personal finance lap 3

45% of americans have less than $1,000 saved for an 

emergency 

if you are always paying for things in your past, you will have ___ ___ with your money

less freedom

once you have a $500 emergency fund, you should do what with it?

save it until you have an emergency

the first step you should take when you want to make large purchases is

decide how much you’'ll need to save and the time frame you want to save it in

the best way to build wealth is to start investing early. when should you start investing money

once you are out of college, living debt free, and have 3-6 months of living expenses saved

why do some accounts, like savings accounts at your local bank, earn interest

because the bank pays you to use your money

the only place you should keep your emergency fund money is

a savings account or a money market account

which two habits are the most important for building wealth and becoming a millionare

consistently investing money and patience to give it time to grow

what does interest rate on savings account determine

how quickly your money will grow over time

__ __ is a millionare’s best friend

compound growth

being able to cover an unexpected expense with cash and protect you from having to pile up debt when something goes wrong, is the purpose of what

emergency fund

why do stores rarely advertise the full price of big purchases like smartphones

by only showing you the monthly payment, they make the product seem affordable

compound interest is earned at a fixed rate, while __ __ is an everage based on an investment’s past performace

compound growth

the main reasons for saving your hard-earned money are

emergencies, large purhcases, wealth building

once you are out of school, have started your career, and have zero debt, your emergency fund should have

3-6 living expenses

the tope three careers reported among millionares

accountants, engineers, teachers

true or false: 90% of millionaires make over 100,000 a year

false

true or false: in order to outpace inflation when investing, your investments need to have a lower rate of return than the rate of inflation 

false 

what are the main differences between saving and investing

length: saving is for short term goals like a vehicle or a new TV, while investing is putting money away for longer than five years: live 20-30 years

where you put your money: saving requires only a savings account or a money market account, but when you invest you want to put your money into a wealth-building like 401K

the amount of interest charged on a debt but not yet collected iscalled what

accrued interest

which principle says that a certain amount of money today is worth more than the same amount in the future

the time value of money

how does murphy’s law (anything that can go wrong, will), apply to saving money

applies to saving money because you don’t make a plan to save money, you’re inviting trouble. When you run into tough spots, you won’t have money saved to take care of the problem

if you don’t have money saved up and something goes wrong, it will seem like a crisis instead of an incovenience

how does planning and saving for your future help you build wwealth

planning and saving help you build wealth because you being a millionare does not happen overnight

it takes patience and the key is to start saving as early as possible

most millionares don’t make $1 million a year, they are just really good at saving

what three questions to ask yourself before you spend money from your emergency fund

is it unexpected?

is it necessary?

is it urgent?

explain why making payments on a car can be a poor financial decision

because a car’s value goes down fast. with interest, you will end up paying far more for your car than you initially bargained for

at that point, you could have saved and paid cash for a good car

explain how jack ended up with more money in his investment account by the time he retired, when blake invested more moeny

while Blake invested more money for more years than Jack, Jack started investing sooner and then let compound growth do the work for him

Jack then stopped putting money into his investments, but thanks to the momentum of compound growth, he still ended up with more than Blake

why should you avoid interest rate deals like zero-precent interest

if you don’t have the money to pay for it upfront, you will probably have a hard time making the monthly payments on time

that’s what businesses are counting on: if you make a late payment or fail to pay off the balance in time, you’ll pay accrued interest, often all the way back to the purchase date

an investment’s __ is its percentage of gain or loss over time

rate of return

the average rate of growth for an investment over a period of time

compound growth

the price of goods and services increases over time due to

inflation

the initial amount of money you deposit or invest is called the

principle

you save for a ___ when you don’t have the cash to buy it now

large purchase

---

deals, such as a 90-day-same-as-cash, are often used to get you to buy higher-priced items

interest rate

the ___ refers to the earning potential of money

time value of money

A great principle for saving money is, “Start paying yourself and

investing in your future

the First Foundation is: Save

a $500 emergency fund

If you make a late credit payment, you might see the lender add

accrued interest

The three reasons to save money are

emergencies, large purchases, wealth building 

Which of the following would be considered an emergency fund expense?:

lost cell phone, video game sale, blown car tire, shoe sale

blown care tire

”Rate of return“ is a phrase used to describe what aspect of investing?

compound growth

In The Five Foundations, what is The Third Foundation?

pay cash for your car

When you make a purchase but later wish you hadn‘t done so, you experience:

buyer’s remorse

Which of the following questions helps you determine if something is actually an emergency expense?

it is urgent, is it unexpected, is it necessary

all of the above

What two elements do you need to build wealth through compound growth?

money invested and time

Why is it important to make an emergency fund your first financial priority?

It is important to make an emergency fund your first financial priority because emergencies will always happen, especially when you least expect, so it is better to be prepared and have the money to pay for these emergencies. It is better to have the money saved than to go into debt due to an emergency and have to pay off all the bills later.