fbla personal finance

fbla

Consumer Protection Laws

created to ensure the rights of consumers, as well as fair trade, competition, and accurate information in the marketplace. Federal CP Laws are mainly enforced by the FTC, The Consumer Financial Protection Bureau, the FDA, and the U.S. Department of Justice.

Federal Food, Drug, and Cosmetic Act

a set of laws that enable the FDA to oversee the safety of food, drugs, cosmetics

Fair Debt Collection Practices Act

Prevents debt collectors from using abusive, deceptive, or unfair tactics to collect from you

Fair Credit Reporting Act

promotes accuracy, fairness, and privacy of information in the files of consumer reporting agencies

Truth in Lending Act

promotes the informed use of credit by requiring disclosures about its terms and cost to standardize the manner in which costs are calculated and disclosed

Fair Credit Billing Act

Protects consumers from unfair credit billing practices by providing guidelines for consumers and creditors.

Gramm-Leach-Bliley Act

requires financial institutions to ensure the security and confidentiality of customer data

how should you make major personal financial decisions?

annual income

how can decision-making at certain stages in your life be costly or beneficial to your bank account?

based on the year/financial crisis/economics, etc.

credit score

A number ranging from 300 to 850 representing a person's credit history. created based on financial info such as yearly income, monthly expenses, etc. and is sent to you every 12 months

what are the three different credit reporting agencies?

Equifax, Experian, and TransUnion

what is your credit score used to determine?

loans for cars, mortgage, credit card, etc. also interest rates

why is wise financial planning helpful?

have a baseline of what is necessary for you to do in order to reach your goals

financial planning process

1. Determine financial goals
2. Evaluate financial status
3. Develop financial goals
4. Implement goals
5. Monitor goals

most basic economic principle

supply and demand

traditional economy

decisions are made from customs handed down for generations: now rare

market economies

prices are determined by supply and demand, and individuals decide what they want to produce, how they want to produce it, and for whom they want to produce it

command ecnomy

government sets prices for goods and individuals have little to no say in economic decisions (see communism)

mixed economy

(like us and most) individuals make decisions, but the government regulates them

fiat money

valueless objects used as money because of government decree

commodity money

money consisting of objects that have value in themselves and their use in money (think gold, silver, etc.)

time value money

the increase of an amount of money due to earned interest or dividends

gold standard

the system by which the value of a currency was defined in terms of gold, for which the currency could be exchanged. The gold standard was generally abandoned in the Depression of the 1930s.

budget

A plan for making and spending money

check register

a personal record of your checking account activity

gross personal income

salary without deducting the many taxes you must pay

disposable income

income available for you to use at your discretion after deducting taxes

discretionary income

disposable income after you pay for necessities, such as insurance, food, mortgage

employee benefits

Employers may offer employee benefits in the form of products or services that add extra value for employees beyond earned wages (increase disposable income)

overtime

additional compensation for any hours worked by nonexempt workers for more than forty hours

cafeteria benefit

allows staff to choose form a variety of benefits to formulate a plan that best suits their needs

maternity leave

a temporary paid period of absence from employment given to new or expecting mothers during the months immediately before and after childbirth

fringe benefits

benefits provided by an employer to an employee, some of which are tax-exempt when certain requirements are met

income tax

taxes on a person's yearly incom

excise tax

taxes paid when purchases are made on a specific good

property tax

taxes based on the value of a person's property

value-added tax

taxes on the amt by which the value of an article has been increased at each stage of its production/distribution

sales tax

regressive tax on sales or on the receipts from sales

progressive tax

taxes in which the tax rate increases as the taxable amt increases

regressive tax

taxes imposed in a way where the tax rate decreases as the amt being taxed increases in value

estate tax

taxes on the net value of the estate of a deceased person before distribution to the heirs

Federal Insurance Contributions Act (FICA)

taxes used ot fund Social Security and Medicare

IRS

tax-collecting agency

1040EZ Form

has the requirements that your income is less than $100K, you are filing as single or married filing jointly, you are under 65, you claim not dependents, you are not a debtor, and your income comes only from wages

1040A Form

has many of the same requirements as the 1040EZ form, except the 1040A form allows you to claim credits for child and dependent care and education expenses, and you don't itemize deductions like your mortgage or charitable donations

1099 form

Details what kinds of income you may receive other than the salary you get from your employer

W-2 Form

Sent to the IRS by an employer and details annual salary and amount of taxes withheld from an employee's paycheck.

W-4 Form

tells an employer what amount of taxes to withhold from an employee's paycheck based on their marital status, number of exemptions, dependents, etc.

