Personal financial literacy

Budgeting

The process of creating a plan to manage income and expenses to live within one's means.

Fixed Expenses

Regular payments that do not change, such as rent, utilities, and insurance.

Variable Expenses

Expenses that vary in amount each month, such as food, entertainment, and gas.

Surplus

When income exceeds expenses, resulting in extra money.

Deficit

When expenses exceed income, resulting in a shortfall.

Credit Score

A numerical representation of a person's creditworthiness based on their credit history.

Revolving Debt

A type of debt that allows the borrower to use or borrow up to a maximum limit, such as credit cards.

Installment Debt

Debt that is paid back in fixed amounts over a set period, such as student loans or mortgages.

Debt-to-Income Ratio

A measure of how much of a person's income goes toward paying debt, influencing loan eligibility.

Emergency Fund

Savings set aside to cover 3-6 months of living expenses for unexpected situations.

Compound Interest

Interest calculated on the initial principal and also on the accumulated interest from previous periods.

Diversification

The practice of spreading investments across various assets to reduce risk.

401(k)

A retirement savings plan that allows employees to save and invest a portion of their paycheck before taxes are taken out.

Roth IRA

An individual retirement account allowing a person to set aside after-tax income for retirement.

Premium

The amount paid regularly for an insurance policy.

Deductible

The amount a policyholder must pay out-of-pocket before the insurance coverage kicks in.

Taxable Income

The portion of income that is subject to income tax.

Tax Deductions

Expenses that can be deducted from gross income to reduce taxable income.

Net Worth

The difference between assets and liabilities, indicating overall financial health.

Monthly Payment Formula

M = P[r(1 + r)^n] / [(1 + r)^n - 1], used to calculate monthly loan payments.

Practice Case Studies

Simulated scenarios used to prepare for real-life financial challenges and scenarios.

Confidence in Communication

The ability to present ideas clearly and assertively in a professional setting.