Money Management Final

Term

Definition

"Investing (definition)"

"Purchasing an asset with the hope that it will appreciate (increase in value) in the future."

"Stock Market (definition)"

"A market in which securities (stocks

"NYSE (New York Stock Exchange)"

"The world's largest stock exchange; investors buy and sell stock through a brokerage that trades on the exchange."

"Market Capitalization (""Market Cap"")"

"The total dollar value of a company's outstanding shares (share price x number of shares outstanding); used to classify companies as small-cap

"S&P 500"

"A stock market index that tracks 500 of the largest U.S. companies; commonly used as a benchmark for overall U.S. stock market performance."

"Index Fund"

"A fund built to track a specific market index (like the S&P 500) rather than being actively managed by a fund manager."

"Balanced (Blend) Fund"

"A mutual fund that invests in a mix of both stocks and bonds to balance risk and potential return."

"Diversification"

"Spreading investments across different asset classes (stocks

"Age-Based Rule (Rule of 100)"

"A guideline suggesting the percentage of your portfolio held in stocks should equal 100 minus your age

"Municipal Bonds"

"Bonds issued by state or local governments (cities

"Corporate Bonds"

"Bonds issued by corporations to raise money. They carry more risk than government bonds

"U.S. Treasury Bonds"

"Loans made to the U.S. federal government

"Tax-Advantaged Account"

"An account (such as a Roth IRA or 401(k)) that allows you to reduce or avoid paying taxes on investment earnings and/or contributions."

"Traditional 401(k)"

"An employer-sponsored retirement account where contributions are tax-deferred

"Compound Interest (long-term investing)"

"Interest earned on both the original investment and on previously earned interest. Example: investing $200/month in an index fund grows significantly over decades through compound interest."

"Cash Equivalents"

"Highly liquid

"Asset Allocation"

"The strategy of dividing an investment portfolio among different asset classes (stocks

"Actively Managed Fund"

"A mutual fund run by a professional manager who picks investments trying to beat the market

"Market Index"

"A measurement of a section of the stock market

"Roth IRA"

"A tax-advantaged retirement account funded with after-tax dollars; contributions grow tax-free and qualified withdrawals in retirement are also tax-free."

Term

Definition

Tax Liability

"The amount you owe in federal income tax

Progressive Tax

"A tax structure in which the percentage of income paid in tax increases as income rises

Marginal Tax Rate

"The tax rate that applies to your next dollar of income — the rate on the top bracket you fall into

Taxable Income

"The 2nd step of calculating federal income tax: your Adjusted Gross Income (AGI) minus your deductions."

Deductions

"IRS-allowed reductions to your Adjusted Gross Income used to calculate taxable income — either the standard deduction or itemized deductions."

Standard Deduction

"A dollar amount set by the federal government that a taxpayer can deduct instead of itemizing; it varies by filing status. For 2025: $15

Gross Income

"All income received during the tax year

Tax Credit

"A dollar-for-dollar reduction in your tax liability. Credits are more valuable than deductions of the same amount — a $2

Tax Due or Refund (final step)

"The final step of calculating federal income tax: subtracting your credits and any amounts already withheld from your tax liability to find what you owe or your refund."

Tax Planning

"Arranging your financial affairs — timing

Health Savings Account (HSA)

"A tax-advantaged savings account for people with a qualifying high-deductible health plan

Adjustments to Income

"Amounts subtracted from gross income to determine AGI (Adjusted Gross Income) — applied before deductions are even considered."

Refundable vs. Nonrefundable Credits

"Refundable credits (like the EITC) can generate a refund even if you owe $0 in tax; nonrefundable credits can only reduce your tax liability down to zero."

Which form reports self-employment business deductions (e.g. laptop & mileage)?

Schedule C

Why is a tax credit generally more valuable than a deduction of the same dollar amount?

"A deduction only saves you as much as your marginal tax rate; a $1

When should a family itemize deductions instead of taking the standard deduction?

"When the sum of their specific deductible expenses (e.g. mortgage interest

Which form is used to claim education tax credits?

"Form 8863 — used to claim the American Opportunity Tax Credit and the Lifetime Learning Credit."

Which credit is designed for low-to-moderate income working families and is fully refundable?

"The Earned Income Tax Credit (EITC) — fully refundable

Which account offers tax-deductible contributions

tax-free growth

How is your filing status determined?

"By your marital status as of December 31 of the tax year (not by your employer)."

How is the U.S. national debt financed?

"Primarily by selling Treasury bills and bonds to investors

What is Tax Freedom Day?

"A date calculated annually by the Tax Foundation marking the point when Americans

What percent of the U.S. population currently pays federal income tax?

"About 56% — the rest owe $0 in tax due to credits or other provisions."

True or False: Only business owners can benefit from tax planning.

"False — tax planning uses legal strategies like retirement accounts

True or False: Roughly 90% of taxpayers now take the standard deduction.

"True — since the standard deduction nearly doubled under the Tax Cuts and Jobs Act."

What are the 5 components of a comprehensive financial plan?

"Risk Management

What are the first two steps in calculating tax due or refund?

"1) Choose your filing status. 2) Calculate your AGI (Gross Income minus adjustments to income) — the foundation for every later step."

Term

Definition

"According to Robert D. Hales, how do parents help children become "provident providers"?

By regularly reviewing the family budget together in family council meetings

"What did the University of Illinois study (cited in Ch. 14) find about saving?"

"Young adults with good financial skills said their parents got them into the habit of saving as children — saving is learned through experience

"Why does Rachel Cruze recommend the word ""commission"" instead of ""allowance""?"

"It helps children see the direct connection between work and pay (an allowance can blur that link)."

"Why is open financial communication in the home important?"

"It instills confidence that children can make good financial decisions themselves."

"True or False: ""Live Within Your Means"" teaches that children must understand money is finite — once it's spent

it's gone."

"What is Financial Socialization?"

"The process by which children learn attitudes

"How should major financial decisions be made in marriage?"

"By consensus between both spouses."

"True or False: Major purchases should be made independently to save time without full discussion between spouses."

False, they should be made together

"What is the average cost of a wedding in the United States?"

"$35,329

"True or False: Money decisions should be included in a couple's prayers and counsel together with the Lord."

"True."

"According to a 2025 CFP Board survey

what percentage of women reported being their household's primary decision-maker for investment choices?"

"Why is it important to discuss tithing and other donations before marriage?"

"Religion and money are two areas that can either strengthen or weaken a relationship

"What is the healthiest approach for a new couple regarding financial help from family?"

"Being as financially independent as possible from both sets of parents."

"Which of these is NOT a recommended way to simplify your life: distinguishing needs from wants

learning to say no

"What is self-reliance?"

The ability and effort to provide life's necessities for self and family

"What is Voluntary Simplicity?"

"Deliberately choosing to accumulate fewer possessions and engage in fewer activities than possible

"What is Life Harmony?"

"A perspective — sometimes described with a musical metaphor — in which the responsibilities of work