Final Exam (Personal Finance)

Consumer

Someone who buys products/ goods for personal use

Social Media Influencer

An individual who promotes products on social media for the purpose of convincing others to buy certain things

Comparison Shopping

Comparing things such as price, quality, and longevity when deciding to buy something

Why is it important to take charge of your own financial decisions?

Being in charge of your own financial decisions can help you become more responsible with your money, and teach you how to grow as an individual.

How can yo use decision-making skills to make smart personal financial choices?

Making the right deciosn when it comes to your finches can be done through looking at any red flags, taking your time to look over your decision, and overall just being smart about what you decide to do with your finances.

What’s a lifetime guarantee?

Promise to replace of repair a product throughout its whole “lifetime”

How does social media marketing try to get you to spend money, and how can you reduce its influence on you?

Social media marketing gets you to spend money by purposefully showing you things frequently on your algorithm, but you can reduce its influence by thinking before your buy something online and considering whether it is something you really need.

How can you protect your financial information from online threats?

Protecting financial information from online threats involves using strong passwords, enabling two-factor authentication, and being cautious about sharing personal information.

Need

Something that you require and cannot go without

Want

Something that you do not need but would like to have

Annual expense

Fee that is paid every year

Fixed expense

Fee that has a set rate that does NOT change

Whammy expense

Expense that is unpredictable and often costly

Recurring expense

Expense that constantly occurs on a regular basis

What strategies can you apply to make informed purchasing decisions?

Try to budget things, considering prices, thinking whether you really need something, and weighing the value against your financial goals.

How can you create a budget that meets your personal finance goals?

Start by looking over your individual expenses and what goal you want to achieve and then allocate your income accordingly to prioritize needs and savings.

How does the 50/20/30 budgeting method work?

50% is needs, 30% is wants, and 20% is savings and paying off debt

What is the difference between wants and needs?

A want is something that is desired for enjoyment or pleasure, while a need is essential for survival or basic functioning.

What’s the difference between a surplus and deficit in your budget?

A surplus occurs when your income exceeds your expenses, allowing you to save or invest the extra money, while a deficit happens when your expenses exceed your income, requiring you to borrow or adjust your spending.

Tuition

Amount that you owe to attend college for classes such as technology and lab fees (vary per college)

Subsidized loan

Federal government pays the interest on your loan while you study (at least half time)

Unsubsidized loan

Interest builds up right away and make your payments in school

Scholarship

Grant/ free money you can receive from colleges to attend their school

Grant

Money given to attend school and is typically more financial-need based

Work-study program

You study and work while at school to pay for your education

Who receives and uses information from your FASFA form?

Colleges and universities to calculate your financial aid

When considering how you will pay for college, what options should you take first?

consider whether you want o go out of state, community college, and what path you’ll take after completing under grad.

What are the differences between scholarships, grants, loans, and work-study programs?

Scholarship - money given by a college based off merit

Grant - money given based off financial need

Loan - agreement to borrow a sum of money that is later paid off through smaller payments by the borrower to the lender

Work-study program - financial aid opportunity where students can earn money to help pay for college by working a part-time job

What is the difference between subsidized and unsubsidized student loans?

Subsidized - paid by federal government

Unsubsidized - you pay

How would monthly payments differ between a loan with a longer-term length and a loan with a shorter term?

Loan with a longer-term length would typically have less expensive monthly payments whereas a shorter term would be more costly.

What are the different types of student loans, and what are their repayment options?

Standard (10 years) - Default, fixed amount, and paid fast

Graduated (10 years) - Increase over 2 years, start off paying less, but payments increase and income doesn’t

Extended (20 years) - Payments are lower, longer, but more interest

Taxable income

Portion of your income that is taxed

Exemptions

Omitted from something

Deduction

Portion of the profit/ income is taken away

Net pay

Total income AFTER deductions

Gross pay

Total income BEFORE deductions

How do federal, state, and local taxes affect your finances?

