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Senior Year > Personal Financial Management - Chapter 4 > Flashcards

Personal Financial Management - Chapter 4 Flashcards

0
Q

Co-signing

A

Taking responsibility for someone else’s loan

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1
Q

Cash advance

A

Charges of 400% and up for their services

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2
Q

Loaning money to a friend or relative

A

Strains / destroys relationships

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3
Q

You take responsibility for a loan that probably won’t get paid back if you…

A

Co-sign a loan

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4
Q

80% of…

A

Millionaires are first generation millionaires –> they started with nothing

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5
Q

What services are only out to benefit the owners of their company? (4)

A

Cash advance

Rent-to-own

Title pawning

Tote-the-note-lots

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6
Q

The lottery and gambling are…

A

Forms of taxes that target the poor and people who can’t do math

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7
Q

The typical millionaire drives…

A

Reliable used cars in order to avoid car payments

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8
Q

What is the average car payment per month over how many months?

A

$464/per month for over 64-months

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9
Q

Leasing (3)

A

The most expensive way to operate and finance a vehicle

Can write-off your paid-for car on taxes, if you own a business, without paying payments

Can minimize money lost on things that go down in value by buying slightly used

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10
Q

A new car loses…

A

70% of its value in its first 4 years

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11
Q

Never take out more than a __ __ ___ rate mortgage

A

15 year fixed

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12
Q

It’s never wise to take out an ___ or ____ _____ if you know you’ll be moving, because…. (2)

A
  • ARM or a balloon mortgage

- they will foreclose, the ARM transfers the risk of higher interest rates to you

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13
Q

A debit card card…

A

Can do whatever a credit card can do but is better (can rent a car and can make a purchase online, or by phone)

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14
Q

You spend ___ to ___ less when using ____ rather than ____ (3)

A

12-18%

Cash

Plastic

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15
Q

Teens are a huge target of… (2)

A

Credit card companies

About 80% of college graduates have credit card debt before they even get a job

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16
Q

The home equity loan is BAD for…

A

Consolidation and isn’t a substitute for the emergency fund

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17
Q

Debt consolidation is bad because… (3)

A

It saves little or no interest

You can’t borrow your way out of debt

Smaller payments = more time spent in debt

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18
Q

The borrower is a ___ to the lender

A

SLAVE

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19
Q

The fastest growing group of bankruptcy filers consist of…

A

People under 25 years old

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20
Q

Car payments are…

A

NOT a way of life

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21
Q

You don’t need to build your credit score by…

A

Applying for a credit card

22
Q

Best way to beat debt?

A

Quit borrowing money and live on less than what you make

23
Q

Reasons people think a home equity loan is good (2)

A

Tax refund

Substitute for emergency fund

24
Q

Pay off debts….

A

SMALLEST TO LARGEST

25
Q

What appreciates and what depreciates? (2)

A

The value of your house appreciates

The value of your car depreciates

26
Q

First charge card in the U.S.?

A

Diners club

27
Q

JC penny =

A

James cash penny —> didn’t like debt

28
Q

The first debt in the debt snowball is the one with the highest interest rate

A

False

29
Q

78% of Americans…

A

Don’t pay off their card every month

30
Q

Why do people go into debt when they know that they will have to pay more for an item once they figure interest?

A

You spend 12-18% more than if you use cash

31
Q

Why are teens such a major target of the credit card industry?

A

Adults have all the credit card offers they can get, so they advertise to teens.

32
Q

Why is it better to buy a used car instead of a brand new vehicle?

A

The car loses value when you leave the lot so you pay more than its worth

33
Q

Annual fee

A

Fee charged by a credit card company for the use of their credit card

34
Q

Annual percentage rate (APR) (2)

A

Cost of borrowing money on an annual basis

Takes into account the interest rate and other related fees on a loan

35
Q

Adjustable rate mortgage (ARM) (3)

A

Home loan secured by a deed of trust or mortgage in which the interest rate will change periodically (I.e. Annually)

Typically adjusted based on a published index such as the treasury bill or LIBOR

Brought on as a result of high interest rates in the early 1980s as a way for banks to transfer the risk of higher rates to the consumer

36
Q

Balloon mortgage (2)

A

Home loan in which the sum of the monthly payments is insufficient to repay the entire loan

A final payment comes due, which is a lump sum of the remaining principal balance

37
Q

Credit

A

Money owed/loaned

38
Q

Credit card

A

Tool used to finance a purchase

39
Q

Credit limit

A

The maximum amount of credit a lender will extend to a customer

40
Q

Debit card (3)

A

Type of card, often bearing the seal of a major credit card company

issued by a bank and used to make purchases

unlike a credit card, the $ comes directly out of a checking account (aka a check card)

41
Q

Debt consolidation

A

Act of combining all debts into one monthly payment, typically extending the terms and the length of time required to repay the debt

42
Q

Debt snowball (3)

A

Preferred method of debt repayment

Includes a list of all debts organized from smallest to largest balance

Minimum payments are made to all debts except for the smallest, which is attacked with the largest possible payments

43
Q

Depreciation (2)

A

A decline in the value of property

Opposite of appreciation

44
Q

Finance charge

A

The total dollar amount you pay to use credit

45
Q

Foreclosure

A

The 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

46
Q

Grace period

A

Time period during which a borrower can pay the full balance of credit due with no finance charges

47
Q

Home equity loan (HEL) (2)

A

Credit line offered by mortgage lenders that allows a homeowner to borrow money against the equity in their home

Uses your home as collateral to borrow money

48
Q

Introductory rate (3)

A

A temporary interest rate

Advertised as a low APR to entice customers to apply for a credit card

After the introductory period, the interest rate will increase to the regular APR

49
Q

Lease

A

A long-term rental agreement, and a form of secured long-term debt

50
Q

Loan term

A

The length of time you have to pay off a loan

51
Q

Myth

A

Information that’s been passed on but isn’t true

52
Q

Paradigm (2)

A

Your belief system

The way you see or perceive things

53
Q

Tax deduction

A

An expense that a tax payer is allowed to deduct from taxable income

Senior Year (31 decks)

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