FBLA Personal finance 3

Debtor

A person that owes a sum of money

April 15th

Due date for filing tax returns

Special Endorsement

Allows Payee to transfer check ownership to another person; This is written by the middle man (original payee) by saying "pay to the order of"

Full Endorsement

Has name of endorser and payee

Blank endorsement

A signature/statement that does not specify a payee (person being paid)

Restrictive Endorsement

Conditional guarantee of a transfer (Ex: For Deposit only (funds can't be cashed), Pay to the order of [name] (Funds can only be used by the specified person), For Collection only (When Payee acts as a middle man), Account Payee only (fund can only be deposited into the account specified)

Endorsement

Signature/Statement that authorizes a check to be cashed/deposited

Certified Check

Similar to Cashier Check (guaranteed by bank), but is drawn from a personal/business account.

Cashier's Check

Official check issued, signed, and draws money from a bank. Offers a lot of security

Federal Insurance Contributions Act (FICA)

Deducted from each paycheck to pay for medicare and Social Security

Health Maintenance Organizations (HMOs)

Health Plan that provides care to members through network out doctors and hospitals. An Advantage is that members don't receive bills or fill out claim forms.

Preferred provider organization

A health plan similar to HMOs, but has a larger network (and covers out-of-network) but is more expensive

Money Order

Similar to checks but is bought before sending, meaning it can't bounce (also clear immediately). However, it has a limit of 1000

Traveler's Check

Used to purchase things abroad; can be exchanged for cash and offers protection against loss/theft

W-4 Form

Used to provide information to employer to determine how much to withhold from paychecks

W-2 Form

Reports employee annual wage and taxes withheld; filed by employer, sent to employees and IRS

1040 Form

Used to file annual income tax returns

Truth in lending law

protect you against inaccurate and unfair credit billing and credit card practices. It requires lenders to provide you with loan cost information and terms and conditions.

Collision insurance

Auto insurance that covers losses from crashes,

Liability coverage

Auto insurance that covers some else's damages caused by insurance holder

Uninsured motorist protection

Auto insurance that protects drivers from those that caused an accident but can't pay. May pay for Bodily injury as well as property damage

Renter's insurance

Property insurance that covers losses to movable belongings

Bodily injury liability insurance

A auto insurance that protects those who kill someone in a car accident

Liability protection

Property insurance that covers the cost of injuries to others on the policyholder's property

Dwelling coverage

Property insurance that covers natural disaster damage.

Annuity

A written contract with a life insurance company that guarantees an income for life or some other defined period in exchange for premiums you pay

Character (5c's of Credit)

Borrower's reputation in repaying debts (in essence, credit history)

Capacity (5c's of Credit)

Borrower's ability to repay a debt (assessed by looking at debt-to income ratio)

Capital

The amount of money a lender has

Collateral

An asset used as security for the loan (typically the object for which one is borrowing the money: Auto loans, for instance, are secured by cars, and mortgages are secured by homes.)

Conditions

the purpose of the loan, the amount involved, and prevailing interest rates.

Term life insurance

Gives your relatives financial support if you pass in a certain time (term)

Universal life insurance

allows you to adjust your premiums (within limits) and has a cash value component that grows based on market interest rates. Premiums typically increase over time, forcing you to increase your premium payments or cover rising costs by subtracting from your cash value account or death benefit.

Variable life insurance

tied to investment accounts, such as bonds and mutual funds

Whole life insurance

The regular life insurance; is similar to term but is lifetime and more expensive.

New issues market

Securities are created and offered to the public for the first time.

Secondary market

Securities are traded among investors (after the primary market)

OTC Market

Stocks trades that occur without an exchange; typically via pink sheets and bulletin boards

Coupon rate

rate of interest for a bond

Face Value

Value of bond at maturity

Coupon date

The date where issuers make interest payments

Zero-Coupon bonds

Bonds that do not give interest, but are sold at a deep discount compared to face value

Convertible Bond

Allows the bond to be changed into stocks

Callable bonds

Can be called back by the issuer before the day of maturity (usually when interest rates drop)

Puttable Bonds

Allows the bondholder to sell the bond to the company before maturity

Investment-Grade Bonds

Typically between AAA and BBB; highly likely to be repaid

High-Yield Bonds

Has a higher risk (rated below BB) than investment-grade bonds, but are justified by providing a higher interest rate

Junk Bonds

The riskest bonds (rated below BB), but provide higher potential return than other bond types

Bond default

When the bond issuer cannot pay interest/ principal

Cash Advance

Short-term loan given in cash from the bank, typically by tapping into one's credit card limit

Call Option

Provides one with the right to purchase an underlying stock at a predetermined price.

Put Option

Provides one the right to sell a specific stock at a specific price, on or before a specific date

Line of Credit

Allows you to withdraw the amount of money needed rather than be given a lump sum

Open-ended Credit

Has no end date or a long revolving credit (ex-credit cards)

Close-ended Credit

Has an end date for repayment (ex-mortgages and car loans)

Yield

Earnings generated that are expressed as a percentage (profit/principal)

Amortization

Pay off the loan through scheduled payments (with most covering interest in the early stages)

Previous Balance Method

Interest is calculated based on the balance at the start of the billing cycle (therefore payments made during the cycle has no effect on the interest)

Adjusted Balance Method

Interest is calculated based on the balance at the end of the cycle

Average Daily Balance Method

Interest is calculated based on the average balance each day of the billing cycle

Daily Balance Method

The annual rate is divided by 365 to get the daily rate; the daily rate is multiplied to the balance and interest is summed at the end of the billing cycle

Tax Allowances

Reduces the amount of tax taken out of your paycheck

Tax reductions

Reduces the tax bills when you file tax returns

Itemized deductions

Expenses the taxpayer incurred that lower the income tax

Standard deductions

preset amount of tax deductions that varies according to taxpayer's filing (on the 1040 form)

Simple will

Basic legal document stating how assets will be distributed after death

Trust Will

A type of will that includes a trust in its estate plan

Holographic Will

A will written in a person's own handwriting

Probate

The court process to validate a will

Codicil

Legal document that makes changes to a will

Trust

A legal entity created to manage assets for someone

Trustee

Person/organization managing the trust for the trustor

Front-End Load

Fee or charge paid at the time of purchase

Back-End load

(of a mutual fund) Service fee charged when one sells an investment

Defensive Stocks

Stocks that provide a consistent dividend and stable earnings

Income fund

Mutual funds that prioritize current income in the form of interest and dividends

Subsidized Student Loan

A student loan based on financial need in which the government helps pay for interest while the student is enrolled (Only available undergraduates).

Unsubsidized student loan

A student loan that accrues interest while the student is enrolled but is available to all college students and does not require financial need.

Commodities Investing

Types of Commodities investing include such as gold, or by purchasing ETFs that track specific commodity indexes. You can also buy stocks of commodity-related businesses such as oil and gas producers or miners of precious metals; carries more risks than most types of equity investment

Intestate

Not having made a will before one’s death

Pell Grant

Money awarded by government to students based on financial need (doesn’t need to be repaid); must submit FASFA application to qualify

Primate Rate

The interest rate that commercial banks charge large businesses and the most loyal customers

Discount Rate

the interest rate the Federal Reserve charges commercial banks and other financial institutions for short-term loans from its discount window.