consumer economics midterm vocabulary study guide

ch. 1-4 & 7

Personal Finance

your personal finances and what you choose to do with your money.

Interest Rate

the percentage of principal charged by the lender for use of its money.

Net Worth

the amount by which the value of a person’s assets exceeds or falls behind the value of their liabilities.

Credit

the granting of a loan and the creation of debt; any form of deferred payment.

Consumer

a person or organization that uses a product or service.

Loan Shark

person or entity that charges borrowers interest rates above an established legal rate.

Asset

anything that is owned by an individual, including money in the bank or investments.

Net Income

what a person earns after payroll taxes and other deductions are taken out; often referred to as take-home pay.

Debt

money owned to another person or company.

Interest

the additional cost a lender charges for borrowing their money.

Liability

financial debts or obligations.

Expenses

the cost of goods or services; money paid out.

Financial Plan

a plan of action that allows a person to meet not only their immediate needs but also their long-term goals.

Positive Net Worth

the dollar value of a person’s assets is greater than the dollar value of their liabilities.

Negative Net Worth

the dollar value of a person’s liabilities is larger than the value of their assets.

Financial Literacy

the knowledge and skill base necessary for people to be informed consumers and manage their finances effectively.

Associate’s Degree

A two-year degree that offers specialized training and provides a flexible schedule so you can work while you earn your degree.

Deferred

When debt payments are held off for or until a certain time and no interest accrues.

Forbearance

Debt payments are held off for or until a certain time but interest continues to accrue.

Subsidized Loans

Federal student loans that are based on a student's financial need and don't accrue interest for a set period of time.

Gift Aid

Any form of financial aid that doesn't need to be repaid.

Bachelor’s Degree

An undergraduate degree from a college or university, usually completed after 4 or 5 years of study.

FAFSA

The federal application required to receive any financial aid, including scholarships, grants, or loans offered through a college or university.

Scholarships

Financial aid that does not need to be repaid; usually awarded based on achievements.

Unsubsidized Loans

Federal student loans that aren't based on a student's financial need and start accruing interest immediately.

Grant

Financial aid that does not usually need to be repaid; usually awarded based on financial need.

CLEP

A set of tests that qualifies students to earn college credit if they pass them.

Federal Student Loan

Loans made by the government with terms and conditions set by law; often have a lower fixed interest rate.

ROI

The measurement of gain or loss generated on an investment relative to the amount of money invested.

Work Study

A program that allows students to work part-time while continuing their studies.

Budget

a written plan for giving, saving, and spending.

Variable Expense

expense that varies in dollar amount from month to month but that you can expect to have every month.

Zero-Based Budget

a cash-flow plan that assigns an expense to every dollar of your income; the goal is for the total income minus the total expenses to equal zero.

Cash Flow Statement

a record that summarizes all of the income and outgo over a certain time period.

Income

money received for work, as a gift, or through investments.

Gross Income

the amount you earn before taxes and other payroll deductions.

Net Income

what a person earns after payroll taxes and other deductions are taken out; often referred to as take-home pay.

Irregular Income

income that comes in at different amounts at different times, or both.

Fixed Expenses

expense that remains the same from month to month.

Intermittent Income

expense that occurs at various times throughout the year and tends to be in large, lump sums.

Discretionary Expenses

expenses for things you don’t need.

Commission

earnings based on a percentage of the sales made.

Envelope System

one of the best ways to track your expenses.

Emergency Fund

a savings account set up specifically to be used to cover financial emergencies.

Accrued Interest

the amount of interest charged on a debt but not yet collected; interest accumulates from the date a loan is issued.

Principal

the initial amount of money invested or borrowed.

Inflation

the persistent rise in the cost of goods and services over time.

Compound Growth

the average rate of growth for an investment over time; often expressed as an annual figure.

Rate of Return

the measure of an investment’s profit or loss, usually expressed as a percentage of the initial investment.

Time Value of Money

concept that an amount of money is worth more today than in the future due to earning potential.

Interest Rate

the percentage of principal charged by the lender for the use of its money.

Compound Interest

interest paid on interest previously earned.

Debt

money owed to another person or company.

Appreciating Asset

An asset that increases in value over time.

Depreciating Asset

An asset that loses value over time, such as a car that's worth less every year.

Principal

Original amount of a loan; the total amount borrowed before interest.

Revolving Credit

Credit that automatically renews whenever a payment is made to reduce the debt.

Equity

The increase in value of a home over time; the difference between the amount owed and what the home could be sold for.

Predatory Lender

A lender who uses deceptive, unfair, or fraudulent practices on borrowers who are desperate for cash.

Term

The amount of time, in months, that you'll be making payments.

Collateral

Something owned and offered as security on a debt; if the debt is not repaid as agreed, the item is forfeited to the lender.

Default

A failure to repay a loan on time.

Credit Score

A statistical number used to represent a consumer's creditworthiness.

Depreciation

The loss of value of an asset over time.

Installment Credit

A loan for a fixed amount of money that's paid back in monthly installments.

Credit Bureau

A company that collects credit rating information and makes it available to creditors.

Negative Equity

When the value of an asset falls below what is owed on it.

Lien

a legal claim against an asset until the debt is repaid.

Secured loans

When a borrower is required to put up collateral on something they own.

Unsecured Loans

Credit or loans that don't require collateral.

Personal Loans

Used to pay for anything from a vacation to debt consolidation.

home mortgage

A loan that typically lasts for 15 to 30 years and is used to buy a house.

Home equity loans

When the home increases in value over time as the mortgage is paid.

Leasing

A payment that helps you cover the depreciation of the vehicle.