PF FINAL Flashcards
fixed expense
expense that remains the same from month to month
variable expense
expense that varies in dollar amount from month to month but that you can expect to have every month
intermittent expense
expense that occurs at various times throughout the year and tends to be in large, lump sums
discretionary expense
expense for things you don’t need
interest rate
the percentage of principal charged by the lender for the use of its money
compound interest
interest paid on interest previously earned
principal
the initial amount of money invested or borrowed
rate of return
the measure of an investment’s profit or loss, usually expressed as a percentage of the initial investment
inflation
the persistent rise in the cost of goods and services over time
time value of money
concept that an amount of money is worth more today than in the future due to earning potential
What is the difference between revolving credit and installment credit?
Installment credit gives borrowers a lump sum, and fixed, scheduled payments are made until the loan is paid in full. Revolving credit allows a borrower to spend the money they have borrowed, repay it, and borrow again as needed.
federal student loans
loans made by the government with terms and conditions set by law; often have a lower fixed interest rate
private student loans
loans made by banks, credit unions, or other organizations with terms and conditions set by the lender, including higher or variable interest rates
subsidized loans
federal student loans that are based on a student’s financial need and don’t accrue interest for a set period of time
unsubsidized loans
federal student loans that aren’t based on a student’s financial need and start accruing interest immediately
FAFSA
the federal application required to receive any financial aid, including scholarships, grants, or loans offered through a college or university
What is the difference between scholarships and grants?
Grants tend to be based on financial need, while scholarships tend to be based on merit.
Policy
the contract between an insurance company and the insured individual
coverage
the amount of liability protection offered to an individual through an insurance policy
premium
the amount of money paid for an insurance policy
deductible
the amount of money you will pay out of pocket before the insurance company will make a payment
claim
a formal request by a policyholder to their insurance company for compensation for a covered loss
health insurance
coverage for an individual’s (or family‘s) medical expenses from illness or injury
liability insurance
protection against claims resulting from personal injury or property damage as the result of an auto accident
long-term care insurance
a type of insurance that covers some or all of the costs of nursing home care, assisted living, in-home care, and other end-of-life care
homeowners insurance
protection for losses to a private residence and the possessions within it, as well as liability coverage against accidents in the home or on the property
renters insurance
protection for destroyed or stolen personal property for a renter
disability insurance
a type of insurance that will replace a portion of the policyholder’s income in the event that the policyholder becomes disabled and is unable to work
affordable care act
also known as Obamacare; the health care reform law enacted in 2010, intended to make affordable health insurance more available
health savings account
a tax-exempt savings account dedicated to health care costs; only available for individuals on a high-deductible health plan (HDHP)
What is the difference between excise and sales tax?
The excise tax only applies to specific goods, usually considered nonessential. Excise tax is typically already included in the purchase price of an item, so you don’t really see it.
Tax bracket
the income ranges in which tax rates apply
Tax return
a report that a taxpayer has to submit annually to the government and is used to determine a person‘s tax liability
What is the difference between net and gross income?
Gross income is the amount you earn before taxes and other deductions are taken out, while net income is the total after deductions are applied.
standard deduction
the dollar amount people can subtract from their income before the tax is calculated
Investing
the process of setting money aside to increase wealth over time for long-term financial goals, such as retirement
stock market
a financial market that trades shares of ownership of public companies
stock
a security that represents part ownership or equity in a company
What is the difference between bull and bear market?
Bull market means prices will rise and bear market means prices have experienced a prolonged decline.
Diversification
the practice of dividing the money a person invests among different types of investments in order to lower risk
dividend
a distribution from the net profits of a company to its shareholders
