments issued by financial institutions, big corporations, and government agencies having the backing of collaterals and physical assets. Debentures are debt financial instruments issued by private companies but are not backed by any collaterals or physical assets.
Bibliography
a detailed list of all the sources consulted and cited in a research paper or project
Warranty vs. Guarantee
A guarantee is a promise that something is of good quality and will perform the way it is intended to. A warranty is an assurance issued to the consumer, which is attached to a product.
Commercial Bank vs. Investment Bank
investment banks typically raise money by selling securities (like stocks and bonds). On the other hand, commercial banks use consumer deposits to fund loans and mortgages, and the interest on those loans becomes profit for the bank.
Ownership Investments
things you buy while expecting an appreciation in value; stocks, real estate, precious objects, and businesses
Lending Investments
debts you buy, expecting to be repaid; bonds, certificates of deposit, and Treasury Inflation-Protected Securities (TIPS)
Good Debt
debt the helps put you in a better position; taking out a mortgage, buying things that save you time and money, buying essential items, investing in yourself by borrowing for more education or to consolidate debt
Store-Value Card
gift card
Career vs. Occupation
Occupation: principal work or business, specifically as a means of earning a living
Career: an occupation undertaken for a significant period of one’s life; broader concept than occupation
Human Capital
the skills, knowledge, and experience possessed by an individual or population, viewed in terms of their value or cost to an organization or country
money
any item or verifiable record that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular country or socio-economic context
elements of capitalism
private ownership, the motive for profit, the ability for businesses to compete in the free market, and minimal intervention in government
voluntary exchange
the act of buyers and sellers freely and willingly engaging in market transactions
equity
or economic equality, is the concept or idea of fairness in economics, particularly in regard to taxation or welfare economics
factors of production
land, labor, capital, entrepreneurship
market value
how much something is worth in a competitive marketplace
CPI
consumer price index; measures inflation and purchasing power; measures the average change in price over time of a market basket of consumer goods and services
components of GDP
consumption, investment, government expenditure, net exports
“Investment” in GDP
purchase of new capital goods
“consumption” in GDP
private consumption expenditures by households and non-profit organizations
capital stock
value of a company’s shares held by outside investors
GNP
gross national product; value of all products and services produced by the citizens of a country both domestically, and internationally
NDP
net domestic product; gross domestic product minus depreciation on a country’s capital goods
NI
national income; the money value of all the final services and goods produced in an economy during a given period of time. It includes the incomes of all factors of production, such as rent, wages, profits, and interest
PI
personal income; personal income refers to the total earnings of an individual from various sources such as wages, investment ventures, and other sources of income
NI vs. PI
Personal income refers to the money received by factors of production, whereas national income represents the income generated by these factors
DI
disposable income; income minus taxes
absolute advantage
The ability of an actor to produce more of a good or service than a competitor
comparative advantage
The ability of an actor to produce a good or service for a lower opportunity cost than a competitor
balance of trade
difference between a country’s imports and exports
Currency appreciation and depreciation
value of currency increases or decreases over time
monopolistic competition
a type of imperfect competition such that there are many producers competing against each other, but selling products that are differentiated from one another and hence are not perfect substitutes (Restaurants, hair salons, household items, and clothing)
oligopolisitc competition
a competitive situation in which there are only a few sellers (of products that can be differentiated but not to any great extent); each seller has a high percentage of the market and cannot afford to ignore the actions of the others (automobiles, airlines, pharmaceuticals)
imperfect competition
the situation prevailing in a market in which elements of monopoly allow individual producers or consumers to exercise some control over market prices (includes monopolies and oligopolies)
perfect competition
market in which buyers and sellers are so numerous and well informed that all elements of monopoly are absent and the market price of a commodity is beyond the control of individual buyers and sellers (agricultural markets, foreign currency exchange markets)
monopsony
market structure with only one buyer (U.S. government, miners in mining towns)
antitrust laws
prohibit conduct by a single firm that unreasonably restrains competition by creating or maintaining monopoly power
stock market
process and facilitation of investors buying and selling stocks with one another
stock exchange
the actual intermediary that connects buyers with sellers (NYSE)
stock index
numerical representation of a group of stocks that is used to track their collective performance (S&P 500, Dow Jones, Nasdaq)
Who controls interest rates?
