Week 2: Maximizing Income Flashcards
ROI (Rate of I…)
Dollar amount gained from original principle
Rate of Return
Percentage amount gained from original principle
TDF (Target Date Fund)
- ## Risk level automatically changes from high risk to low risk
Income
The money you receive in exchange for providing a good or service or through investing capital
Single underline income
Labor
Double underline income
Asset classes
High income is a
Tool for building wealth
Capital
Is the asset that can be used/leveraged to grow wealth. You leverage something to get something in return.
What asset class would a financially literate person focus more on
Have investments in all four of them— diversification
What are the four asset classes?
Cash
Fixed Income
Alternative Investment
Equities
Political capital v social capital
Two types on income
Active and passive
What is passive income and what are examples
Your capital grows wealth for you
Capital gains (profit from selling/ developing an asset)
Inheritance
Social Security
Pension Payments (retire payment)
Mutual fund vs index funds
Mutual funds= actively managed with higher fees
- allows investors to pool their money to purchase shares in a diversified portfolio (high risk than index fund)
index Funds= equity investment following a group of stocks with similar characteristics
- lower risk because its a larger slice of the pie
How to maximize active income
- Professional identity: present yourself in such way that employers want to hire, promote, and retain you.
- Know your market value:
- Brave enough to negotiate: to increase your income
- Ask about COLA trends
Maximize income in your personal expenses
zero based budgeting= name dollars/ track spending
Direct deposit
Fixed Income
Pays investor a set return for a set number of years and returns principle after a number of years
- bonds and annuities
Bonds
Not equity
A government issued investment that provides a set rate of return for a set period, and pays back the original principle
Annuities
Generally for retirees
Offer a guaranteed income stream. Doesn’t change, and you know you’re going to get it.
What are the two types of Cash
CDs (Certificate of Deposit) and Govt issued T-Bill (treasury bill)
Certificate of Deposit (CDs)
A cash investment tool that locks up a selected amount of money and pays a set return for a set duration. guaranteed by the bank
Government issued T-bill
Issued investment offering a guaranteed need return if the consumer allows the tool to mature in full.
