Untitled Flashcard Set

Gross Pay

The total amount of money earned before any deductions.

Net Pay

The amount left after all deductions like taxes and insurance, also known as take-home pay.

Wages

Money earned based on an hourly rate, paid for hours actually worked.

Salary

A fixed annual payment amount regardless of hours worked, usually paid biweekly or monthly.

Commission

Income based on a percentage of sales made.

Budgeting

A written plan showing how to spend and save money each month.

Credit Union

A nonprofit financial institution owned by its members, offering better rates on loans and savings.

Payday Loan

A short-term loan with very high interest rates meant to cover expenses until the next paycheck.

Interest Rate

The percentage charged on a loan or earned on savings, often expressed as an APR.

FICA

Federal Insurance Contributions Act, requiring workers to contribute to Social Security and Medicare.

Sales Tax

A percentage added to the price of goods and services at the time of purchase.

Communication

The ability to clearly express ideas and effectively exchange information.

Teamwork

Working cooperatively with others to achieve a shared goal.

Problem-Solving

Identifying issues and finding practical solutions effectively.

Punctuality

Showing up on time for work, meetings, and deadlines.

Digital Skills

The ability to use technology effectively in the workplace.

Premium (Insurance)

The monthly fee paid to maintain insurance coverage.

Deductible

The amount you pay out of pocket before the insurance starts covering costs.

Wages, Income & Paystub

Gross Pay vs Net Pay

Gross Pay: The total earnings before deductions. For example, if paid $15/hr for 40 hours, gross pay is $600.

Net Pay: The amount after deductions like taxes and insurance. This is the actual take-home pay deposited into your account.

Types of Income

Wages: Earnings based on hourly work; paid only for hours worked.

Salary: A fixed annual amount, paid regardless of hours worked, typically distributed biweekly or monthly.

Commission: Earnings based on sales performance, e.g., a car salesman earning 5% per sale.

Tips: Additional money given for good service, common in hospitality.

Paystub Components

A paystub includes gross pay, federal/state taxes withheld, Social Security, Medicare deductions, and net pay.

Regular review of paystubs is crucial to ensure accuracy in deductions and payments.

Overtime Pay

Federal law mandates overtime pay for hours worked over 40 in a week at a rate of at least 1.5 times the normal rate.

Example: If earning $12/hr, the overtime rate would be $18/hr.

Budgeting & Financial Institutions

Budgeting

A budget is a plan for spending and saving money monthly, helping to avoid overspending.

The 50/30/20 rule: 50% for needs, 30% for wants, and 20% for savings.

Financial Institutions

Organizations that provide money services, including banks and credit unions.

Credit Unions: Nonprofit institutions owned by members, offering lower loan rates and higher savings rates. Membership often requires qualification through employment or community ties.

High-Cost Lenders

Entities like payday loan stores and check cashing businesses that charge high fees and interest rates.

These lenders can trap individuals in a cycle of debt, making them risky options for financial assistance.

Credit, Loans & Interest

Credit Basics

Credit allows borrowing money with the obligation to repay later, usually with interest.

Lenders assess creditworthiness using a credit score (300-850); higher scores lead to better loan terms.

Costs of Credit

Borrowers repay the principal plus interest, late fees, and possibly annual fees.

The longer the debt remains unpaid, the more it costs overall due to accumulating interest.

Benefits of Credit

Responsible credit use enables large purchases and builds a strong credit history.

A good credit history can lead to better loan rates and affect job and rental applications.

Interest Rates

Interest rates are the cost of borrowing, expressed as an APR (Annual Percentage Rate).

Example: A $1,000 loan at 10% APR incurs $100 in interest annually; better credit scores yield lower rates.

Payday Loans and Title Pawn Loans

Payday Loans: Short-term loans with high interest (300-400% APR); risky and often lead to debt cycles.

Title Pawn Loans: Loans secured by a vehicle title; high interest and risk of losing the vehicle if unpaid.

Identity Theft & Protection

Protect Yourself

Identity theft involves stealing personal information for fraud.

Protection tips: use strong passwords, limit sharing of Social Security numbers, regularly check financial statements, shred documents, and avoid suspicious links.

Warning Signs of Identity Theft

Signs of Identity Theft

Unfamiliar charges on bank or credit card statements can indicate unauthorized use of your accounts.

Receiving bills or collection calls for accounts you never opened suggests that someone may be using your identity.

Missing expected mail can be a sign that someone has changed your address to receive your correspondence.

Being denied credit for no clear reason may indicate that your credit report has been tampered with.

Noticing accounts you don’t recognize on your credit report is a critical warning sign that should prompt immediate action.

Responding to Identity Theft

If you suspect identity theft, act quickly to minimize damage by placing a fraud alert on your credit reports with Equifax, Experian, and TransUnion.

Consider freezing your credit to prevent new accounts from being opened in your name without your consent.

Report the theft to the Federal Trade Commission at IdentityTheft.gov to document the incident and receive guidance.

Contact your bank immediately to close or monitor any affected accounts to prevent further unauthorized transactions.

Filing a police report can help in documenting the crime and may be necessary for disputing fraudulent charges.

Types of Insurance

Health Insurance

Health insurance covers medical expenses such as doctor visits, hospital stays, surgeries, and prescription medications, protecting against high costs.

Monthly premiums are paid to maintain coverage, while deductibles are the amounts paid out-of-pocket before insurance starts to cover costs.

Without health insurance, individuals may face devastating financial burdens due to unexpected medical emergencies.

Auto Insurance

Auto insurance is legally required in most states and covers costs related to car accidents, vehicle damage, theft, and liability.

The level of coverage affects the premium; higher coverage results in higher premiums but lower out-of-pocket costs in case of an accident.

Liability coverage is crucial as it protects you financially if you injure someone else in an accident.

Life Insurance

Life insurance provides a financial payout to beneficiaries upon the policyholder's death, helping to replace lost income and cover expenses.

It is particularly important for individuals with dependents, ensuring that family members can maintain their standard of living after the policyholder's death.

Different types of life insurance include term life, whole life, and universal life, each with unique features and benefits.

Homeowners Insurance

Homeowners insurance protects your home and belongings from damage due to events like fire, storms, or theft.

It also includes liability coverage for injuries that occur on your property, safeguarding against potential lawsuits.

Most mortgage lenders require homeowners insurance as a condition for approving a home loan.

Understanding Taxes

Income Tax

Income tax is a percentage of earnings collected by federal and state governments, with higher earners typically paying a higher percentage.

Employers automatically withhold income tax from paychecks and remit it to the government on behalf of employees.

At the end of the year, individuals file a tax return to reconcile their tax obligations and determine if they owe additional taxes or are due a refund.

FICA

FICA stands for the Federal Insurance Contributions Act, which mandates contributions to Social Security and Medicare.