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45 Cards in this Set
- Front
- Back
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What is the difference in the Level of Living verses the Standard of Living?
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Level of Living: the way we can afford to live today and make ends meet
Standard of Living: how we want to live financially |
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What occurs in each phase of the business cycle?
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1) Expansion: when the economy is increasing
2) Peak: the end of an expansion and the beginning of a contraction 3) Contraction: when the economy is falling 4) Trough / Recession: the end of a contraction and beginning of an expansion |
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How do you determine the future direction of the business cycle?
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1) Gross Domestic Product
2) Employment Record 3) Index of Leading Economic Leaders 4) Consumer Confidence Index |
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How is inflation measured?
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It is measured by a "market basket" of goods and services. The market basket is the average things that the average family buys. In measuring inflation, we also look at the consumer price index published by the U.S. Bureau of Labor statistics.
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How is inflation forecasted?
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Inflation forecast are made by the Office Management and Budget and Private Economists. It is always better to estimate higher than lower.
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How are interest rates predicted?
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Interest rates are predicted based on Income, Inflation, Interest Rates, and the Economy.
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How does opportunity cost affect financial decision making?
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Opportunity Cost = the value of the next best alternative
(EX) If you spend money on gas, you no longer have the opportunity to spend the money on pizza |
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How does a marginal utility analysis affect financial decision making?
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Marginal Utility Analysis = the next feature of a product worth the extra cost
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What are the advantages of a employer-sponsored, qualified retirement plan?
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1) Tax sheltered contributions
create larger returns 2) Tax deferred growth enhances earnings (EX) 401K |
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What are the key steps in successful career planning?
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1) Create a career goal and plan
2) Clarify your interest 3) Review abilities, experiences, and education 4) Identify your values 5) Consider costs, benefits, and lifestyles 6)Align yourself with tomorrow's employment trends 7) Take advantage of networking 8) Target preferred employers 9) Be willing to change career goals and plans |
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What are the financial aspects of employment?
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1) Compare salary and living cost in different cities
2) Place value on employee benefits 3) Know your legal employment rights |
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What are some effective employment search strategies?
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1) Assemble a resume
2) Identify job opportunities 3) Write an effective cover letter 4) Obtain strong reference letters 5) Apply for the job 6) Interview for success ** Employers have the right to check your credit report before hiring you. They also have the right to NOT hire you. |
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What tips can you follow to help advance your career?
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1) Find mentors
2) Volunteer for new assignments 3) Sign up for employee-sponsored training and seminars 4) Attend meetings and conferences in your field 5) Complete certification programs 6) Take graduate level courses 7) Stay alert to changes in your field 8) Be up-to-date on current events 9) Be actively involved in something other than work 10) Change jobs when appropriate |
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What are the three components of successful planning?
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1) Specified Values
2) Explicitly stated financial goals 3) Consistent financial strategies = Most important |
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What is the purpose of explicitly stating your financial goals?
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It helps you visualize the gap between your current financial status and where you want to be in the future; needs to be stated in terms of purpose, dollar amounts, and projected dates by which they are to be completed
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What is included on a balance sheet or (net worth statement)?
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1) Assets: everything you own with monetary value
2) Liabilities: what you owe 3) Net Worth: what's left when you subtract liabilities from assets |
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What are the different types of assets?
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1) Monetary: assets that can be used as cash; for emergencies
2) Tangible: personal property used to maintain your everyday lifestyle; car, furniture, house 3) Investment: tangible and intangible items acquired for their monetary benefits; retirement |
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What are the different types of liabilities?
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1) Short-term: (or Current) an obligation to be paid off in one year; personal loans, unpaid taxes, past due rent
2) Long-term: debts that do not have to be paid in full for more than a year from now; automobile loans, mortgages, margin loans |
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What is included on a cash flow statement?
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1) Income: total income recieved
2) Expenses: total expeditures made * Fixed = expenses that recur at fixed intervels; rent, automobile loans * Variable = expenses over which you have substantial control; meals, utilities. medical, clothing, snacks 3) Surplus: (net gain or net income) when total income exceeds total expenses |
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If you encounter a loss, you need to fix some __________.
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Variable Expenses
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If you have a surplus, you need to ___________.
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Invest
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What is a debt service-to-income ratio and how is it calculated?
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Compares the dollars spent on gross annual debt with gross annual income.
Annual Debt Repayments / Gross Income |
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What is a debt payment-to-disposable income ratio and how is it calculated?
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Divides monthly disposable personal income into monthly debt repayments.
Monthly nonmortgage debt repayments / disposable income |
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What is a investment assets-to-total assets ratio and how is it calculated?
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Compares investment asset value with net worth.
Investment assets / Total assets |
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What are the six steps in budgeting for financial success?
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1) Set financial goals
2) Organize your recordkeeping 3) Make budget estimates 4) Plan cash flow 5) Control spending 6) Evaluate the budgeting process |
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What crisis steps should be taken for budget defecits?
