Personal Finance - Final

Consumer

A person who purchases goods and services for personal use.

Social media influencer

An online celebrity who promotes products and advertises on social media.

Comparison shopping

Evaluating multiple products or services to find the best deal based on price, quality, and other factors.

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

Because it helps you take responsibility, avoid debt, build wealth, and achieve long-term goals.

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

By evaluating options, considering consequences, setting goals, and making informed choices using research and critical thinking.

What is a lifetime guarantee?

A warranty that promises the product will be repaired or replaced for as long as you own it.

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

Through targeted ads and influencers promoting products. You can reduce its influence by setting a budget, limiting screen time, and questioning your spending impulses.

How can you protect your financial information from online threats?

Use strong passwords, enable two-factor authentication, avoid public Wi-Fi for financial transactions, and don’t share sensitive information online.

Need

Something essential for survival or well-being.

Want

Something desired but not essential.

Annual Expense

A cost that occurs once a year.

Fixed Expense

A cost that stays the same each month (like rent).

Whammy expense

An unexpected and often large expense

Recurring Expense

A cost that repeats regularly (weekly, monthly, etc.)

What strategies can you apply to make informed purchasing decisions?

Comparison shopping, budgeting, checking reviews, and delaying purchases to avoid impulse buying.

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

Track income and expenses, prioritize needs over wants, and plan savings.

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

50% for needs, 20% for savings/debt repayment, and 30% for wants. This method helps allocate income effectively to ensure financial stability.

What is the difference between wants and needs?

Needs are essential, like housing and food. Wants are non-essential, like designer clothes or video games.

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

A surplus means you have extra money; a deficit means you're spending more than you earn.

Tuition

The amount you owe to attend college for classes and instruction. Some colleges may charge one set tuition rate while others may charge per credit hour.

Subsidized Loan

A student loan where the government pays the interest while you're in school.

Unsubsidized Loan

You are responsible for all interest that accrues.

Scholarship

Free money awarded for academic or other achievements.

Grant

Need-based financial aid that doesn’t need to be repaid.

Work-Study Program

A program that allows students to work part-time to earn money for school. Students gain practical experience while covering educational costs.

Who receives and uses information from your FAFSA form?

Colleges, the Department of Education, and some state financial aid programs.

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

Scholarships, grants, and work-study before taking loans. Federal loans generally have more buyer protections than private loans do.

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

Scholarships and grants don’t require repayment; loans do. Work-study provides part-time job earnings.

What is the difference between subsidized and unsubsidized student loans?

Subsidized: no interest while in school; Unsubsidized: interest accrues immediately. Subsidized loans are need-based and do not accrue interest while you're in school, whereas unsubsidized loans are not need-based and begin accruing interest from the date of disbursement.

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

Longer-term = smaller monthly payments but more interest over time. Shorter-term = higher payments, less interest. Overall, shorter-term loans typically save you money on interest but require higher monthly payments, while longer-term loans lower the monthly payment but increase the total interest paid.

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

Federal and private loans. Repayment options include standard, graduated, income-driven, and extended repayment.

Taxable income

The income used to calculate how much tax you owe.

Exemptions

Allowances that reduce taxable income (now mostly replaced by standard deductions).

Deductions

Expenses you can subtract from your taxable income. An amount (often a personal or business expense) that reduces income subject to tax.

Net Pay

Your take-home pay after tax deductions.

Gross Pay

Your total earnings before any tax deductions.

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

They reduce your income and influence how much you can spend or save, depending on where you live.

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

By checking your state/local government website or receipts which show sales tax.

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

They may move into a higher tax bracket, paying a higher rate on part of their income.

What is the difference between gross pay and net pay?

Gross pay is before tax deductions; net pay is after.

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

Gather forms (W-2s, 1099s), choose your filing status, report income, claim deductions/credits, calculate tax owed/refund.

How do deductions impact your taxable income?

They reduce the amount of income that is taxed, potentially lowering your tax bill.

Checking Account

A bank account used for daily transactions.

Savings Account

A bank account for storing money and earning interest.

Debit Card

Draws money directly from your checking account.

Credit Card

Allows you to borrow money up to a limit to make purchases.

What is the difference between a checking and a saving account?

Checking is for frequent transactions; savings is for storing money and earning interest.

What is a certificate of deposit?

A savings tool that locks in your money for a fixed time in exchange for higher interest.

What are the main parts of a bank statement?

Starting/ending balance, deposits, withdrawals, fees, and interest earned.

How do you reconcile (balance) a bank account?

Compare your records with the bank statement to ensure accuracy.

What is direct deposit?

Automatic deposit of paychecks into your account.

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

Fees: ATM, overdraft, maintenance. Incentives: interest, rewards, mobile access.

How can you avoid certain ATM fees?

Use in-network ATMs, or get accounts that reimburse fees.

What is overdraft protection?

A service that covers transactions when you don’t have enough money, often with a fee.

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

Debit: linked to a bank. Prepaid: loaded with funds. Credit: borrowed money.

What is a P2P app?

Peer-to-peer payment app (like Venmo, Cash App) for sending money to others.

Principal

The original amount of money borrowed or invested.

Interest

The cost of borrowing money.

Term

The length of time for loan repayment.

Credit Score

A number that represents your creditworthiness.

What are the costs and benefits of using credit?

Benefits: convenience, building credit, emergency use. Costs: interest, fees, risk of debt.

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

Based on payment history, amounts owed, credit history length, new credit, and credit mix.

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

Use credit responsibly, create a budget, build emergency savings, and seek help before falling behind.

Investments

Assets purchased with the goal of earning income or profit.

Risk & Return

The relationship between the potential risk of an investment and its possible return.

Estate

Everything a person owns at death.

Trust

A legal arrangement where assets are held for a beneficiary.

What is a 401K plan?

A retirement savings plan through your employer, often with matching contributions.

Why should you have a diverse set of investments?

To reduce risk — if one investment loses value, others may perform well.

Describe risk and return as far as investments go

Higher risk can mean higher returns — or bigger losses. Lower risk usually means lower return.

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

To ensure assets are distributed according to your wishes and minimize taxes.

How can you develop a personal investment portfolio?

Set goals, assess risk tolerance, research investment options, and monitor regularly.

Claim

A request to an insurance company for payment based on a policy.

Beneficiary

The person who receives the insurance payout.

Deductible

The amount you pay before insurance kicks in.

Premium

The cost of insurance coverage.

Liability

Legal responsibility for damages or injury.

What is the purpose of insurance?

To protect against financial loss due to unexpected events.

How does insurance play a role in financial planning?

It helps manage risk and protect savings/assets.

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

Liability, collision, comprehensive, uninsured motorist. Each affects your protection and premium.

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

To help cover medical costs. Features: premiums, copays, deductibles, network providers.

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

Short-term covers a few months; long-term covers extended periods, possibly until retirement.

How long is term insurance usually in effect for?

Typically 10–30 years, depending on the policy.