Financial Stewardship exam 1

Strategy

A plan for achieving a long-term goal (what/why)

Tactic

A short term action used to achieve a goal (how)

Six-step financial planning process

Define financial goals, develop financial plans, implement plans, use budgets to monitor and control progress, use balance sheet to evaluate results, reducing goals as life changes

S.M.A.R.T goals

Specific, Measurable, Achievable, Relevant, Time bound

What determines pay of given job

Education, Experience, supply of workers, demand for that work, cost of living for city/country, Desirability of work

Fixed expenses

Contractual, usually the same rate of payment

Variable expenses

Amounts change from one period to the next

50/30/20 rule

50% needs, 30% wants, 20% Savings

Balance Sheet

A statement of your financial position at a given point in time.

Assets

Liabilities + Net Worth (equity)

Insolvent

More liabilities than assets

Solvent

Net Worth is greater than 0

Who determines tax rates

USA congress

Progressive tax structure

The more you earn, the more you pay

Taxable income

The portion of a family’s income that is eligible to be taxed, after deductions

Tax credits

Tax credits can reduce the amount of tax you owe

What part of income is taxed more?

Extra income above the bracket threshold

Capital gain

Taxes paid on appreciation of assets, from purchase to sale.

What is the exception for capital gains

Owning a home

Annual filing deadline

April 15th

Best way to file taxes

Free/paid software

Cash management

Routine, day to day use of liquid assets

Liquid assets

Cash and other assets rhat can be converted easily into cash with little or no loss in value

Annual percentage yield (APY)

Will appear to be a bigger percentage rate; includes compounding (saving)

Annual Percentage Rate (APR)

Appears smaller because it excludes compounding (loans)

Certificate of Deposit (CD)

A savings account where you promise to leave funds for a pre determined duration

As liquidity goes up…

Interest rate goes down