Financial Planning

Your own individual goals that you want to accomplish.

What are personal goals?

Getting good grades in school or being accepted to college.

Example of personal goals

Goals that are specifically related to money.

What are financial goals?

Saving money to buy a video game or buying a gift for a friend are short- term goals.

Example of a short term financial goal

Paying for college, buying a car, and saving for retirement are financial goals that take much longer to achieve.

Example of a long term financial goal

College, Buying a House, and Retirement

Common Long Term Financial Goals

When you pay to use something that belongs to someone else. Many people rent homes and apartments instead of buying them.

What is renting?

A type of retirement savings account set up by employers for their employees.

What is a 401(k) account?

A way of organizing your finances so you'll be able to set and meet financial goals, while making sure you have enough money to spend on things you need.

What is a financial plan?

Ranking things in order of importance.

What is prioritizing?

If your most important goal is saving up for a car, you shouldn't spend all of your money on smaller goals like an expensive pair of shoes, a new video game system,and so on.

Example of prioritizing financial goals

Because it is a way to plan out when you want to meet a goal and the longer you have to meet a large financial goal, the easier it will be to save up that money.

How can setting dates for financial goals help?

Carla wants to save money for her son Thomas to go to college. If she starts saving when Thomas is two years old, she has sixteen years to save. If she waits until Thomas is fifteen, she only has three years to save up all that money.

Example of setting dates for financial goals

The money you have, the money you earn and receive, and the things you own that are worth money.

What do your financial resources include?

Money that you earn or receive.

What is income?

Money you have and things you own that are worth money.

What do assets include?

A car, a computer, or a home that you own are assets.

Example of assets

Things you spend money on.

What are expenses?

Expenses you've planned for.

What are expected expenses?

Expenses like bills for electricity and water can be expected, since you know that bills for these utilities will be sent to you on a regular basis.

Example of expected expenses

Expenses that you didn't predict (us usually occur when something goes wrong or when things don't go as you planned).

What are unexpected expenses?

If you're hurt in an accident, your medical bills are an unexpected expense. If there is a fire in the place where you live, finding new shelter and replacing your things are unexpected expenses.

Example of unexpected expenses

Money, goods, or services that one person owes to another person or institution, like a credit card company or bank.

What is debt?

Money you borrow from a friend for lunch or money you borrow from a bank to help you pay for college are both examples of debts.

Example of debt

The more money it will cost you in interest.

What happens the longer you wait to pay of debt?

An extra fee that a borrower must pay to a lender.

What is interest?

A guess or estimate about what something will be like in the future.

What is a projection?

You might expect to continue working at the same job and making the same amount of money. Also, you might plan to increase the hours you work so that your income increases.

Example of a projection

The chance that something negative might happen.

What is a risk?

Risks include things like the possibility for injury, sickness, premature death,unemployment, car accidents, and property damage due to natural disasters such as fire, flood, or earthquakes.

Example of risks

A type of risk protection that you can purchase from an insurance company, also called an insurance provider.

What is insurance?

The amount that you must pay the insurance company in order to get insurance.

What is an insurance premium

The amount that the insurance company is willing to pay. 

What is your insurance coverage?

A legal document that states what you want to have happen to your finances after your death.

What is a will?

An amount of money you've set aside in case of an emergency.

What is a reserve?

Income that you receive for work you've done.

What is earned income?

Wages

If you are paid by the hour, what is your income called?

A salary

If you are paid the same amount of money on a regular basis, not matter hours you work, what is your income called?

Income that you receive for reasons other than work you've done.

What is unearned income?

If a family member gives you $10 for your birthday, that $10 is unearned income.

Example of unearned income

A financial obligation that a person or company is required by law to pay to the government.

What is a tax?

Public services and projects, such as law enforcement, national defense, schools, roads, libraries, and much more.

What are taxes used for?

Taxes that are paid to the federal government.

What are federal taxes?

The government agency in charge of administering federal taxes.

What is the Internal Revenue Service (IRS)?

Taxes paid to the federal government on an individual's or company's income.

What are federal income taxes?

National defense, law enforcement, the national debt, social programs, community development, the costs of running the country, and more.

What are federal income taxes used?

Tax that applies to investments and other personal property.

What is the capital gains tax?

On the amount that the investment has increased in value.

How is the capital gains tax calculated?

It is a short-term capital gain and is taxed along with regular income at the regular income tax rate.

