Personal Finance Final Review

Will

A legal declaration of a person’s wishes regarding the disposal of his or her property or estate after death.

Executor

Manages the estate and makes decisions by following the instructions of the will.

Beneficiary

Receives the assets.

When should you get a will?

1. Asset accumulation

2. Business ownership

3. Marriage

4. Birth of a child (most important)

5. Illness

6. Death of a spouse

Probate

The legal process of allowing time for interested parties to make a claim against the estate of the deceased.

Probate generally takes a minimum of ____ months.

nine

Your first experience with probate will likely be at ______________.

the death of a parent

Subsidized loans

Loans that do not accrue interest while a student is enrolled in college. A need-based loan as determined by the FAFSA results.

Unsubsidized loans

Loans that accrue interest while a student is enrolled in college.

Principal

The total sum of money borrowed plus any interest that has been capitalized.

The three primary market indexes are…

Dow Jones Industrial Average, S&P 500, Nasdaq Composite.

Dow Jones Industrial Average tracks the __ largest U.S. companies.

30

S&P 500 tracks ___ large U.S. companies across industries.

500

Nasdaq Composite tracks ____ companies on the Nasdaq Exchange.

~3,000

Investing

The process of committing money to a vehicle with the expectation of receiving a future benefit — typically growth of capital or income.

________ involves highly uncertain future values and returns. Disciplined

________ is based on research and long-term strategy.

Speculation; investing

Dividends

Periodic cash payments distributed to shareholders from company profits.

Bonds

When you buy one, you become a lender. The issuer owes you money.

“Stocks make you wealthy … ____ keep you wealthy.”

Bonds

• Investor optimism and confidence

• Rising securities prices

• Economic expansion and recovery

• Consumers spend more freely

Bull market

• Investor pessimism and fear

• Falling securities prices

• Economic slowdown or recession

• Consumer spending decreases

Bear market

Stockbroker

A licensed professional who buys and sells securities on behalf of clients, and provides investment advice and market information.

Capital gains

Profit realized when an investment is sold for more than its purchase price. Reflected as an increase in the market value of the investment.

• Private for-profit empowers & some nonprofits

  • Contributions reduce taxable income today. Growth is tax-deferred until withdrawal in retirement.

401(k)

• Private nonprofits, government & public school employees

  • Similar to 401(k) but designed for mission-driven organizations.

403(b)

• State/local public employers & some nonprofits

  • Less common but allows extra savings above other plan limits without early-withdrawal penalties.

457

Roth IRA

Pay taxes now, withdraw tax-free

• Funded with after-tax dollars

• Contributions are NOT tax-deductible

• Qualified withdrawals are TAX-FREE

• Best if you expect higher taxes in retirement

Traditional IRA

Deduct now, pay taxes later

• Funded with pre-tax dollars

• Contributions may be tax-deductible

• Withdrawals are taxed as income

• Best if you expect lower taxes in retirement

Annuities/pensions

• Investment product that provides a series of regular payments over time

• Typically issued by insurance companies

• Useful for ensuring steady retirement income

• Fixed, variable, or indexed options available

529 Education plans

• State-sponsored, tax-advantaged savings plan

• Withdrawals are tax-free for qualified education expenses (tuition, textbooks, computers)

• You can use any state’s plan regardless of your residency

• Unused funds may be transferred to another family member