Personal Financial Management Test 1

Gross Income Salary if your annual salary is employer paid $30,000 a year from your full time job. Your entire salary
net salary income your “take-home” income. your gross salary income minus certain amounts subtracted from your paycheck
Common subtractions from net salary income estimated federal personal income tax liability, actual social security tax liability, retirement account
federal personal income tax rate 15 percent
employee paid social security tax rate 7.65 percent
flexible benefits a large menu of benefits provided by the employer (usually an $8000 limit) where the employee can choose any combination
total compensation gross salary plus the value of the employer provided benefits
2 benefits of employer sponsored retirement plans a current year tax deduction equal to the employee’s contribution, and a possible employer match invested in the employee’s account
disability income insurance replaces a portion of the employee’s salary for a time period if the employee becomes temporarily or permanently disabled
term life insurance temporary. pays a designated death benefit to the employee’s beneficiary upon death
health care insurance managed care plan, either an healrth maintenance organization plan or a Preferred provider organization plan
other types of income interest income, dividend income, business income
interest income derived from investments lie government or corporate bonds, certificates of deposit, and savings account balances
dividend income derived from corporate stocks you own
business income derived from a business you own either solely or in conjunction with one or more other people
tax deductions a reduction of your taxable income
tax liability the tax dollars you owe
tax credits dollar-for-dollar deduction in your tax liability.
personal and dependency exemptions tax deductions that result in a dollar-for-dollar reduction in the tax payers taxable income
tax deferred tax liability that is postponed till a later date rather than the current year
tax exempt tax free
Investment process earn income by working, save income, purchase investments, accumulate wealth (invested dollars, earnings), spend on well-defined purpose,
social security administration enforces the Social Security System
Internal Revenue Service enforces the federal income tax system

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