EPF Unit 5&6 Key Terms/Concepts

Income

Money earned from work, investments, or other sources.

Stock Market

A collection of markets for buying and selling shares of publicly traded companies, reflecting the overall economic performance.

Certificate of Deposit

A savings product offered by banks that provides a fixed interest rate for a specified period, typically with penalties for early withdrawal.

Budget

An estimate of income and expenditures for a set period.

S&P 500

A stock market index that measures the stock performance of 500 large companies listed on stock exchanges in the U.S.. Companies with larger market values have a greater impact on the index’s performance.

IRA (Individual Retirement Account)

A tax-advantaged savings account that individuals use to save and invest for retirement. IRAs offer tax benefits, including tax-deferred growth or tax-free withdrawals depending on the account type, such as Traditional or Roth.

Traditional IRA

A type of IRA that allows individuals to make tax-deductible contributions and defer taxes on earnings until withdrawals are made during retirement.

Money Market

A segment of the financial market for large-volume, short-term borrowing and lending of highly liquid debt instruments, typically with maturities of one year or less.

Cost of Living

The amount of money needed to sustain a certain standard of living, which varies from place to place.

NASDAQ

An American stock exchange primarily known for listing technology and growth companies. NASDAQ is an electronic exchange without a physical trading floor, facilitating trades through a computer network.

New York Stock Exchange (NYSE)

The largest stock exchange in the world by market capitalization of its listed companies. It operates as an auction market with a physical trading floor where specialists manage the trading of stocks.

Roth IRA

A retirement account allowing tax-free growth and tax-free withdrawals in retirement, primarily designed for individual investors.

Investments

Assets accquired with the goal of generating income or appreciation over time.

Dow Jones Industrial Average

A stock market index that indicates the value of 30 large publicly-oqned companies based in the United States.

401(k)

A defined contribution pension account for employees, funded by contributions from an employee and often matched by an employer. Contributions are typically made on a pre-tax basis, reducing current taxable income.

Retirement

The time of life when one chooses to permanantly leave the workforce behind.

Bonds

Debt securities issued by corporations or governments to raise capital, typically offering periodic interest payments and the return of principal at maturity.

Social Security

A government program in the United States that provides economic assistance to retired, disabled, or low-income individuals and their dependents.

Index Fund

A type of mutual fund with a portfolio constructed to match or track the components of a market index.

Mutual Fund

A pool of money collected from multiple investors to invest in a diversified portfolio of stocks, bonds, or other securities.

Actively Managed

A fund where a manager or management team makes decisions about how to buy and sell investments with the goal of outperforming a specific market index.

Passively Managed

A fund that tracks a particulate index or benchmark and does not require active management decisions. The goal is to replicate the performance of the index, not beat it.

Commodities

Basic goods used in commerce that are interchangeable with other goods of the same type. (Raw materials include energy, agriculture, and metals).

Bear Market

A market condition where prices are falling or expected to fall, typically charecterized by a widespread decline of 20% or more in stick prices from recent highs.

Bull Market

A market condition where prices are rising or are expected to rise.

Dividend

A payment made by a corporation to its shareholders, usually as a distribution of profits. Dividends can be paid in cash or as additional shares of stock.

Diversification

A risk management strategy that mixes a wide variety of invenstments within a portfolio to reduce exposure to any single asset or risk..

Risk

The potential of losing something of value, wieghed against the potential to gain something of value.

Speculative Investments

Investments that carry high risk with the possibility of substantial returns. (Ex: cryptocurrencies, NFTs)

Derivative

A financial contract whose value is derived from an underlying asset, group of assets, or benchmark.

Financial Planner

A professional who helps individuals and businesses create strategies for achieving their financial goals, including investments, retirement, and estate planning.

REIT (Real Estate Investment Trust)

A company that owns, operates, or finances income-producing real estate. Generally allow individuals to invest in large-scale commercial real estate though the purchase of stock.

IPO (Initial Public Offering)

The process of a privately held company offering its shares to the public for the first time.

Tax Liability

The total amount of tax debt owed by an individual, corporation, or other entity to a taxing authority.

Stock Buybacks

A program by which a company repurchases its own shares from the open market.

Philanthropy

The desire to promote the welfare of others, usually through the donation of money to good causes.

Nonprofit Organizations

Organizations that operate for purposes other than making a profit.

Donation

Money or goods given to charitable organizations or individuals.

Community/Recreation Centers

Facilities that provide various activities and services for community members.

Community Gardens

Any piece of land gardened by a group of people, often used to grow food for personal consumptions, donation, or same.

Food Banks

Non-profit organizations that collect and distribute food to those in need.

Mentorship Programs

Support and guidance provided to individuals by more experienced mentors to help them develop skills and achieve personal goals.