If the investment or property is owned for less than a year, what type of capital gain tax is it and how is it taxed?

It is a long-term capital gain and is taxed at a lower rate.

If the investment or property is owned for more than a year, what type of capital gain tax is it and how is it taxed?

To provide income for retired and disabled people and their families.

What are social security taxes used for?

The Federal Insurance Contributions Act (FICA) tax.

Another name for social security taxes?

To provide medical benefits for people who are ages 65 and over.

What is the medicare tax used for?

Is a federal tax for people who are self-employed.

What is self-employed tax?

If provides income for workers who are unemployed. 

What does the  Federal Unemployment Tax Act (FUTA) do?

When someone dies and the tax is charged on the person's estate.

When is the estate tax charged and what is it charged on?

All the assets that were owned by that person.

What is the estate?

Taxes that are paid to the state government.

What are state taxes?

Things like schools, roads, libraries, and more.

What are state taxes used for?

Taxes charged on sales of goods and services.

What are transaction taxes?

Sales taxes

What is a common type of transaction taxes?

As a percentage of the total sale amount.

How are sales taxes calculated?

When transaction taxes are calculated based on a physical quantity in units, such as a gas tax that charges a tax per gallon.

What are excise taxes?

Taxes that are paid to a local government within a state, such as a county, city, water or fire management district, school district, or library district.

What are local taxes?

Taxes charged on property, such as real estate, cars, boats, business inventories, and other properties.

What are property taxes?

When you complete a tax form that shows how much you owe in taxes.

What is filing taxes?

The government owes you money in the form of a tax refund.

What happens if you have already paid more than you owe in taxes?

When a company sets aside a specific amount of an employee's paycheck for specific purposes, such as income tax, Social Security tax, Medicare tax, or a retirement fund.

What is payroll withholding?

When someone who is self employed can estimate the amount owed in taxes and spread it out into four payments throughout the year.

What is an estimated tax?

The full amount of wages or salary that an employer agrees to pay an employee.

What is gross pay?

The amount of money that actually gets paid to the employee after payroll withholding.

What is net pay?

A short summary of the amount of your gross pay, and the amount of payroll withholding for that pay period.

What is a pay stub?

A W-2 tax form, also called the Federal Wage and Tax Statement.

What type of tax forms do full-time employees receive from their employers?

 A 1099 form

What type of tax form do independent contractors, such as part-time freelance employees, lawyers, or accountants, receive?

When the IRS performs an examination of your tax forms to make sure everything you have claimed is accurate.

What an IRS audit?

Single filers, joint filers, and head of household.

Who is the 1040 tax form used by?

A person who is unmarried

What is a single filer?

A married couple (spouses) filing together on the same form.

Who are joint filers?

A person who is unmarried, has dependents, and pays for more than half of the household expenses.

What is a head of household?

A member of the household who depends on your income, such as a child or relative.

What is a dependent?

A nine-digit number assigned to a U.S. citizen or resident.

What is a social security number?

A financial plan that shows what you plan to do with your money.

What is a budget?

An expense that is the same amount each time you pay it.

What is a fixed expense?

A monthly gym membership, a car payment, and the rent you pay on a house or apartment are all fixed expenses.

Examples of fixed expenses

An expense that changes each time you pay it.

What is a variable expense?

The amount you spend on food each month is usually a variable expense, since prices and the kind of food you buy can change.

Examples of variable expenses

When you spend money on things you need

What are non-discretionary expenses?

Rent, food, and medical bills are examples of non-discretionary expenses.

Example of non-discretionary expenses

When you buy things that you want but don't need.

What are discretionary expenses?

Vacations, jewelry, and movie tickets are discretionary expenses, since they are not necessary.

Example of discretionary expense

The priorities, principles, and beliefs that guide your life.

What are your values?

Leadership, creativity, honesty, comfort, respect, status, and social responsibility are examples of values.

Examples of values

Being responsible about the way you spend your money.

What is financial responsibility?

An amount you pay to live in a space such as a room in a house, an apartment, or an entire house.

What is rent?

Leasing

What is another word for renting?

Services that are necessary for running a home

What are utilities?

Electricity, heat, water, Internet, and telephone service.

Examples of utilities

When a consumer feels good about the price and quality of products he or she has purchased.

What is consumer satisfaction?

The notable qualities or characteristics of a product.

What are features?

The features of an MP3 player might include how long its battery lasts, how many songs it holds, or how portable it is.

Examples of features?