CPF Unit 1

Simple Interest

interest paid on the principal alone

Compound Interest

interest earned on both the principal amount and any interest already earned

SMART Goal Setting

Specific

Measurable

Attainable

Relevant

Time-bound

Gross Pay

the total amount of an employee's earnings before deductions are taken out

Net Pay

Amount of income left after taxes and deductions have been taken out.

FICA

Federal Insurance Contributions Act; tax levied on employers and employees to support Social Security and Medicare

Opportunity Cost

whatever must be given up to obtain some item

Trade Off

Giving up one thing for another

Fixed Cost

Costs that do not vary with the quantity of output produced (internet fee)

Variable Cost

a cost that rises or falls depending on how much is produced (groceries)

Period Cost

known but occasional payments (school fees)

PYF

pay yourself first

surplus

more income than expenses

Deficit

more expenses than income

Cash Flow Statement

A summary that shows total income and spending for a given time period

monthly budget

Your guide to income and

spending for the month.

personal net worth statement

shows a person's net worth based on assets and liabilities

asset

something of value

Liabilities

debts that you owe

Debt Ratio

total liabilities/total assets

debt-to-income ratio

The amount of debt a person or a household has in relation to his or her income. ( lenders prefer a ratio 28-36% )

Current Ratio

liquid assets/current liabilities

Liquidity

how fast an asset can be converted into cash

Current Liabilities

liabilities due within a short time, usually within a year

long-term liabilities

liabilities owed for more than a year, usually loans/mortgages

Rule of 72

The number of years it takes for a certain amount to double in value is equal to 72 divided by its annual rate of interest.

Inflation

A general and progressive increase in prices

Time Value of Money

the increase of an amount of money due to earned interest or dividends

Future Value

the amount of money in the future that an amount of money today will yield, given prevailing interest rates

Future Value of a series of deposits

Future value can be computed for a single amount or for a series of deposits called an annuity

present value of a single amount

The amount at a present time that is equivalent to a payment or an investment at a future time

Present Value of a series of deposits

amount of money a person needs to deposit so he can take a certain amount out of the account for a desired number of years

Pension

employer promises to set aside a certain amount for your retirement

Profit Sharing

Employer contributions depending on company profits

401k Plans

you contribute and your employer matches contribution

Vesting

your right to at least a portion of the benefits

TSA

Tax-sheltered annuity

Traditional IRA

not taxed now, taxed when you retire

Roth IRA

taxed now, not when you retire

401(k) Rollovers

when you direct the transfer of the money in your 401(k) plan to a new 401(k) plan or IRA

Deductions

Social Security - FICA

Medicare

401K

Health Insurance