Philanthropic Foundations

Organizations that manage and distribute funds for charitable purposes to support various causes such as education, healthcare, and social services.

Volunteer Services

Services provided by individuals or groups without financial gain to benefit others, communities, or organizations.

GoFundMe (crowdfunding application)

A popular platform for personal fundraising, allowing individuals to raise money for various life events.

CaringBridge (crowdfunding application)

A platform designed to connect people during challenging health journeys, enabling users to share updates, receive support, and coordinate help.

DonorChoose

A platform specifically for funding classroom projects, allowing public school teachers to request materials and experiences for their students directly from donors.

Support from Family and Friends, Non-profits, and Charities

Receiving assistance from various sources to meet personal or community needs.

Life Insurance

Provides a monetary benefit to a designated beneficiary upon the insured’s death.

Health Insurance

Covers medical expenses for illnesses, injuries, and other health-related issues.

Short-term disability insurance

Provides income replacement in the event that an employee is unable to work for a short period due to illness or injury.

Auto insurance

Protects against financial loss in the event of an accident or theft involving a vehicle.

Homeowner’s insurance

Offers coverage for damage or loss to an individual’s home and possesions inside it, as well as liability protection for accidents that occur on the property.

Renter’s Insurance

Provides coverage for a tanant’s personal belonging against perils like fire or theft, and liability protection for accidents within a rented property.

Premium

The amount paid for an insurance policy, usually on a monthly, quarterly, or annual basis, to maintain coverage.

Deductible

The amount the insured must pay out of pocket before the insurance company begins to pay on a claim. A higher deductible usually means a lower premium.

Coverage Limits

The maximum amount an insurance company will pay for a covered loss, often specified per incident, per person, or as an aggregate limit over a policy period.

Death Benefit

The amount paid to the beneficiaries of a life insurance policy after the insured passes away.

Beneficiary

The person or entity designated to receive the benefits from an insurance policy, will, or trust.

Budgeting

The systematic process of creating a plan to spend your money, tracking expenses, and managing financial resources to align with financial goals,

Fixed vs. Variable Expenses

Fixed expenses are costs that remain constant each month, such as rent or mortgage payments, while variable expenses can vary in amount and frequency, such as groceries and entertainment.

50-30-20 Budget Plan

50% Needs, 30% Wants, 20% Savings.

Zero-Based Budgeting

A method of budgeting in which all expenses must be justified for each new period, starting from a zero base. This means every dollar of income is assigned a purpose, ensuring that your expenses do not exceed your income and maximizing financial efficiency.

Financial Data

Current and historical financial figures, including income, expenses, assets, and liabilities.

Goals

Objectives that influence how money is saved, spent, and invested.

Spending Behavior

Patterns of spending that affect budgetary constraints and the ability to save.

Saving and Investing

Decisions that contribute to duture financial stability and wealth accumulation.

Provisions for Emergencies

Plans to manage unexpected financial challenges through an emergency fund, typically 3-6 months of living expenses.

Risk Tolerance

An individuals’s psychological willingess to endure financial loss for potential gain.

Debt

Money owed to others

Secured Debt

Loans backed up by collateral; if the borrower does not repay the lender can legally seize the asset used to secure the loan.

Unsecured Debt

Loans that are not backed by collateral; there is no specific asset for the lender to sieze if the borrower defaults. (Medical Bills and Credit Cards)

Good Debt

Debt taken on for investments that are likely to generate income, appreciate in value, or provide long-term financial benefit.

Bad Debt

Debt incurred for items that do not hold value, generate income, or are consumer-oriented and quickly depreciate.

Debt-to-Income Ratio

A financial ratio that compares an individual’s total monthly debt payments to their overall gross monthly income.

Fair Isaac Corporation (FICO) Score:

A three-digit number, typically ranging from 300 to 850, used by lenders to gauge the creditworthiness.

Credit Report

A detailed report of an individual’s credit history, including personal information, credit accounts, payment history, public records, and credit inquiries

Credit Unions

Member-owned financial cooperatives that provide traditional banking services like savings accounts, checking accounts, and loans.

Commercial Banks

Privately owned banks that provide various financial services to the general public and businesses, including deposits, loans, and investment services.

Debit Cards

A payment card that provides the cardholder electronic access to his or her bank account.

Cryptocurrency

Digital or virtual currency that uses cryptography for security, making it difficult to counterfeit or double-spend.

Interest Rate

The amount charged by lenders to borrowers for the use of money.

Maintenence Fees

Charges levied by financial instututions for account upkeep, often waived if certain conditions are met.

Late Fees

Charges incurred for payments made after the due date on loans, credit cards, or other financial obligations.

Overdraft Fees

Fees for withdrawing more money from an account than is currently available, causing the account balance to go below zero.

Credit Scores

Indicators of an individual’s creditworthiness based on their credit history and debt management behavior.