Final Study Guide - Personal Finance

Flashcards covering values, life skills, career planning, economic biases, U.S. economy basics, job tools, budgeting, taxes, banking, and insurance based on the provided personal finance study guide.

Values

Things important to you that influence how you spend time, money, and energy.

Opportunity Cost

The concept that choosing one thing means giving up another.

Associate Degree

An education level typically requiring $2$ years of study.

Bachelor Degree

An education level typically requiring $4$ years of study.

Master Degree

An education level requiring an additional $+2$ years beyond a Bachelor degree.

PhD

An education level requiring an additional $+4$ years beyond a Bachelor degree.

Standard of Living

Level of comfort measured by the goods and services available to a person or group.

Resume

A formal summary of goals, education, and experience.

Overconfidence

The bias of thinking you know more than you actually do.

Heuristics

Quick gut decisions that are not always good.

Hedonic Adaptation

The phenomenon where excitement from buying a new item fades over time.

Endowment Effect

Valuing something more simply because you own it.

FOMO

Spending money to keep up with others (Fear Of Missing Out).

Loss Aversion

The principle that losing hurts more than winning feels good.

Sunk Cost Fallacy

The difficulty of quitting something because you have already invested time or money into it.

Impulsive Spending

Buying something you did not plan to, often caused by emotions, deals, or consumer culture.

GDP

Total value of goods and services produced; a higher value indicates a strong economy.

CPI

Consumer Price Index; a measure used to track inflation by observing prices going up.

Inflation

A condition where your money buys less over time.

National Debt

The result of the government borrowing when it spends more than it collects.

Recession

An economic weakening where the GDP drops for $6$ months.

Net Worth

Calculated as Assets $-$ debts.

LinkedIn

A social, profile-style job tool, distinct from the formal and static nature of a resume.

U.S. Baseline Minimum Wage (2025)

Approximately $\$15$.

Highest Minimum Wage (2025)

D.C. at $\$17.50$.

Lowest Minimum Wage (2025)

WY and GA at $\$7.25$.

STAR Method

A technique for answering questions: Situation, Task, Action, Result.

Soft Skills

Interpersonal skills including communication, teamwork, and creativity.

Hard Skills

Technical skills such as coding, carpentry, and culinary skills.

Surplus

Money left over after all expenses have been paid.

Flexible Expenses

Budget items such as food and entertainment.

Security Deposit

A payment made when renting to cover potential damage.

APR

The full yearly cost of a loan, used to compare between different loan options.

50% Rule

The suggestion that car costs should be approximately half of leftover money after bills.

No-fault Insurance

Insurance that covers damage when the responsible person is unknown.

Circular Flow Model

The economic model showing how money moves between households and businesses.

Contractionary Policy

The practice of raising interest rates to reduce inflation.

Government Deficit

Occurs when government spending is greater than revenue.

Withholding

Money taken directly from a paycheck for taxes.

1040

The main tax form used to determine if a taxpayer receives a refund or owes a payment.

W2

The employer wage and tax statement due by Jan $31$.

1099

A form for reporting other income such as freelance, dividends, and interest.

W4

A form that tells an employer how much tax to withhold from a paycheck.

I-9

A form used to verify eligibility to work.

FICA

A tax totaling $7.65\%$ from the employee and $7.65\%$ from the employer.

Gross vs Net Pay

Pay before taxes versus pay after taxes.

Dependent Tax Credits

Kids under $17$ receive a $\$2200$ credit; others receive $\$500$.

Deductions vs Credits

Deductions lower taxable income; credits lower tax owed.

Illinois Income Tax

$4.95\%$ (Proportional/flat system).

Illinois Sales Tax

$6.25\%$ (Regressive system).

Compound Interest

Interest earned on interest, often calculated using the Rule of $72$.

Credit Unions

Nonprofit banking institutions that often offer better rates than for-profit commercial banks.

Federal Reserve

The entity that controls interest rates.

Mutual Funds

A diversified investment fund containing many different investments.

ETFs

Low-risk, diversified baskets of stocks similar to mutual funds.

Bonds

A loan made to a government or company that is repaid with interest.

Roth IRA

A retirement account where you pay tax now in order to withdraw money tax-free later.

Principal

The original amount of money borrowed.

Secured vs Unsecured Loans

Secured loans require collateral (car, house), while unsecured loans (credit cards) do not.

Debt Snowball

A debt payoff strategy that focuses on paying off the smallest debt first.

Debt Avalanche

A debt payoff strategy that focuses on paying off the debt with the highest interest first.

Premium

The monthly amount paid for insurance coverage.

Deductible

The amount you must pay out-of-pocket before insurance begins to pay.

Co-pay

A fixed fee paid for a specific insurance service.