Federal tax - used to provide for national programs

State tax - Vary upon state

Local tax - Governments, countries, cities, towns, etc.

How can you figure out local taxes on products and services?

Use search engines/ look up the information in your area

What happens to someone’s income tax if their pay increases?

Their income tax will increase until they meet a certain tax bracket (varies)

What is the difference between gross pay and net pay?

Net pay in the total after deductions such as taxes to figure out your TRUE income whereas gross pay in your income before deductions

What is the process of filling out a federal and state individual income tax return?

Federal income tax return:

1. gather documents

2. choose filing status

3. fill out 1040 form

4. calculate refund or taxes owed

5. submit

State individual income tax return:

1. gather documents

2. choose filing status

3. check for available credits

4. submit

How do deductions impact your taxable income?

Deductions can help reduce your income tax

Checking account

Account at a bank that is mean to keep your money safe and make it easier to deal with checks

Savings account

Account that is used to help save your money

Debit card

Moves money from checking account electronically, also can be used as ATM card for cash access

Credit Card

Payment card that allows you to borrow money from the bank as a set limit which you have to pay back at the end of every month

What’s the difference between a checking and a saving account?

Checking: Money for easy access, fewer limitations, and flows with your expenses and income, but no earned interest

Saving: Tool for investing rather than saving, requires withdrawal or transfer to be spent, interest overtime, and bank lends it out to other customers

What is a certificate of deposit?

Allows you to deposit a certain amount of money away for a certain period of time to earn interest

What different fees and incentives can you find with online, mobile, and traditional banking?

Online: Easily accessible, electronic payments, and immediate

Mobile: low balance, very convenient, and alerts/notifications

Traditional: Physical presence, face-to-face, and wider range of options

How can you avoid certain ATM fees?

Use in-network ATMs

How do you reconcile (balance) a bank account?

Compare your records and come up with evidence

What is a direct deposit?

Payment when funds are placed electronically (not through a paper check)

What is overdraft protection?

service offered by banks that helps prevent transactions from being declined due to insufficient funds in your checking account

What is the difference between a debit card, prepaid debit card, and a credit card?

Debit: linked to a checking account and when you purchase things that money is directly deducted

Prepaid Debit: NOT linked but you put money on the card in advance, so you can only spend the preset amount

Credit: A line of credit where you borrow money

What is a P2P app?

A peer-to-peer app such as:

PayPal, Venmo, Google pay, Apple Pay, Zelle, etc.

Principal

Amount that you are borrowing

Interest

% charged for lending you the money

Term

Amount of time to pay it all back

Credit Score

Predication of how likely you are to pay off your loans based off your credit history

What are the costs and benefits of using credit?

You can help build credit history for yourself and potentially raise your credit score by making on time credit card payments, showing that you are financially responsible and reliable

How are the components of a credit score and a credit profile determined?

Credit Score: FICO, which is 35% credit history, 30% amount owed, 15% length of credit history 10% types of credit, and 10% new credit

Credit Profile: Created by credit bureaus like Equifax, Experian, and transition based on your credit activity like your current balance, payment history, loan amounts, etc.

How can you avoid the financial pitfalls of high-risk repayment strategies such as payday loans, over-extended-credit, and bankruptcy?

Avoid quick cash loans with high interest rates, be a “deadbeat” (always pay off your debts), and thinking critically with how you are going to spend your money

Investments

Many things such as stocks, mutual funds, and bonds

Risk & Return

Determine whether the risk of the investment is worth the potential return

Estate

Property that is owned by an individual

Trust

Legal transfer of assets from one person to another

What is a 401K plan?

An investment made for retirement

Why should you have a diverse set of investments?

Choosing a variety of investments can help reduce risk

Describe risk and return as far as investments go.

Risk: possibility the entire stock/investment fails

Return: profit or lost that is created by an investment overtime

What are the different types and purposes of estate planning, such as wills, trusts, gifts, and charitable contribution?