The Federal Reserve
Income tax
levied by federal and most state governments; “progressive”
Sales tax
levied by state governments; “regressive”
Property tax
levied by local governments; “regressive”
Excise tax
Excise taxes are taxes imposed on certain goods, services, and activities. Taxpayers include importers, manufacturers, retailers, and consumers, and vary depending on the specific tax (can be levied by federal, state, and local governments)
Specific tax
refers to the excise tax imposed which is based on weight or volume capacity or any other physical unit of measurement
Ad Valorem or Value-added tax
refers to the excise tax which is based on selling price or other specified value of the goods/articles
Monetary policy
revising interest rates and changing bank reserve requirements (controlled by the Fed)
When the Fed lowers interest rates…
financial institutions can procure funds at low interest rates. This enables them to reduce their lending rates on loans to firms and households.
fiscal policy
the use of government taxing and spending to influence a country’s economy; influences aggregate supply and demand (controlled by the executive and legislative branch) (two main tools of fiscal policy are taxes and gov’t spending)
Expansionary fiscal policy
increases aggregate demand directly through an increase in government spending (“loose”)
reserve ratio/reserve requirement
sets the minimum amount that a commercial bank must hold in liquid assets
open market operations
the purchase and sale of securities in the open market by a central bank to manage the money supply
Discount rate/bank rate
rate of interest which a central bank charges on its loans and advances to a commercial bank
Corporation
a company or group of people authorized to act as a single entity (legally a person) and recognized as such in law, limited liability (Double tax: The profit of a corporation is taxed to the corporation when earned, and then is taxed to the shareholders when distributed as dividends)
sole proprietorship
(unlimited personal liability) (self-employment tax, income tax)
partnership
(Unlimited personal liability unless structured as a limited partnership)(Self-employment tax (except for limited partners, income tax) (no more than 50 members)
Limited liability company (LLC)
(One or more people) (Owners are not personally liable) (Self-employment tax, Personal tax or corporate tax)
Non-profit corporation
(Tax-exempt, but corporate profits can’t be distributed)
labor union
organization of workers intent on “maintaining or improving the conditions of their employment (“organized labor”)
circular flow model
model of the economy in which the major exchanges are represented as flows of money, goods and services, etc. between economic agents. The flows of money and goods exchanged in a closed circuit correspond in value, but run in the opposite direction.
4 factors of production
land, labor, capital, entrepreneurship
business cycle
expansion, peak, contraction, and trough
production possibility frontier
illustrates the possible quantities that can be produced of two products if both depend upon the same finite resource for their manufacture
brokerage firm
middleman who connects buyers and sellers to complete a transaction for stock shares, bonds, options, and other financial instruments
capital deepening
capital per worker is increasing
capital widening
situation where the stock of capital is increasing at the same rate as the labor force and the depreciation rate, thus the capital per worker ratio remains constant
money growth
an increase in the amount of money in an economy; money supply
lagging economic indicator
an economic statistical indicator that changes after macroeconomic conditions have already changed
elasticity
measures change in quantity relative to change in PRICE
Earned Income Tax Credit
a federal tax credit for working people with low and moderate incomes; It boosts the incomes of workers paid low wages while offsetting federal payroll and income taxes
What caused stagflation in the 70s?
monetary and fiscal policy; oil embargo
HMO/Health Maintenance Organization
delivers all health services through a network of healthcare providers and facilities; least freedom to choose providers; require referal to see a specialist
PPO/Preffered Provider Organization
A moderate amount of freedom to choose your health care providers – more than an HMO; you do not have to get a referral from a primary care doctor to see a specialist; Higher out-of-pocket costs if you see out-of-network doctors vs. in-network providers
EPO/Exclusive Provider Organization
A moderate amount of freedom to choose your health care providers – more than an HMO; you do not have to get a referral from a primary care doctor to see a specialist; No coverage for out-of-network providers; Lower premium than a PPO
POS/Point of Service Plan
blends features of an HMO with a PPO; You can see in-network providers your primary care doctor refers you to. You can see out-of-network doctors, but you’ll pay more.
