| Opportunity Costs | is what you give up by making a choice |
| Trade-Offs | cannot always be measured in dollars |
| Inflation risk | rising or falling (deflation) prices that cause changes in buying power |
| Interest rate risk | changes in the cost of money which can affect your costs and benefits |
| income risk | result from a loss of a job or encountering illness |
| personal risk | involves tangible and intangible factors that create a less than desirable situation such as health or safety concerns |
| liquidity risk | when savings and investments that have potential for higher earnings are difficult to convert to cash or to sell without significant loss in value |
| convenience users | pay off their balances every month |
| borrowers | do not pay their balances off every month |
| grace period | a time period during which no finance charges will be added to your account |
| finance charge | the total dollar amount paid to use credit |
| debit cards | electronically subtract money from your savings or checking account to pay for goods or services |
| store cards- | using a magnetic stripe technology to store information and track funds |
| smart cards | is a plastic card equipped with a computer chip that can store 500 times as much as a normal credit card |
| travel and entertainment cards | balances are due in full each month unlike credit cards Diners Club and American express |
| net worth | the difference between total assets and total liabilities |
| insolvency | the inability to pay debts when they are due because liabilities far exceed the value of assets |
| emergency fund | an amount of money you can obtain quickly in case of immediate need |
| variable interest rate | based on fluctuating rates in the banking systemm, such as the prime rate |
| secured loan | pledge property or other assests as collateral |
| copayment | a provision under which the insrued pays a flat dollar amount each time a covered medical service is received after the deductible has been met |
| comparison shopping | is the process of considering alternative stores brands and prices |
| impulse buying | is unplanned purchasing which can result in financial problems |
| national brand | are highly advertised items available in many stores |
| store brand | products sold by one chain of stores are low cost alternatives |
| unit pricing | standard unit of measurement to compare the prices of packages of different sizes |
| rebate | is a partial refund of the price of the product |
| warranties | a written guarantee from the manufacturer or distributor of a product that specifies the conditions under which the product can be returned, replaces, or repaired |
| service contracts | an agreement between a business and a consumer to cover the repair costs of a product |
| overdraft protection | is an automatic loan made to checking account customers to cover the amount of checks written in excess of the available |
| term insurance | life insurance protection for a specified period of time; sometimes called temporary life insurance |
| renewable term | the coverage ends at the conclusion of the term but could continue for another term |
| multiyear level term | straight term policy that guarantees that you will pay the same premium for the duration of your policy |
| conversion term | allows you to change from term to permanent coverage, this will have a higher premium |
| decreasing term | pays less to the beneficiary as time passes |
| return of premium term | returns all premiums of you survive to the end of your policy term |
| cash value | the amount received after giving up a life insurance policy |
| universal policy | a whole life policy that combines term insurance and investment elements |
| limited payment policy | charges premiums usually 20 or 30 years until the insured reaches a certain |
| variable life policy | premiums are fixed |
| adjustable life policy | able to change you coverage as your needs change |
| group life insurance | variation of term insurance and covers a large number of people |
| credit life insurance | used to pay off certain debts such as auto loans or mortgages, in the even that you die before they are paid in full |
| endowment life insurance | life insurance that provides coverage for a specific period of time and pays an agreed upon a sum of money to the policy holder of he or she is still living at the end of the endowment period |
| actual cash value | a claim settlement method in which the insured receives payment based on current replacement cost of a damaged or lost item, less depreciation |
| replacement value | a claim settlement method in which the full cost of repairing or replacing a damaged or lost item |
| asset allocation | the prices of spreading your assets among different types of investments to lessen risk |
| portfolio investing | securities in the portfolio |
| risk | chance of uncertainty of loss; also used to mean “the insured” |
| peril | the cause of possible loss |
| hazard | a factor that increases the likelihood of loss through some peril |
| personal risks | loss of income or life due to illness, disability, old age, or unemployment |
| property risks | include losses to property caused by perils such as fire or theft |
| liability risks | involve losses caused by negligence that leads to injury or property damage |
| negligence | is the failure to take ordinary or reasonable care in a situation |
| pure risks | are accidental and unintentional |
| speculative risk | is a risk that carries a chance of either loss or gain |
| risk management | is an organized plan for protecting yourself your family and your property |
| self insurance | is setting up a special fund perhaps from savings to cover the cost of a loss |
| deductible | the set amount that the policy holder must pay per loss on an insurance policy |
| appraisal | an estimate of the current value of property, can provide a good indication of the price you should set |
| leasing | is a contractual agreement with monthly payments for the sue of an automobile over a set time period, typically three, four, or five years |
| capitalized cost | which is the price of the vehicle |
| money factor | which is the interest rate being paid on the capitalized cost |
| payments schedule | which is the amount paid monthly and the number of payments |
| residual value | the expected value of the vehicle at the end of the lease |
| negotiation | may also be used in other buying situations to obtain a lower price or additional features |
| sticker price label | printed on vehicle with the suggested retail price |
| invoice price | the amount less than a sticker price |
