Chapter 18 Personal finances

discretionary income

money income left after taxes on it have been paid and that you can choose to spend

disposable income

money income left after all taxes on it have been paid

impulse buying

an unplanned, often emotional, decision to buy

distinguish

 to see a difference in; to separate into categories

warranty

the promise made by a manufacturer or a seller to repair or replace a product within a certain time period if it is faulty

Generic good

an item that does not have a brand name but is basically similar to a more expensive, well-known product

comparison shopping

the process of comparing competing products and prices in order to find the best value

Redress

payment for a wrong or loss

consumerism

a one-party system of government based on the idea of state ownership and direction of property and industry

Annual percentage rate (APR)

annual cost of credit expressed as a percentage of the amount borrowed

borrower

the recipient of a loan

Loan

money lent at interest

interest

the payment people or institutions receive when they lend money or allow someone else to use their money

fee

the cost of a service

credit

permission to pay later for goods or services obtained today

Data

 factual information used for reasoning

deficit

a negative balance

Balance

amount of money left over after subtracting expenses from income; money still owed on a credit card or bank loan

expense

money spent on goods and services

budget

a plan for making and spending money

mutual fund

 an investment company that sells stock in itself and uses the proceeds to buy stocks and bonds issued by other companies

Bond

interest-bearing certificate of agreement between a borrower and a lender

dividend

a portion of company earnings paid to shareholders

Stock

shares of a company held by an investor

Return

profit earned by an investor

penalty

 fee for early withdrawal of funds

Maturity

 the present time at which you may withdraw funds from a certificate of deposit

access

 the freedom to make use of something

principal

 basic belief

Saving

the dollars that become available when people abstain for consumption.

How does a warranty protect a consumer? 

A warranty is a guarantee issued by a seller to a buyer that a product will meet certain specifications. If the product does not meet those specifications, the buyer can ask the manufacturer or seller to correct the problem.

What makes you more likely to buy on impulse?

impulse buy things that make them feel good; or things that have an emotional value. Its very convienient and easy

basic parts of a budget

revenues, discretionary spending, and direct spending.

Sources/benefits of credit 

It helps you to get the things you need now, like a loan for a car or a credit card, based on your promise to pay later

Most common source of credit today

Finance comanies

Disadvantage of a CD

account holders can't easily access their money if an unanticipated need arises. They typically have to pay a penalty for early withdrawals

Debit card

a card issued by a bank allowing the holder to transfer money electronically to another bank account when making a purchase.

Steps in making a budget

1. make a list of what you want to buy in two weeks
2. record money you take and source
3. record data

money market account

deposit account is a deposit account that pays interest based on current interest rates in the money markets

short-term/long-term financial goals

short-term: setting a budget, reducing your debt, and starting an emergency fund. 

long-term:

* Saving for a down payment on a house.
* Funding your retirement.
* Paying off large debts

Better Business Bureau

a private, nonprofit organization focused on advancing marketplace trust

collateral

an asset, such as a home or a car, pledged by a borrower that a lender accepts as security against a loan in case the borrower for any reason cannot pay back the loan.

Lender

a person or companie that makes funds available to a person or business with the expectation that the funds will be repaid

Credit rating

credit rating is an evaluation of the credit risk of a prospective debtor, predicting their ability to pay back the deb

Questions to ask before applying for credit

* Why Are You Considering Getting a Credit Card?
* What is the Interest Rate?
* What is the Credit Limit?
* Is there an Annual Fee?
* What are the Penalties & Fees?
* What are the Rewards Offered?
* Can you balance your Credit Utilization Ratio?

Banks

an institution that deals in money and its substitutes and provides other money-related services.

Credit union

an institution that deals in money and its substitutes and provides other money-related services.

finance companies

a company concerned primarily with providing money, as for short-term loans.

store credit

a value that retailers offer customers instead of a traditional cash refund.

Checks

 written, dated, and signed instrument that directs a bank to pay a specific sum of money to the bearer.

electronic banking

the transfer of funds from one account to another through electronic methods.

What do advertisement techniques try to do? 

attract attention to a product.

Food & Drug Administration (FDA)

Assures safety, efficacy, and security of human and veterinary drugs, biological products, medical devices, the US food supply, cosmetics, and products that emit radiation.

Federal Trade Commission (FTC)

enforces a variety of antitrust and consumer protection laws affecting virtually every area of commerce