WISE test prep

sources of income

wages, stocks, interest, salary

exemption

a deduction allowing to reduce the amount of your income that would be taxed

liquidity

access to money fast

discretionary income

extra money you can use for anything

money orders

bought @ bank; if you don't trust the lender of money

Why does US currency have value

because we agree it does

opportunity cost

the loss of potential gain of other alternatives when one alternative is chosen

who is the most hurt and least hurt with inflation?

biggest losers- those with fixed income

winners- those who are priced out of the loan market

role of US treasury department

print money, collect taxes through IRS, look at national debt

PYF

pay yourself first- put some money in the bank then pay bills

CD

certificate of deposit- a time deposit that pays a fixed rate of interest for a specific length of time

institutions that give loans

banks, credit unions, pawnshops, finance companies, etc.

which institutions charge the highest interest rate on loans?

in most cases: a bank

what is a credit union?

a nonprofit organization whose members can borrow from pooled deposits at low interest rates

what is an advantage of using a credit union?

credit unions can offer higher savings rates

members own credit

overdraft protection

when you write a check greater than money you have in your account bank will pay who you wrote a check to

compound interest

interest on you money

time value of money

a dollar today is worth less tomorrow

liquid financial products vs. products that are less liquid

checking account vs. CD

rule of 72

interest/72= time it takes to double

forms of endorsement for personal check

government issued ID's needed

reconciling a checking account- WHY? WHEN?

why- make sure all fees are correct & ID isn't stolen, etc.

when- every month

repayment of student loans

starts after you graduate from college

subsidized and unsubsidized

subsidized

interest not charged until after graduation

unsubsidized

interest accumulates while in school

tax anticipation loans

expecting taxes will cost more than money you have

credit card cash advances

when credit card gives you money and credit card company charges you a percentage. like a loan

truth in lending act

law passed that credit cards have to tell you interest they charge

consequences of paying minimum payment due on credit card or paying late

fees, minimum payment = interest

how does the degree of risk influence the interest rate charged for credit?

high risk=high interest

bad credit score=high interest

debt to credit ratio

when your debt outweighs your income, bank will usually refuse a loan

credit reports

tell debt history

three credit bureaus?

equifax, TransUnion, experian

consequences of lost or stolen credit card

cancel the card before someone can use it, fight charges if you don't notice charges

what to do if person thinks they are a victim of ID theft

call credit agency, bank

characteristics of predatory loans

lenders aren't honest, hide fees

collateral (secured vs. unsecured)

property used as security for a loan

ex: if I don't pay loan back, take house

secured- home

unsecured- nice guy/ good credit

pawn shops

trade in property for loan/cash

how insurance works

the risk of loss of money or abilities protected

deductible

what you have to pay before your insurance pays

collision coverage

a policy that covers your part

comprehensive coverage

covers other people & you when you're at fault;

liability coverage

for other people; HAVE TO HAVE

term-life insurance

temporary death benefit; pays if you die in term

whole-life insurance

(like a savings account)

HMO (health maintenance organization)

a group plan that provides prepaid medical care for its members

renter's insurance

covers if you are renting and property is damaged or stolen; have to have?

disability insurance

helps pay bills if suddenly disabled

how to reduce cost of auto insurance

don't get tickets,

most and least liquid investments

stocks, bonds, CD, etc.

securities/ equities

having more than what you owe

ex: loan and house

what is bull market

stock does well

bear market

stock drops

purpose of bond

temporary hold of money

municipal bond

government gives money and people use taxes to pay off that bond

mutual funds

group of people put money in and basically agree to let someone else manage the money

investment portolio

shows what you own

ex: stocks, homes, fields

diversification

spread your money out

dividends

what you earn from stock

treasury bills

money

retirement plans

401k

social security

traditional IRA- pre tax

roth IRA- post tax

inflation

when economy thrives, dollar is worth more

three C's of credit

character

capacity

collateral

Accountant

An accountant is a professional person who performs accounting functions such as audits or financial statement analysis. Accountants can either be employed with an accounting firm, a large company with an internal accounting department, or can set up an individual practice. Accountants are given certifications by national professional associations, after meeting state-specific requirements, although non-qualified persons can still work under other accountants, or independently.

Banker

One serving as an officer or owner of a bank.

Broker

A broker is an individual or firm that charges a fee or commission for executing buy and sell orders submitted by an investor

Credit counselor

Personalized counseling services that provide guidance and support for those who have gotten in over their heads financially.

Financial Consultant/Financial Advisor

A professional who helps manage your money; might help manage investments, broker the sale and purchase of stocks and funds or create a comprehensive estate and tax plan

Financial planner

The financial planner is one type of financial advisor, who helps companies and individuals create a program to meet long term financial goals.

Financial writer

A financial writer creates educational content and/or market commentary for either print and/or web publications

Insurance agent

An individual who is licensed by the state to sell insurance for one or more specific insurance companies.

Insurance sales person

Insurance sales agents contact potential customers and sell one or more types of insurance. Insurance sales agents explain various insurance policies and help clients choose plans that suit them.

Investment analyst

A researcher employed by a financial institution to research investments.

Mortgage banker

A company, individual or institution that originates mortgages. Mortgage bankers use their own funds, or funds borrowed from a warehouse lender, to fund mortgages.

Real estate sales person

A real estate agent is a person with a state/provincial license to represent a buyer or a seller in a real estate transaction in exchange for commission. Most agents work for a real estate broker or realtor

Stock analyst

A stock analyst follows the movement of publicly traded stocks, analyzing market trends and other drivers that affect stock prices. He or she may also track historical movement in a stock price, with a general goal of assisting his or her employer or clients in buying and selling stocks profitably. Many stock analysts will track not only one stock, but also the equities of other major players in the same industry segment, as these firms' fortunes often impact their competition's market price. Some stock analysts work for one employer, such as a major hedge fund, while others advise multiple clients. A stock analyst will typically generate financial reports about market trends or individual stocks for clients or the firm for which he or she works.

Cash advances

A cash advance is a service provided by many credit card issuers allowing cardholders to withdraw a certain amount of cash, either through an ATM or directly from a bank or other financial agency. Cash advances typically carry a high interest rate - even higher than credit card itself - and the interest begins to accrue immediately.

Charge cards

A card that charges no interest but requires the user to pay his/her balance in full upon receipt of the statement, usually on a monthly basis. While it is similar to a credit card, the major benefit offered by a charge card is that it has much higher, often unlimited, spending limits.

Credit card companies

Examples include: American Express, Capital One, MasterCard, Bank of America, Citi Cards, Visa

Credit cards

A card issued by a financial company giving the holder an option to borrow funds, usually at point of sale; typically charge interest and are primarily used for short-erm financing.

Due date

Credit card bills have a due date. If your credit card payment does not arrive -- and get posted -- by the due date, you will be charged a late fee. It's important for credit cardholders to watch their payment due dates, since they sometimes change

Finance charge

A fee charged for the use of credit or the extension of existing credit; may be a flat fee or a percentage of borrowings, with percentage-based finance charges are most common. A finance charge is often an aggregated cost, including the cost of the carrying the debt itself along with any related transaction fees, account maintenance fees or late fees charged by the lender

Grace period

The grace period is the provision in most loan and insurance contracts which allows payment to be received for a certain period of time after the actual due date. During this period no late fees will be charged, and the late payment will not result in default or cancellation of the loan. A typical grace period is 15 days

Identity theft

The crime of obtaining the personal or financial information of another person for the sole purpose of assuming that person's name or identity to make transactions or purchases.

Late fee

A charge a consumer pays for making a required minimum payment on a credit card after the due date.