Will: instructions on how assets should be distributed after a persons death

Trust: “relationship in which one person holds title to property” before or after death

Gifts: Give money to others before death (up to $17,000 a year without tax)

Charitable Contributions: People with large estates over $12,920,000 sometimes make contributions to charities to reduce their assets

How can you develop a personal investment portfolio?

Plan out your future goals/ what you want to achieve, set a time horizon, and determine your comfort levels based on your personal needs and lifestyle

Claim

Formal request made to your insurance company for payment or reimbursement for losses or damages covered by your insurance policy

Beneficiary

a person or entity (like a trust or charity) who is legally designated to receive the benefits or proceeds of a policy, account, or estate when the owner dies

Deductible

Amount that you’ll have to pay out of pocket before insurance benefits kick in

Premium

Amount that you’re charged for your insurance policy, making ontime payments keeps your policy in place

Liability

Being responsible of something, or owning some one something else

What’s the purpose of insurance

To offer you a guarantee for a certain risk that may not occur and help you cover large and unexpected costs

How does insurance play a role in financial planning?

serving as a safety net against unexpected events that could otherwise jeopardize an individual or family's financial well-being; it acts as a risk management tool, transferring the financial burden of potential losses

What are the different coverage choices with auto insurance and how would these have an impact on you?

Liability - pays for the damage you cause in an accident when you’re at fault

Collisions - damages to you car (even if you’re at fault)

Comprehensive - cover losses that are out of your control

Personal injury protection - “no fault insurance”

Uninsured/Underinsured motorist coverage

What is the purpose of health insurance, and what are its key features?

The purpose of health insurance is to help provide you with financial protection and medical care.

Key features: once you meet your deductible you insurance begins to pay some of your medical bills, and once you reach your out of picked maximum you insurance pays for everything for the rest of the year

What is the difference between short term and long-term disability insurance?

Short-term: shorter period of time, but has a greater % coverage level of income

Long-term: stated in years (5, 10, or 20) snd 40-70% for a longer period of time

How long is term insurance usually in effect for?

In effect for a specific time period or “term” that you chose

All of the following are common types of social media scams except

library fee scam

The first step to defeat hidden fees is to ___.

Notice the fees are there

Which type of expense may only happen once or twice a year and can be challenging for people trying to get on a budget?

Non-recurring

Arthit wants to buy a truck but discovers truck tires cost more than the ones on the compact car he now drives. What type of non-recurring cost is this an example of?

Registration fees

Which description is most accurate for a zero-based budget?

You put every dollar of your net pay into a budget category each month

Which of the following statements about applying for grants and scholarships is TRUE?

While some grants and scholarships are guaranteed for all four years of attendance, others expire every year and must be reapplied for.

What’s a Pell Grant?

Form of financial aid provided by the U.S. government to help students pay for their college and DO NOT have to be repaid

Janelle has been accepted to State U and Greenlawn College and is comparing their financial aid packages. State U has a sticker price of $28,000 and a net price of $12,000. Greenlawn College has a sticker price of $60,000 and a net price of $9,000. Which statement below is TRUE?

Greenlawn College is providing Janelle with more grants and scholarships.

Which of the following ways to pay for college is MOST likely to be based on someone’s financial need?

Grants

Each of the following is an organization that can offer grants to college students EXCEPT…

FAFSA

What effect does sales tax have on net income?

None – sales tax does not come out of paychecks

Elaine just accepted a new job and is working with the company’s HR department to fill out paperwork. Which of the following steps is she responsible for?

Complete a W-4 form

W-4 form is…

information about yourself and family and how much money gets taken out of your pay check

W-2 form…

received in January, one for every job, and has how much your earned & paid in taxes

Estate tax

tax on the value property you own at your death

Income tax

federal, state, and local taxes on income, earned + unearned

On a paystub, income taxes are usually calculated on

Gross pay.

Ellis receives a salary of $89,000 a year. She is paid every two weeks. What is the gross amount for each of her paychecks?

$3,423.08