Wise test vocab:

budget variance

The difference between the budgeted amount and the actual amount that you spend.

debt ratio

Shows the relationship between debt and net worth.

debt ratio - lower better

The lower the ratio the better off financially the person is.

debt ratio calculation

Calculated by dividing liabilities by net worth.

excise tax

A government tax on specific goods and services such as alcohol, cigarettes, gasoline, and airline.

capital gains

Profits made from the sale of capital assets such as stocks and bonds.

capital gains tax deferral

Tax deferred until the asset is sold.

long-term capital gains tax benefits

If held over one year, are taxed at a lower tax rate or may not be taxed at all.

variable expenses

Change from one period to another, examples include electricity and food expenditures.

financial planning

The process of developing and implementing a coordinated series of actions to achieve financial success.

liquidity

Being in cash or easily convertible to cash, indicating how easily an asset can be converted into cash.

collateralized loan

A loan that is secured by collateral, properties or assets that can be seized on default.

uncollateralized loan

A personal loan without assets to cover the loan amount.

bankruptcy

Will appear on the person's credit report for 10 years and can significantly impact their ability to obtain future loans or credit.

installment loan

A loan repaid with interest in equal periodic payments.

garnishment

Occurs when a creditor obtains a court order requiring an employer to attach an employee's earnings to pay back a debt.

rate of inflation

Determines the time value of depositing into a savings account and the interest rate.

short-term savings instruments

Your money will be available to invest in a higher interest instrument in the near future.

credit unions

Usually pay the highest rates of interest because they have lower risks and costs of operation; they are not-for-profit organizations.

Truth in Lending Act

Requires that the finance charge and annual percentage rate be disclosed to the consumer in advance.

finance charge

The amount charged by the lender for any kind of credit.

annual percentage rate (APR)

The true cost of credit that must be disclosed on a loan agreement.

certificate of deposit

A long-term, fixed rate investment product.

usury laws

Charging excessive interest rates on loans.

personal property floater

Additional property insurance that covers the damage or loss of a specific item of high value.

cash value of whole life insurance

The calculated amount of money which includes the premiums paid as well as the interest on that money.

premiums

Low cost items given to the consumer at a discount or for free.

deductible

The amount of money that the policyholder pays when a claim is settled.

liability insurance

Insurance that provides protection from claims arising from injuries or damage to other people or property.

automobile insurance

Covers motor vehicles, including automobiles, trucks, and motorcycles, along with injuries to the driver and passengers.

direct deposits

Money deposited in checking accounts sooner, directly from the paycheck.

credit card disposal

Cut up the card, put parts in different garbage bags, and notify the credit card company to close the account.

identity theft

Exposes consumers to a greater likelihood of fraud and/or identity theft.

treasury bill (T-bill)

A secure, low risk investment backed by the full faith and credit of the US government.

dividend reinvestment

Using dividends previously earned on the stock to buy more shares.

Securities and Exchange Commission (SEC)

Agency created in 1934 to monitor the stock market and enforce laws regulating sales of stocks and bonds.

common stock

The most basic form of ownership in a company, including voting rights on major issues.

preferred stock

Stock whose holders are guaranteed priority in payment of dividends but have no voting rights.

New York Stock Exchange (NYSE)

The largest stock market in the United States, also known as the "Big Board".

bonds issuance

Corporations issue bonds to raise money for expansion or other company operations.