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1) Stop using credit cards
2) Spend only the cash or money that you have, leave debit and credit cards at home 3) Stop making ATM withdrawls and getting cash back from purchases 4) Reduce or stop spending on luxuries; eating out, clothing, movies 5) Use a list when shopping and stick to it 6) Drop landline service and use only cell phone 7) Sell an assets 8) Move to lower cost housing 9) Find a part-time job |
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What are the various spending personality types?
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1) Tightwads: don't want to spend any money
2) Me Spenders: any extra money, spend it only on themselves 3) Givers: spend money on others, like to buy presents 4) Big Spenders: usually have a lot of cash in pocket, like flashy things 5) Normal Spenders: only 5% of people |
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How are tax laws made and interpreted?
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Tax laws are passed by the U.S. Congress. Then it is interpreted by the Internal Revenue Service through the issuance of regulations which have the effect of law
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What is the difference between progressive and regressive taxes?
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Progressive taxes take a large percentage of income from higher-income taxpayers and regressive taxes are the opposite.
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What is the marginal tax rate or bracket?
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It is one of the six income-range segments that are taxed at increasing rates as income goes up.
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What ways help to reduce taxable income?
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1) Practice legal avoidance
2) Through your employer 3) Make tax-sheltered investments 4) Postpone income 5) Take all legal tax deductions |
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What is involved in record keeping for your taxes?
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1) Never discard information about home purchases, retirement contributions, and investments
2) Keep other documents a minimum of 14 years; IRS doesn't tell you to do this 3) When in doubt, DO NOT throw out |
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What are the four depository institutions and what service do they each provide?
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1) Commerical Banks: checking, savings, loans, safe-deposit boxes, investment services, etc.
2) Savings Banks: checking services through interest earning NOW accounts 3) Mutual Savings Banks: accepts deposits, housing and consumer loans; only permitted in 17 states 4) Credit Unions: checking savings, loans; have higher interest rates, but lower fees |
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What do people base their selection of a depository institution on?
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1) Convenience
2) Products 3) Service Charges 4) Personal Relationships |
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What is the ideal order that people base their selection of a depository institution on?
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1) Personal Relationship
2) Service Charges 3) Products 4) Convenience |
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What are the features of a checking account?
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1) Service Charges
2) Interest 3) Minimum Balance 4) Average Balance |
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What are the different types of savings accounts and what are the features of each?
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1) Statement Savings: permit frequent deposits or withdrawls of funds
2) Certificate of Deposit: interest-earning savings instrument purchased for a fixed period of time 3) How to Save: slow and steady over a period of time 4) Interest: based on the amount of money on depocit, method of determining the balance, interest rate applied, frequency of compunding |
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What are the different types of money market accounts?
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1) Super NOW Account
2) Money Market Deposit Account 3) Money Market Mutual Funds 4) Asset Management Accounts |
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What are the methods of electronic money management and what features do they offer?
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1) ATM Cards / Debit Cards: safer to swipe debit over credit
2) Point of Sale Terminals: where the card is saved 3) Smart Cards / Store-Value Cards: ACT cards 4) Electronic Benefits Transfer Cards: food stamps, gift card 5) Electronic Transfers: paying bills on-line 6) Direct Deposit: salary checks 7) Preauthorized Payments: telling people that you owe money to debit the money out of your account at the beginning of each month * 80% of theft is stealing pin numbers |
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What is money management psychology?
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It has to do with the fact that money is connected to strong or high emotions. The way in which a person can manage their emotions ib by:
1) Learn to manage financial disagreements 2) Use positive "I" statements 3) Be honest 4) Talk regularly |
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How can a person protect themselves against lost or stolen credit cards?
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1) Cardholders are only liable for the first $50 if the company is notified within two days
2) Card Registration Service 3) After two days, liable for $500 4) Unlimited loss after 60 days |
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How can a person protect their privacy while banking online?
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1) Never check your bank account via wireless systems away from home
2) Avoid using someone else's computer to manage your account 3) Do not provide any account information if you get an unsolicited e-mail 4) When finished, always hit the log off button 5) Regularly change your password 6) Study your statement 7) Make and save paper copies of all your online transactions until you can verify the accuracy on your next account statement |
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What are the best investments for each stage of the business cycle?
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1) Expansion: buy homes, cars, expensive goods on credit
2) Peak: credit increases 3) Contraction: people stop purchasing due to increasing interest rates 4) Trough / Recession: economy declines |
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What are the features of tax-sheltered flexible spending account?
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1) Tax-Deductible Contributions
2) Employer's Matching Contributions 3) Tax-Deferred Growth 4) Starting Early Really Pays Off Big |
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What are the different types of CFP's and how are they compensated?
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1) Commission-only financial planners / brokers: live solely on the commissions they recieve on the financial products (investments, insurance) they sell to their clients
2) Fee-based financial planners / brokers: charge an upfront fee for providing services and charge a commission on any securities trades or insurance purchases that they conduct on your behalf 3) Fee-offset financial planners / brokers: charge an annual or hourly fee; fee will be reduced by any commissions earned off the purchase of financial products sold to their clients 4) Fee-only financial planners: earn no commissions and work solely on a fee-for-service basis |
