Unit 4 Study Vocab - EPF

Fixed Expense

A cost that remains the same each billing period, such as monthly rent or car payment.

Gross Income

Total income earned before any deductions are taken out.

50/30/20 Rule

A budgeting guideline where 50% of income goes to needs, 30% to wants, and 20% to savings or debt.

Needs vs. Wants

Distinguishing essential expenses from non-essential expenses.

Lease (Apartment)

A contractual agreement to rent an apartment for a specified period and payment amount.

Lease (Car)

A contract to use a vehicle for a set period in exchange for monthly payments.

Net Income

Income after all taxes and deductions, also known as take-home pay.

Variable Expense

An expense that changes from month to month, such as groceries or utilities.

Minimum Payment

The smallest amount you must pay on a credit card balance each month.

Credit Limit

The maximum amount of credit a lender extends to a borrower.

APR (Annual Percentage Rate)

The yearly interest rate charged on borrowed money, inclusive of fees.

Introductory APR

A temporary, lower-than-usual interest rate offered to new customers.

Credit Score

A numerical representation of your creditworthiness based on your credit history.

Credit Utilization Ratio

The percentage of your available credit that you’re currently using.

Debt-to-Income (DTI) Ratio

The percentage of your monthly income that goes toward debt payments.

Liability

Coverage that protects you from costs if you’re legally responsible for someone else’s injury or property damage.

Co-Payment (Co-Pay)

A fixed fee you pay for a covered health care service, typically at the time of service.

Deductible

The amount you must pay out of pocket before your insurance coverage begins.

Co-Insurance

The percentage of costs you share with your insurance after you’ve met your deductible.

Claim

A request to an insurance company for payment of covered services or losses.

Coverage Limit

The maximum amount an insurance policy will pay for a covered loss.

Out-of-Pocket Maximum

The most you’ll pay during a policy period before your insurance covers 100% of costs.

Medicare

A federal health insurance program primarily for people aged 65 and older.

Medicaid

A federal and state program that helps with medical costs for people with limited income.

Premium

The amount you pay to maintain an insurance policy.

Beneficiary

The person or entity designated to receive benefits from an insurance policy.

W-2

A form employers send to employees detailing annual wages and taxes withheld.

W-4

A form you complete for your employer indicating how much federal income tax to withhold.

1040

The standard IRS form for individuals to file annual income tax returns.

1099

A form reporting income not earned as an employee.

I-9

A form used to verify an employee’s identity and authorization to work in the United States.

Deductions/Contributions

Deductions reduce taxable income; contributions refer to retirement account amounts.

FICA (Social Security)

Federal Insurance Contributions Act tax withheld from paychecks for Social Security and Medicare.

Tax Bracket

Income ranges taxed at different rates.

Tax Credit vs. Tax Deduction

A credit reduces taxes owed, while a deduction reduces taxable income.

Savings Account

A bank account that earns interest and is used for storing money.

Interest Rate

The cost of borrowing money or the return for saving, expressed as a percentage.

Compound Interest

Interest calculated on the initial principal and accumulated interest.

401(k) / 403(b)

Employer-sponsored retirement plans allowing employees to save pre-tax money.

IRA (Traditional/Roth)

Individual retirement accounts with different tax treatments for contributions.

Mortgage

A loan used to purchase property, with the property itself as collateral.