Personal Finance

Income

Income

Is money that an individual or business receives from sources, such as wages or sales, interest, and dividends.

Salary

Paid the same amount regardless of hours worked

Wages

Paid dependent on number of hours worked

Commission

Paid a % of sale made, often added to wages or salary

Piecework

Paid per piece completed

Profit sharing

Paid a % of the profit…often in addition to salary

CPP

Canadian Pension Plan. This is a pension that is automatically collected by the Government from employees, from the pay checks. When you retire at 65 years of age you then receive CPP from the government approximately.

EI

Employment Insurance. Money paid to people who are laid off due to a shortage of work who have accumulated a number of hours of work. It is designed to assist people financially while they looking for alternative work.

IT

Income Tax is charged on income you earned, it is revenue for governments

Common stock

Higher Risk, gives its owner a voice in the operation of the business, they are paid dividends, paid after preferred shareholders

Preferred Stock

Owner are paid, usually higher dividend pay as for them it is a fixed rate, they have no voting rights within the corporation

Mutual Funds

A type of investment vehicle containing a portfolio of stocks, bonds, or other securities, a diversified professionally managed portfolios at a low price

Blue Chip/Maturing Stocks

They have a good track record and there is little risk of these businesses losing money. The price per share  does not fluctuate that much bought with the intent of making money off the dividends

Growth Stocks

Growth markets include industries that have gained some traction in the market. Prices tend to be higher and the risk less. Typically tech.

Emerging/Penny Stocks

Companies in new industries with no track record. Usually don’t cost too much to buy because they are just new and it is not clear that they will be successful. Examples of companies that would fall under this would be any business developing types of artificial intelligence, it sounds like where the money will be in the future, but who knows whether it will all catch on.

What is the riskiest of the following: Blue Chip/Maturing, Emerging, Growth, Preferred Stocks

Emerging

NASDAQ

Where high tech and emerging market stocks are traded

TSX

Toronto Stock Exchange. Canadian companies are often listed on both the TSX and NYSE

NYSE

New York Stock Exchange

Bull Market

Is when the demand for and prices of most stocks are high

Bear Market

Is when the demand for and prices of most stocks are low

Stock Symbol

A few letters used to identify the stock in the market, often similar to the name

Capital Gain

Is when the price you bought the stock for is LOWER than the price you sold it for

Capital Loss

Is when the price you bought the stock for is HIGHER than the price you sold it for

Stock Broker

A stock broker advises you when it is a good time to buy and sell they comes with expertise and the ability to watch the what is happening in the market. The down side is that you have to pay for these services.

Change

The change tells you whether the price of the share yesterday was higher or lower than today and by how much

Volume

This tells you the number of shares traded in a day for that stock

Dividends

The amount of money a company pays shareholders (over the course of a year) for owning a share of its stock divided by its current stock price, typically a percent

52 Week High

This is the highest price the share has traded at over the last year

52 Week Low

The lowest price the share has traded at over the last year

Risk Management

Investors knowing what they will do if they get into a risky situation with their stocks

Diversification

A risk management technique that mitigates risk by allocating investments across different financial instruments, industries, and several other categories.

Gross Income

The total amount of money received by a person before any deductions.

Disposable Income/Net Income

AKA Take-home-pay, is the amount of income that is left after deductions of income tax, Canada Pension Plan (CPP), and Employment Insurance (EI).

Discretionary Income

The amount of money that is left over after all necessities have been paid. Necessities consist of rent or mortgage, food, transportation, insurance, electricity, and so on

What factors should you consider when making effective purchasing decisions

Comparing Quality

What Services Are Offered

Comparing Price

What Features

Credit Score

Is a score made up of several factors that lenders look at to decide wether they will lend to an individual or not

Factors that affect your credit score (5)

Types of loans you have out

New credit application

Track Record and Age

Payment History

Money owed compared to limits

Ways to spend your income

Spending

Saving

Investing

Donating

Factors Affecting Employment Income (Job Seeker)

Education

Experience

Personal Performance

Uniqueness of Abilities

Factors Affecting Employment Income (Job Market)

Type of Business

Success of business

Economic Conditions

Difference between simple, and compound interest

Simple interest is interest only earned on principal amount, while compound interest is interest on principle amount in addition to interest earned

What is the riskiest of the following: Savings account, GIC, RRSP, RESP, Mutual Fund, Corporate Stocks

Corporate Stocks

Why would you buy preferred stock over common stocks?

I’d purchase preferred stock over common stock, primarily because they typically make more in dividends as for them it’s a fixed rate, preferred stock owners get paid first, and I don’t have any interest in having a voice in the company

What are two ways you can make money when buying stocks

Buying low and selling high, through dividends.

What are at least two indicators you should look at that would indicate a stock is a good investment

52 week high, and low in comparison to current price, volume traded (if it’s low you may not be able to sell the stock) , does it pay dividends?

How do you calculate a capital gain or loss

Subtract buying price from selling price, for example if you bought the stock for 500 and your selling it for 700, it would be 700 - 500 = 200 if it’s positive then its a capital gain, and if negative if it’s capital loss

How do you calculate value of stocks

Value is calculated by multiplying the # of shares you purchase by the share price

How much stock you can buy with a certain amount of money to invest

Say you have $10,000 to spend and you want to invest it all into Microsoft. To figure out how many share you can buy: Take the $ you have to invest and divide it by the share price

RRSP

Designed to encourage people to save for retirement You invest a portion of your yearly income without paying income tax, contributions along with the interest earned on a tax free basis can be withdrawed after retirement. Shouldn’t pull this money out before you retired or you will be taxed heavily.

RESP

A tax sheltered plan designed to help finance post-secondary education. Interest earned from investing in the plan is tax free until the beneficiary is ready to attend a college, university or other approved institution on a full time basis, government contributes a set amount for every dollar.

GIC

Savings plans where you deposit a fixed sum of money for a specific length of time at a fixed rate of interest. Guaranteed to return the principal amount. Earns more interest than a savings account

Stocks

When you buys stock you become a part owner of the corporation $ made from dividends or selling stock. Share in rewards, and risk

Liquidity

The ability to convert an asset or investment into cash quickly and easily. Very Liquid…means it can be converted quickly

Risk

The potential or likelihood of occurrence of losses relative to the expected return on any particular investment

Return/Yield

The amount of money earned above the original investment