Gated Vs. Non Gated
Refers to the need to obtain a referral from your primary care physician before seeing a specialist. With a “Gated” plan, you need a referral, with a “Non-Gated” plan, you don’t.
Transitional Employment
a strategy that places individuals in temporary jobs with the goal of preparing them for permanent job placement. Transitional employment is offered to unemployed or underemployed individuals who need help integrating back into the workforce
Affirmative Action
the practice or policy of favoring individuals belonging to groups regarded as disadvantaged or subject to discrimination; reverse discrimination
Equal Employment Opportunity
refers to fair, unbiased treatment in the workplace; creates a culture that doesn’t accept any kind of discriminatory behavior
Civil Rights Act
prohibits discrimination against women and minorities in the workplace
Americans with Disabilities Act/ADA
prohibits discrimination against people with disabilities in several areas
SMART Goals
Specific, Measurable, Achievable, Relevant, and Time-Bound
OSHA/Occupational Safety and Health Administration requirements
Prevent workplace injuries and illnesses
Pre-tax Deductions
any money taken from an employee’s gross pay before taxes are withheld from the paycheck (Medical and dental benefits, 401(k) retirement plans, group term life insurance)
FICA/Federal Income Contributions Act
mandatory payroll taxes; Social Security (6.2%) and Medicare (1.45%); employee and employer each pay 7.65%
Group Term Life Insurance
provides term life insurance as a benefit to eligible, enrolled employees or group members of an organization at a lower cost than what they would pay for an individual term life policy
Mandatory/Statutory Benefits
medicare and social security contributions, worker’s compensation insurance, unemployment insurance and, under some state and local laws, paid sick leave; applicable large employers (50 or more employees) must also offer health insurance and family/medical leave
Affordable Care Act (Obamacare)
increases health insurance coverage for the uninsured and implements reforms to the health insurance market
Discretionary/Fringe Benefits
various types of non-wage compensation provided to employees in addition to their normal wages or salaries; not required by law (tuition assistance, childcare reimbursement, cafeteria subsidies)
Salary Schedule
a system that determines how much an employee is paid dependent on the employee’s rank or status and the employer’s salary structure with grades that define the range of pay for an employee
Variable Pay
the portion of sales compensation determined by employee performance; incentive pay
Comparable Worth
concept aimed at leveling out salaries based on a job’s value, or worth, to a company; Equal Pay for Equal Work
Broad banding
(a pay structure that consolidates a large number of narrower pay grades into fewer bands with wider salary ranges
Strategic Compensation
strategies that help companies manage the total employee compensation while ensuring growth, equity, and transparency
Piecework Plan
paying an employee a fixed pay rate for each unit they produce
Merit/Incentive Pay
provides base-pay increases or bonuses for workers who perform their jobs effectively
Employee Rewards/Recognition Programs
a system that an organization sets up to celebrate employee successes in an open forum and reward them with monetary and non-monetary perks for meeting goals or embodying core values
Pay Rate
money received divided by hours worked
Team-Based Compensation
financially compensates employees for the goals they meet as a collective group, rather than as individuals (bonuses)
Coaching vs. Counseling
Coaching accepts existing performance and looks forward to even better performance from the employee. Counseling looks back at unacceptable performance to instruct an employee to reach satisfactory performance in the future
Active Listening
listen attentively to a speaker, understand what they’re saying, respond and reflect on what’s being said, and retain the information for later
Appraisal
the process of assessing an employee’s job performance and determining his or her suitability for future assignments
360-Degree Feedback
assessment system or process in which employees receive confidential, anonymous evaluations from the people who work around them (subordinates, peers, colleagues, and supervisor)
Personnel Law/Labor Law
mediate the relationship between workers, employing entities, trade unions, and the government
IRCA/Immigration Reform and Control Act
prohibits employers from knowingly hiring, recruiting, or referring for a fee any alien who is unauthorized to work
Form I-9
