personal finance flashcards

What is the Adjusted Gross Income formula?

Gross Income − Adjustments to Income

What device should you bring for the budget calculating portion of the exam?

A calculator

What is a budget?

An estimate of income and expenditures for a set period of time.

What is the 50-30-20 Rule?

What is the 50-30-20 Rule?
A: 50% needs, 30% wants, 20% savings/debt repayment.

When are taxes usually filed?

Around April 15.

What are the six types of gross income?

Wages, retirement distributions, side hustles, dividends, business income, capital gains.

What are the four adjustments to gross income?

Educator expenses, student loan interest, retirement contributions, alimony payments.

What is a tax write-off?

An expense that reduces taxable income.

What are the two types of deductions?

Standardized deduction and itemized deduction.

Can you use both types of deductions?

No, you choose one.

Examples of tax-filing software?

TurboTax, H&R Block, Cash App, TaxSlayer

What items do you need as a first-time filer?

Social Security number, W-2s, ID, bank account info.

Can you claim yourself if someone else claims you as a dependent?

No

What is the fastest way to get a tax refund?

direct deposit.

What four things might impact your taxes?

Changing jobs, opening a savings account, selling stocks/mutual funds, paying college tuition/student loan interest.

What are common amenities you may need to pay for?

Electric, gas/heating, water, internet.

Who is the person that allows you to live in a space they own?

Landlord/property owner.

When is rent typically due?

The first of the month.

What is a security deposit?

Money paid upfront to cover damages or unpaid rent

What are the outside features of a house called?

Exterior.

What are the indoor features and rooms of a house called?

Interior.

What is a down payment?

A portion of the price of a home (usually 3–20%) paid upfront.

What is a mortgage?

A loan used to buy a home using the home as collateral.

What is title/ownership of property called?

Equity or deed/title ownership.

What is APR?

Annual Percentage Rate; the yearly cost of a loan including fees and interest.

What is a fixed APR?

APR that stays the same for the duration of the loan.

What is a variable APR?

APR that changes after the introductory period.

What is a starter home?

A smaller home usually purchased by first-time buyers.

What is a forever home?

A home intended for long-term living.

Differences between a starter home and forever home?

Starter homes are smaller, cheaper, may have fewer bedrooms, and may be in less ideal locations.

What caused the shortage of new vehicles and higher prices?

Chip shortage.

What are five important steps to purchasing a car?

Budget, research, financing, test drive, negotiate/buy.

What should you consider when purchasing a car?

Price, insurance, gas mileage, reliability, maintenance costs.

Average new car prices are now at what level?

Record highs.

Used vehicles now average more than what?

More than $20,000 (approximate current average)

What is credit?

An arrangement where goods/services are received now and paid for later.

What is credit history?

A person’s payment activity over time.

What is a credit report?

A record of someone’s credit history.

What makes up a credit score?

Payment history, debt amounts, length of credit history, credit mix, new credit.

Why is maintaining a good credit score important?

it helped you get lower interest rates and better loan terms.

Do you want a higher or lower credit score?

Higher.

What is financing a car?

Paying a down payment, then taking out a loan to cover the remaining balance.

What does the stock market encourage corporations to do?

Raise money and grow their businesses.

Executives viewed themselves as “stewards” serving which five groups?

Customers, employees, investors/shareholders, suppliers, and communities.

Who is America’s “most famous investor”?

Warren Buffett

What style of investing is Warren Buffett famous for?

Value investing.

What is value investing?

Buying undervalued stocks expected to grow over time.

What does Buffett suggest if you don’t have time for value investing?

Invest in index funds.

What does an index fund do?

Tracks a group of stocks/indexes.

What is an IPO?

Initial Public Offering; when a company first sells shares to the public.

Giving money back to investors is called what?

Dividends

What is the stock market?

A place where shares of companies are bought and sold

What is the “Big Kahuna” stock exchange on Wall Street?

New York Stock Exchange

What is the “cooler younger brother” exchange with no physical location?

NASDAQ

What does an index do?

Tracks the performance of a group of stocks.

Which index tracks 500 of the largest companies?

S&P 500

Which index tracks 30 major companies?

Dow Jones Industrial Average

Allowing the public to buy shares allows for what?

Raising capital/money for the company.

What can cause shareholders to sell shares and drive prices down?

Bad news, poor earnings, fear, or economic uncertainty.