FACS 350 Exam 2 - Liberty University

Net spendable income

Net spendable income

The amount of left over after taxes, giving, and debt repayment

Reasons for having an emergency fund

1.)     Life is uncertain

2.)     The less we have, the more things cost

3.)     You are required to have a set amount of money to function

What is financial liquidity

Cash, bank accounts, or other resources that can be quickly converted to cash

Overdraft protection

The bank will pay the charge for standard debit and ATM transactions even if you don’t have enough funds in your account. Charges about 75% of total checking account and fees

Nonsufficient funds

Bank charges for checks drawn from accounts with nonsufficient funds (also called a bounced check)

Apostle Paul’s Financial Plan

------ – no collections will have to be made

------ – each individual per individual calling

----- – sum in keeping with the individual’s income

----- – one the first day

----- - every week

planned, personal, proportionate, priority, periodic

Tithing

portion of our income to give back to God, 10%

Giving

anything extra we give beyond that, additional to money (time, actions, words)

Saving

A plan to set aside a certain amount of your net cash flow to be able to accomplish a short-term goal

Investing

The use of money to earn money for the purpose of accomplishing long-term life goals

The size of your investment is dependent on:

1.)     Principle

2.)     Length of time

3.)     Rate of return

Interest

The amount a borrower pays to lender for the use of the money

Dividend

Payments made by a company to its stockholders from excess earnings

Rate of Return

the gain from an investment as a percent of the principle invested

How many credit reports can you get a year?

3

Credit Report agencies

Equifax, TransUnion, Experian

Largest factor in determining credit score

35% payment history

Grace Period

the period between the end of a billing cycle and the date your payment is due.

Skimming

when devices illegally installed on ATMs, point-of-sale (POS) terminals, or fuel pumps capture data or record cardholders' PINs

Bond

Loan made to a corporation or a government agency

When you buy a bond….

you are loaning money to the company whose bond you bought

Bond’s price is inversely related to….

the market interest rates

Mistakes people make with emergency funds

Think that it can be used for things that aren’t emergencies

People tempted to use it to pay off credit card debt

Stock

Documents representing ownership in a company

What is the difference between an overdraft and an NSF?

Overdrafts are sometimes paid by the bank even if you don't have funds; NSFs are declined and returned.

How are online banks able to charge lower fees and have higher interest rates?

They have lower costs thanks to not having buildings and staff.

Even if you don't have much money, it is important to set up a savings account because

it allows you to set aside an amount separately each month and create a savings habit

What is a bank?

A financial institution that accepts deposits and channels those deposits into lending activities

If we are certain that there will always be economic uncertainty, then which one of the following principles should we NOT follow:

Take out a home equity loan for emergencies

The main reason for having an emergency fund is

to avoid building up debt when things go wrong

If you live with a negative net cash flow routinely, what are you doing?

Living paycheck-to-paycheck

How does overdraft protection work?

Overdrafts are protected by a charge to either your savings account, your credit card, or a personal loan. You're charged a smaller fee, and you have to repay the money.

Which is NOT a Biblical reason for giving?

Giving is a short-term view.

A tithe is what?

The biblical starting point of giving

Which of the following would be the lowest risk?

Money market fund

Which of the following is NOT a common investing mistake?

Diversifying

Compounding means to

earn interest on interest already earned as well as the principal

What advantage do money market mutual funds offer over other types?

Safety

The average investor

earns half the return the overall stock market earns because the average investor frequently operates on emotion.

Which characterizes an investment versus a savings?

Has the potential for higher returns

If you DON'T invest your money in some higher risk alternatives as a young adult, what type of risk are you taking?

Risk that high inflation will take away your money's purchasing power