I-9 Form

used to verify an employee's identity and that he or she is authorized to work in the united states

mandatory deductions

wages deducted from a paycheck to meet income tax and other required obligations

voluntary deductions

payments you make to retirement plan contributions, health and life insurance premiums, savings programs, and before-tax health savings

dependent exemptions

Can be used when children under 19 live with you for over half the year and provide for less than half of their financial support, as well as other relatives or your parents in some cases

nontaxable income

child support payments, welfare benefits, cash rebates, damage awards for personal injury or sickness, gifts, etc

taxable income

earned income (salary, tips, commissions, bonuses, etc.) and unearned income (rent, dividends, interest, winning, etc.)

job-sharing

when two part-time employees do a full-time job and share the remuneration

flextime

when the hours an employee has to work are set by the employer and agreed to by the employee

telecommuting

working from home. piecework employment is work paid for according to the amount produced

renting pros

- likely have amenities to access, it is usually cheaper than buying, there are no maintenance or repair costs, no real estate tax, and there is no hefty down payment that is necessary
- utilities and insurance are cheaper, and renting offers more flexibility than buying
- can use a portion of money and put it towards paying the rent, while putting the rest into a savings account that offers high returns

renting cons

- when you buy a house and pay it off, you have equity in your life, and houses for the most part increase in value, so when the time comes to sell it, you can possibly make a hefty profit
- costs are predictable and stable unlike renting
- interest and property tax portion of your mortgage is a tax deduction

good decisions LMAO

- monthly housing costs, including insurance, taxes, HOA fees, etc. should not exceed more than 30-33% of monthly income
- no more than 15% of your net monthly pay should be spent on your cars
- be careful of credit card usage

credit cards

issued by a bank or business allowing the holder to purchase goods or service on credit

debit cards

issued by a bank or business allowing the holder to purchase goods or services through transferring money electronically from one account to another.

overdraft fee

fees charged when someone charges more to their debit card than they have in their bank account, typically around $35 per day until the amount is paid back

annual percentage rate

the annual rate charged for borrowing or earned through an investment, and is expressed as a percentage that represents the actual yearly cost of funds over the term of a loan.

class-action lawsuit

lawsuit brought on behalf of a class of people against a defendant, e.g., lawsuits brought by those who have suffered from smoking against tobacco companies.

arbitration

the abuse of an arbitrator to settle a dispute

negotiation

when two or more parties discuss something and aim at reaching an agreement

mediation

intervention in a dispute in order to resolve it

expressed warranties

a seller's promise or guarantee that a buyer relies on when they buy an item

implied warranties

when a product is guaranteed to work if used for its intended purpose

clearance items

a sale in which the vendor intends to get rid of all remaining inventory

consumer reports

a series of reports on products and services used by consumers

risk management

the forecasting and evaluation of financial risks together with the identification of procedures to avoid or minimize their impact.

yields

income return on an investment

rate of return

the gain or loss on an investment over a specified period of time

mutual fund

an investment vehicle made up of a pool of funds collected from investors for the purpose of investing in stocks

hedge fund

a limited partnership of investors that uses high risk methods, such as investing with borrowed money, in hopes of realizing large capital gains.

bonds

loaning money to a company or government

expense ratio

the annual fee of a mutual fund

stock

a type of security that signifies ownership of a piece of a company

common stock

issues the shareholder rights to dividends and voting rights at the shareholders meeting

preferred stock

stock that doesn't offer voting rights but has a higher claim on assets and earnings than common stock

dividends

a portion of a company's profits paid to stockholders

401k fund

A retirement savings plan sponsored by your employer

broker

a person who arranges transactions between a buyer and a seller for commission

SEC

an agency that oversees securities transactions, financial activities, and mutual fund trading to prevent fraud and deception

compound interest

interest calculate don the initial principal and also on the accumulated interest of previous periods of a deposit/loan

simple interest

a quick method of calculating the interest charge on a loan, by multiplying the daily interest rate by the principal by the number of days

futures market

a central financial exchange where people can trade standardized futures contracts

financial risk

the possibility of losing money due to an investment

credit risk

someone borrows money and is no longer able to pay off the loan

liquidity risk

involves securities and assets that can't be bought or sold fast enough to cut losses

asset-backed risk

the risk that asset-backed securities may become volatile

foreign investment risk

Involves changes in political and economic climates around the world

equity risk

covers the risk involved with buying and selling stocks.

risk management

when firms use financial instruments to expose risks and get rid of them; see insurance

Property and Liability insurance

insures the structure and content of a property for its owner. used in the event of damage to a house, theft, etc. (flood insurance, earthquake insurance, renters/homeowners insurance, etc.)
liabilities: financial obligations

co-pay

the upfront cost you might have to pay based on insurance plan

premium

money than an individual or business must pay

deductible

the amount of money someone pays for expenses before his insurance plan starts to pay