Personal Finance Vocabulary Test

personal financial planning spending, saving, and investing your money so you can have the kind of life you want as well as financial security
goals the things you want to accomplish
values the beliefs and principles you consider important, correct, and desirable
opportunity cost what you give up when you make one choice instead of another
liquidity the ability to easily convert your financial resources into cash without a loss in value
service a task a person or a machine performs for you
good a physical object that is produced and can be weighed or measured
economics the study of the decisions that go into making, distributing, and using goods and services
economy consists of the ways in which people make, distribute, and use their goods and services
supply the amount of goods and services available for sale
demand the amount of good and services people are willing to buy
Federal Reserve System the central banking organization of the US
inflation the rise in the level of prices for goods and services
consumer a person who purchases and uses goods and services
interest the price that is paid for the use of another’s money
time value of money the increase of an amount of money as a result of interest or dividends earned
principal the amount of money you deposit and on which interest is paid
future value the amount your original deposit will be worth in the future based on earning a specific interest rate over a specific period of time
annuity a series of equal regular deposits
present value the amount of money you would need to deposit now in order to attain a desired amount in the future
job work you do mainly to earn money
career a commitment to work in a field that you find interesting and fulfilling
standard of living a measure of quality of life based on the amounts and kinds of goods and services a person can buy
trends developments that mark changes in a particular area
potential earning power the amount of money you may earn over time
aptitudes the natural abilities that people possess
interest inventories the tests that help you identify the activities you enjoy the most
demographic trends ways in which groups of people change over time
service industries provide services for a fee, will offer some of the greatest employment potential in coming years
internship a position in which a person receives training by working with people who are experienced in a particular field
cooperative education programs that allow students to enhance classroom learning with part-time work related to their majors and interests
networking a way of making and using contacts to get job information and advice
informational interview a meeting with someone who works in your area of interest who can provide you with practical information about the career or company you’re considering
resume a one- or two-page summary of your education, training, experience, and qualifications
cover letter the personal letter that you present along with your resume
cafeteria-style employee benefits programs that allow workers to choose the benefits that best meet their personal needs
pension plan a retirement plan that is funded at least in part by an employer
mentor an experienced employee who serves as a teacher and counselor for a less experienced person
money management planning how to get the most from your money
safe-deposit box a small, secure storage compartment that you can rent in a bank
personal financial statements documents that provide information about your current financial position and present a summary of your income and spending
balance sheet a financial statement that lists the items of value that you own, the debts you owe, and your net worth
net worth the difference between the amount you own and the debts you owe
assets any items of value that you own
liquid assets cash and items that can be quickly converted to cash
real estate land that a person or family owns and anything that is on it
market value the price at which you could sell property or an item
liabilities the debts that you owe
insolvency the condition that occurs if your liabilities are greater than your assets
cash flow the money that goes into and out of your accounts
income the money you receive, aka inflow
take-home pay aka net pay, the amount of income left after taxes and other deductions are taken out of your gross pay.
discretionary income the money left over after you have paid for the essentials
surplus extra money that can be spend or saved
deficit the situation that occurs if you spend more than you earn or receive
budget a plan for using your money in a way that best meets your needs and wants
consumer price index a measure of the changes in prices for commonly purchased goods and services in the US
budget variance the difference between the budgeted amount and the actual amount that you spend
down payment a portion of the total cost of an item that must be paid at the time of purchase
cooperative a nonprofit organization owned and operated by its members for the purpose of saving money on the purchase of goods and services
impulse buying purchasing items on the spur of the moment
open dating indicates the freshness or “shelf life” of a perishable product
unit pricing the use of a standard unit of measurement to compare the prices of packages that are different sizes
rebate a partial refund of the price of a product
warranty a written guarantee from the manufacturer or distributor that states the conditions under which the product can be returned, replaced, or reparied
service contract a separately purchased agreement by the manufacturer or distributor to cover the costs of repairing the item
fraud dishonest business practices that are meant to deceive, trick, or gain an unfair advantage
mediation the attempt by a neutral third party to resolve a conflict between a customer and a business through discussion and negotiation
arbitration process where a conflict between a customer and a business is resolved by an impartial third party whose decision is legally binding
small claims court court that deals with legal disputes that involve amounts below a certain limit
class-action suit a legal action on behalf of all the people who have suffered the same injustice
legal aid society one of a network of community law offices that provide free or low-cost legal assistance
automatic teller machine computer terminals that let you withdraw cash from your account
debit card aka cash card, allows you to withdraw money or pay for purchases from your checking or saving accounts
point-of-sale transaction using a debit card to purchase an item or service at a retail store, restaurant, or elsewhere
commercial bank a for-profit institution that offers a full range of financial services, including checking, savings, and lending
savings and loan association traditionally specialized in savings accounts and mortgage loans
credit union nonprofit financial institution that is owned by its members and organized for their benefit
certificate of deposit a time deposit that requires you to leave your money in a financial institution for a set amount of time
money market account a savings account in which the interest rate varies from month to month
rate of return the percentage of increase in the value of your savings from earned interest
compounding the process in which interest is earned on both the principal – the amount you deposited – and on any previously earned interest
annual percentage yield the amount of interest that a $100 deposit would earn, after compounding, for one year
overdraft protection an automatic loan made to you if you write a check for more money than you have in your account
stop-payment order a request that an institution not cash a particular check
endorsement the signature of the payee, the party to whom the check has been written to
bank reconciliation a report that accounts for the difference between the bank statement and your checkbook balance
credit an arrangement to receive cash, goods, or services now and pay for them later
creditor an entity to which money is owed
consumer credit the use of credit for personal needs
closed-end credit a one-time loan that you will pay back over a specified period of time and in payments of equal amounts
open-end credit a loan that has a certain limit maid available
annual percentage rate shows how much credit costs you on a yearly basis, expressed as a percentage
collateral form of security to help guarantee that the creditor will be repaid
simple interest the interest computed only on the principal
line of credit maximum amount of money the creditor has made available to you
grace period a time period during which no finance charges will be added to your account
finance charge the total dollar amount you pay to use credit
net income the income you receive (take home pay, allowance, gifts, interest on accounts, winnings, etc.)
