Csr 485

Front 1

Fiscal Policy

Back 1

Controlled by politicians, how money is spent

Front 2

Monetary Policy

Back 2

Federal Reserve, Ben Bernanke, not controlled by government, control interest rates of the world (QE3)

Front 3

Leading Economic Indicators

Back 3

Employment Rates, CPI, PPI, Stock Prices (these things happened, we have an idea of what will happen in the future)

Front 4

Lagging Economic Indicators

Back 4

The market did this, and lo and behold, this happened.

Front 5

Elastic

Back 5

Stretches; steakhouse/diamonds = consumer discretionary (buy when the times are good)

Front 6

Inelastic

Back 6

Doesn't change, consumer staples (food/milk)

Front 7

Renting vs. Buying

Back 7

Things to consider:
Do you have down payment?

Credit Rating - Above 680

Debt to income ratio - (33%-36%) - doesn't count utility bills

How long will you stay there - min of 5-7 years

Pay for commissions and closing feeds

Front 8

PMI (Private Mortgage Insurance)

Back 8

Protects the bank (not you). Not enough for down payment (<20%) you may be forced to buy.

Front 9

Calculate compounded interest

Back 9

CD says 4% annually, but is compounded quarterly - more than 4%. BONDS DON'T COMPOUND (they have coupons)

Front 10

Ratios

Back 10

Dashboard to give you idea on financial health, a comparison. Some for corps, some for you. Debt to Income ratio is the most important to a consumer, along with credit score.

Use min monthly payment for debt (w/monthly income!)

Front 11

Demographic household spending cycle

Back 11

19 - leave home

25.5 - get married

27 - have child

33 - buy first home

34 - largest debt to income ratio

43-47 - buy largest home

then cycle repeats

*starts on needs, changes to wants over time

Front 12

Impact of the Baby Boom

Back 12

(1957-1961) Not as many babies born then until 2007.

1 out of 5 people in US is a baby boomer (just below Japan, Italy, and Germany)

Front 13

Credit Limits

Back 13

Can only use up to 50% of my limit (by end of month)

Front 14

Credit Scores

Back 14

Impacts lots of things. Cost of car insurance (pay all at one time!), mortgages, etc.

Front 15

Systemic Risk

Back 15

The sick hand, whole body dies. Crash of '08

Front 16

Systematic Risk

Back 16

Undiversifiable risk from the market. It goes up, you go up. It goes down, you go down.

Front 17

Unsystematic Risk

Back 17

Risk you choose. Picking a specific company is diversifiable

Front 18

S&P 500

Back 18

UNMANAGED Index, made up of 500 U.S. based companies that best represent the U.S. economy. Blitzer at S&P selects the companies. Divided into subsectors (technology, energy, staples, etc).
Market cap weighted index!

Front 19

Stock Market Capitalization

Back 19

Small, Mid, Large. Lots of people want shares for a price. 68% of mutual funds are large. 18% of stocks are large.

Front 20

Market Capitalization

Back 20

1 share of a company stock times the number of shares outstanding

Front 21

Growth Stocks

Back 21

Investors that look at a company and believe the future value of the company will be much greater than it is today.

Front 22

Value Stocks

Back 22

Buy stocks when it's a fair value for the stock based on the business today (when price = business model). Most pay dividends (Buffett)

Front 23

Risk Management Strategies

Back 23

In regards to Harley Davidson: Retain (ride if I want), Reduction (use safety equipment), Avoid (never ride), Transfer (insurance).

Front 24

Law of Large Numbers

Back 24

How insurance works. Transfer risk, low probability of occurrence but a high cost to you (if it does happen). Homeowners insurance (houses burning down, not common). Retain when it has a high probability of happening or a low cost to you.

Front 25

Actuaries

Back 25

Decide the cost of insurance (Law of Large Numbers) probability of occurrence.

Front 26

Insurable interest

Back 26

Decides whether or not you can take out an insurance policy on someone and be the beneficiary. Needs a financial interest

Front 27

Open Peril Policy

Back 27

To cover bad things that can happen. Everything is covered, except for things excluded in the document.

Front 28

HO3 & HO5

Back 28

Homeowner's policy (HO5 is broader)

Front 29

HO4

Back 29

Renter's Insurance Policy

Front 30

Effective Yield

Back 30

Bond and coupon rates. Coupons don't change, value of the bond changes whether it is trading at a premium or a discount. (interest rates up, effective yield of rate discount = down) Teeter-totter. Can trade at Premium (interest is down), Discount (interest is high or credit quality is down), or Par. Will mature at Par.

Front 31

Bond Ladder Strategy

Back 31

Buy bongs that have different maturities. Counters Reinvestment Rate Risk.

Front 32

Secured Bond Holder

Back 32

Has ability to go after inventory (or other things company owned) if it goes under.

Front 33

Unsecured Bond Holder

Back 33

Has no ability to go after assets. (Higher risk, but a higher coupon too)

Front 34

Incidents of ownership (life insurance)

Back 34

Change beneficiary, make payments, owner of policy

Front 35

Viatical Settlement

Back 35

Someone buys your policy after issuance

Front 36

Moral Hazard

Back 36

I make 5k, have 10k in disability

Front 37

Life Insurance (lil side notes)

Back 37

All Life Insurance is annual renewable term. Permanent has a cash value, term doesn't.

Front 38

Basis points

Back 38

For homes, charge 1 point = 1%. In our world 100 basis points = 1%

Front 39

Recognized

Back 39

What IRA has on 1040 :(

Front 40

Realized

Back 40

What you see on the statement :D

Front 41

Open End

Back 41

Normal Mutual Fund in 401k (NAV)

Front 42

Closed End

Back 42

Fixed # of shares outstanding. When you go to sell it to get $, someone must actually buy your shares from you (usually at discount).

