Personal Finance

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

Leave a Reply

Your email address will not be published. Required fields are marked *