minimum monthly payment the smallest amount you can pay and remain a borrower in good standing
credit rating a measure of a person’s ability and willingness to make credit payments on time
co-signing you agree to be responsible for loan payments if the other party fails to make them
debt collectors businesses that collect debts for creditors
indebtedness the condition of being deeply in debt
bankruptcy legal process in which some or all of the assets of a debtor are distributed among the creditors because the debtor is unable to pay his or her debts
lifestyle the way you choose to spend your time and money
mobility the ability to move easily from place to place
tenant a person who pays for the right to live in a residence owned by someone else
landlord the person who owns the property that you rent
lease a legal document that defines the conditions of the rental agreement between the tenant and the landlord
sublet to have a person other than the original tenant take over the rental unit and payments for the remaining term of the lease
security deposit an amount of money paid to the owner of the property by a tenant to guard against an financial loss that the tenant might cause
renters insurance a type of insurance that covers the loss of a tenant’s personal property as a result of damage or theft
equity the value of the home less the amount still owed on the money borrowed to purchase it
zoning laws regulations that limit how property in a given area can be used
earnest money a portion of the purchase price
escrow account an account in which money is held in trust until it can be delivered to the designated party
private mortgage insurance a special policy that protects the lender in case the buyer can’t make payments, or can’t make them on time
mortgage a long-term loan extended to someone who buys property
points extra charges that must be paid by the buyer in order to get a lower interest rate
amortization the balance of the loan is reduced every time you make a payment
conventional mortgage offers a buyer a fixed interest rate and a fixed schedule of payments
adjustable rate mortgage has an interest rate that increase or decreases during the life of the loan
defaults if the borrower is unable to make paymets
home equity loan a loan based on the difference between the current market value of your home and the amount you still owe on the mortgage
refinance to take out a new mortgage at a lower interest rate
closing a meeting of the seller, the buyer, and the lender of funds or representatives of each party to complete the transaction
closing costs the fees and chargers the seller and buyer must cover when a real estate transaction is complete
title insurance a type of insurance that protects the buyer in case problems with the title are found later
deed the official document transferring ownership from seller to buyer
appraisal an estimate of the current value of the property
emergency fund money that you can access quickly for an immediate need
speculative investment a high-risk investment made in the hope of earning a relatively large profit in a short time
retained earnings profits reinvested in an organziation
investment liquidity the ability to buy or sell an investment quickly without substantially affecting its value
equity capital money that a business gets from its owners in order to operate
dividends distributions of money, stock, or other property that a corporation sometimes pays to stockholders
common stock stock that provides the most basic form of corporate ownership, and it entitles you to voting privileges
preferred stock stocks that gives the owner the advantage of receiving cash dividends before common stockholders receive any
corporate bond a corporation’s written pledge to repay a specified amount of money, along with interest
government bond the written pledge of a government or a municipality to repay a specific sum of money with interest
mutual fund an investment alternative in which investors pool their money to buy stocks, bonds, and other securities based on selections of professional managers who work for an investment company
diversification the process of spreading your assets among several different types of investments to lessen risk
financial planner a specialist who is trained to offer specific financial help and advice
tax-exempt income income that is not taxed
tax-deferred income income that will be taxed at a later date
capital gain the profit from the sale of an asset such as stocks, bonds, or real estate
capital loss the sale of an investment for less than its purchase price
prospectus a document that discloses information about a company’s earnings, assets, and liabilities, its products or services, and the qualifications of its management

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