Front 43

Unit Investment Trust

Back 43

No manager, basket of stocks like ETSs

Front 44

Closed fund

Back 44

Fund that was open end and manager decided to close it. Open End and Closed Fund are the same funds, just open or closed.

Front 45

Investment Policy Statement (IPS)

Back 45

This is how I have to manage this money, playbook of investments. Must use discretion as a fiduciary. Needs to be signed and follow the guidelines.

Front 46

12B1 fee

Back 46

Internal fees paid every year inside of mutual funds. Does not include trading costs or commissions, cost of existence

Front 47

Annuity

Back 47

Issued from life insurance company.
1. Living benefits (what you can get w/o having to annuitize [trade $ for an income over specified # of years])

2. Period Certain (will last at least # of years 10-20)

Front 48

Marginal Tax Rate

Back 48

Highest rate you'll pay on the last dollar earned. (matters for Roth conversion)

Front 49

Effective Rate

Back 49

Overall Income. Amount of taxes they've paid.

Front 50

Tax Credit

Back 50

Dollar-for-dollar reduction! Good :D (Have to pay taxes to use the credit)

Front 51

Tax Deduction

Back 51

Higher income earners; reduced amount of income that will be taxed. Kinda good :/

Front 52

Itemized

Back 52

Mortgage interest, charitable, state taxes

Front 53

Tax evasion

Back 53

Jail! Don't report income

Front 54

Tax avoidance

Back 54

Penalties, taking deductions that you actually can't

Front 55

Taxable interest

Back 55

You'll get 1099R. Based on Marginal Bracket. (like for regular bonds)

Front 56

Tax exempt

Back 56

Municipal bonds. GOB(general obligation bonds pay you back) ROB (revenue- more risky but better coupons)

Front 57

SS & Medicare

Back 57

Up to 85% of what's received. More income, more you pay.

Front 58

FICA

Back 58

Goes to government for Social Security, maxed around 100,000 (50% you, 50% employer)

Front 59

FUTA

Back 59

No cap, 2.9% per year (1.45% you, 1.45% employer). Self employed? You pay both w/ reduction

Front 60

Taxes for IRA fund movement?

Back 60

None, inside the candy wrapper!

Front 61

Medicare vs. Medicade

Back 61

Medicare - old people & federal

Medicade - poor people & state

Front 62

Filing status

Back 62

Single, Married Filing Jointly (or separately)

Front 63

1040

Back 63

Annual Report

Front 64

1099

Back 64

Money in motion

Front 65

1099R

Back 65

Reportable

Front 66

W2

Back 66

From employer at the end of the year, earnings

Front 67

W4

Back 67

Withholdings from paychecks (exemptions)

Front 68

706

Back 68

Final tax for when you die - state

Front 69

Charitable gifts

Back 69

Give 50% of your income, if qualified organization. Itemized taxation 501c3 (nonprofit)

Front 70

501c3

Back 70

Classification for a nonprofit organization

Front 71

Taxable gifts

Back 71

Gifts where it's not present interest (strings) or money is above annual exclusion - 14k

Front 72

Long term care insurance

Back 72

Take care of you while in nursing home. Based on ADLs.

Front 73

72T

Back 73

Get money out of IRA before 59.5 without 10% federal penalty.
Substantially equal, period payments, unchanged for the greater of 5 years or until 59.5.

Front 74

72Q

Back 74

Same as 72T but out of annuity; very rare

Front 75

1035

Back 75

Transfer tax code. Move money in Life Insurance to Life Insurance or Annuity Contract. Move money in Annuity to Annuity.
NO ANNUITY TO LIFE INSURANCE.

Front 76

Per Stirpes

Back 76

Following the bloodline. Inheritance tax is cheaper when closer to bloodline. (No longer in Indiana).

Front 77

Gifting

Back 77

Give asset ABOVE cost basis. Or cash, but try to give asset ABOVE basis.

Front 78

Estate planning objectives

Back 78

Reduce federal estate taxes, privacy, simplicity, and control where money will go. (CPS?)

Front 79

Probate

Back 79

Legal form of transferring assets when you die from one person to another. Probate and will go together. Probate is a process.

Front 80

Trust

Back 80

Another form of ownership. Must stronger than wills (most are revocable)

Front 81

Operations of Law

Back 81

Happen before probate or will or trust.

JTWROS
POD/TOD
Beneficiary designation

Front 82

Crummey Letter

Back 82

Gift that would be in present interest, makes it present. Irrevocable trust, where money is used to pay premiums in life insurance policy.

Front 83

Disclaimer

Back 83

Beneficiary says "I don't want this asset," lets you make the choice.

Front 84

Modified Endowment Contract (MEC)

Back 84

Put too much money in life insurance policy. Be like an annuity during life, 59.5 LIFO (interest out first - not basis) then act like an insurance policy at death (INCOME TAX FREE).

Front 85

Roth IRA

Back 85

No deduction, grows tax-free. No RMDs. If you have income, you can continue to make contributions

Front 86

Traditional IRA

Back 86

Tax deduction meow. 70.5 - have to RMD

Front 87

Stretch provision (for IRA)

Back 87

Beneficiary can take money out over their life expectancy and not yours (spouse). Everyone else can't use this, it would be an inherited IRA. Without stretch, taxes must be paid upon death within 5 years.

Front 88

Contributions

Back 88

$ you can put in IRAs and 401(k)s based on earned income this year. Under 70.5 and have earned income.

Front 89

Conversion

Back 89

Take money from IRA, pay taxes, then put it in Roth.

Front 90

Basic Annuity Retirement Plan

Back 90

Like a pension, no money left at end

Front 91

403b

Back 91

Nonprofit (schools, hospitals, etc.)