Employment Eligibility Verification, a United States Citizenship and Immigration Services form; used to verify the identity and legal authorization to work of all paid employees in the United States
Exempt Employees
usually hold administrative, professional, or executive positions. They’re “exempt” from the Fair Labor Standards Act overtime regulations and, therefore, not entitled to overtime pay
Non-exempt Employees
typically paid hourly and perform more manual or technical duties, entitled to overtime pay
Negligent Hiring
The employer did not exercise reasonable care in hiring the employee, and now the employee has done something illegal
Fair Labor Standards Act/FLSA
creates the right to a minimum wage, and “time-and-a-half” overtime pay when people work over forty hours a week for non-exempt employees; it also prohibits employment of minors in “oppressive child labor”
ADEA/Age Discrimination in Employment Act
protects certain applicants and employees 40 years of age and older from discrimination on the basis of age in hiring, promotion, discharge, compensation, or terms, conditions or privileges of employment; prohibits involuntary retirement
Family and Medical Leave Act
requiring covered employers to provide employees with job-protected, unpaid leave for qualified medical and family reasons
Worker Adjustment and Retraining Act
protects employees, their families, and communities by requiring most employers with 100 or more employees to provide notification 60 calendar days in advance of planned closings and mass layoffs of employees
Older Worker Benefit Protection Act
prohibits age discrimination in the provision of fringe benefits, such as life insurance, health insurance, disability benefits, pensions, and retirement benefits
Employee Retirement Income Security Act/ERISA
sets standards to protect the interests of employee benefit plan participants and their beneficiaries
Wagner Act/National Labor Relations Act
guarantees the right of private sector employees to organize into trade unions, engage in collective bargaining, and take collective action such as strikes
Taft-Hartley Act/Labor Management Relations Act
outlawed closed shops, giving workers the right to decline to join a union. It permitted union shops only if a majority of employees voted for them
Privacy Act of 1974
governs the collection, maintenance, use, and dissemination of personally identifiable information about individuals that is maintained in systems of records by federal agencies; require employers to let their employees know before any of their personal data is collected or processed
Telecommuting
employees working from their own homes or other remote locations, connecting with coworkers via online platforms; remote work
Job Sharing
an employment arrangement where two people, or sometimes more, are retained on a part-time or reduced-time basis to perform a job normally fulfilled by one person working full-time. This leads to a net reduction in per-employee income
Flexible Scheduling
allows employees a level of autonomy to create their own schedules and find a work-life balance that works for them
Open-Shop
a workplace that allows incoming recruits and existing employees to elect whether to join a union, rather than making it a requirement for employment
Closed-Shop
employer agrees to hire union members only, and employees must remain members of the union at all times to remain employed
Binding Arbitration
a form of dispute resolution in which the involved parties submit their arguments and evidence to a neutral arbitrator who reviews it, and then makes a final, legally binding decision on behalf of the parties
Impasse
occurs when the two sides negotiating an agreement are unable to reach an agreement; deadlock
Labor Strike
work stoppage caused by the mass refusal of employees to work
Mediation
impartial third party neutrally assists disputing parties in resolving conflict
Mediation vs. Arbitration
With mediation, the final decision is a reached agreement between the two conflicting parties, while arbitration calls on an arbitrator to analyze the case details and reach a verdict
Screening
process used to determine a job applicant’s qualifications and potential job fit for a position to which they have applied; comes in right after candidate sourcing and involves skimming through resumes and cover letters
5 Cs of Communication
Clear, concise, complete, cohesive, courteous
Reference Manual
intended to assist users in using a particular product, service or application.
Periodical
anything that comes out periodically. Magazines, newspapers, and journals
Encyclopedia
a book or set of books giving information on many subjects
Skimming Vs Scanning
Skimming is reading rapidly in order to get a general overview of the material. Scanning is reading rapidly in order to find specific facts.