| set price dealers | use no haggling car selling with the prices presented to be accepted or rejected as stated |
| low balling | when quoted a very low price that increases when add on costs are included at the last moment |
| high balling | when offered a very high amount for trade in vehicles with the extra amount made up increasing the new car price |
| lease | a legal document that defines the conditions of rental agreement |
| security deposit | usually one months rent |
| balance sheet | a financial statement that reports what an individual or a family owns and owes; also called a net worth statement of financial position |
| assets | cash and other tangible property with monetary |
| liquid assets | cash and items of value can be easily be converted into cash |
| real estate | includes a home a condominium, vacation property, or other land that a person or family owns |
| personal possession | are a major portion of assets for most people |
| investment assets | are funds set aside for long term financial needs |
| liabilities | amounts owed to others |
| current liabilities | debts that must be paid within a short time usually less than a year |
| cash flow | is the actual inflow and outflow of cash during a given time period |
| Cash flow statement | also called a personal income and expenditure |
| income | inflows of cash to an individual or a household |
| take home pay | earnings after deduction for taxes and other items also called disposable income less than 5% for people under 25 and more than 40% for people older |
| discretionary income | money left over after paying for housing, food, and other necessities |
| Fixed expenses | are payments that do not vary from month to month |
| variable expenses | are flexible payments that change from month to month |
| savings | provides safe storage of funds for future use commonly referred to as |
| time deposits | money in savings accounts and certificates of deposit are examples of savings plans |
| payment services | offer an ability to transfer money to others for daily business activities |
| demand deposits | checking accounts and other payment methods |
| borrowing | used by most people at some time during their lives |
| trust | a legal agreement that provides for the management and control of assets by one party for the benefit of another |
| asset management account | all in one account that includes savings checking, borrowing, investing, and other financial services for a single fee |
| deposit institutions | serve as intermediaries between suppliers and users of funds |
| commercial banks | a financial institutions that offers a full range of financial services to individuals, business, and givernment agencies |
| saving and loan assistance | which traditionally specialized in savings accounts and mortgages |
| mutual savings banks | financial institution that is owned by depositors and specializes in saving accounts and mortgage loans |
| credit union | a user owned, non profit, cooperative, financial institutions that is organized for the benefit of its members |
| non deposit institutions | offer various financial services |
| money market funds | a savings investment plan offered by investment companies with earnings based on investment in various short term financial goals |
| will | the legal declaration of a persons mind as to the disposition of his or her property after death |
| intestate | without a valid will |
| trust | a legal arrangement through which ones assets are held by a trustee |
| probate | the legal procedure of providing a valid or invalid will |
| holographic will | is a handwritten will that you prepare yourself |
| formal will | usually prepared with the help of an attorney |
| statutory will | prepared on preprinted from available from lawyers or stationary stores |
| executor | someone willing and able to perform the tasks involved carrying out your will |
| guardian | a person who assumes responsibility for providing children with personal care and managing the decease’s estate for them |
| codicil | a document that modifies provisions in an existing will |
| living will | a document that enables an individual while well to express the intention that life be allowed to end if he or she becomes terminally ill |
| power of attorney | a legal document authorizing someone to act on ones behalf |
| revocable trust | is one in which you have the right to end the trust or change its terms during your lifetime |
| irrevocable trust | is one that cannot be changed or ended |
| pension plans | is a retirement plan that is funded by an employer |
| defined contribution | an individual account of each employee to which the employer contributes a specific amount annually |
| 401 k | set aside a portion of your salary from each paycheck to be taken out from your gross pay and placed in a special account |
| vesting | is the right to receive at retirement age, based on your total earnings and years on the job |
| individual retirement account | is a special account in which the person sets aside a portion of income for retirement |
| regular IRA | annual contributions are not tax deductible but the earnings accumulate tax free |
| simplified employee pension | is an IRA funded by an employer |
| spousal IRA | lets you make contributions on behalf of your non working spouse if you file a joint tax return |
| roll over IRA | is a traditional IRA that lets you roll over TRANSFER all all or a portion of your tax deductible distribution from a retirement plan or other IRA |
| education IRA | allows individuals to contribute $2,000 per year toward the education of any child under the age 18 the contributions are not tax deductible |
| keogh plan | a plan in which tax deductible contributions fun the retirement of self employed people and their employees |
| tax avoidance | the use of legitimate methods to reduce ones taxes |
| tax evasion | the use of illegal actions to reduce ones taxes |
| capital gains | profits from the sale of a capital asset such as stocks, bonds, real estate |
| income dividends | are the earning a fund pays to shareholders from its dividend and interest income |
| capital gain distributions | are the payments made to a funds shareholders that result front he sale of securities in the funds portfolio |
| capital gain | the profit that results when you sell your shares in the mutual fund for more than you paid for them |
| turnover ratio | measures the % of f funds holdings that have changed or been replaces |
| reinvestment plan | a service provided by an investment company in which income dividends and capital gain distributions are automatically reinvested to purchase additional shares of the fund |
