personal finance final
Personal Finance: all the financial decisions an individual or family must make in order to earn, budget, save, spend, and give money over time
Paycheck to Paycheck: an expression used to describe a person or household whose monthly income is devoted to expenses and has little to no savings
Credit: the granting of a loan and the creation of debt; any form of deferred payment
Net Worth: the amount by which the value of a person’s assets exceeds or falls behind the value of their liabilities
Asset: anything that is owned by an individual, including money in the bank or investments
Liability: financial debts or obligations
Budget: a written plan for giving, saving, and spending
Fixed Expense: expense that remains the same from month to month
Variable Expense: expense that varies in dollar amount from month to month but that you can expect to have every month
Intermittent Expense: expense that occurs at various times throughout the year and tends to be in large, lump sums
Discretionary (Nonessential) Expense: expense for things you don’t need
Net Income: what a person earns after payroll taxes and other deductions are taken out; often referred to as take-home pay
Gross Income: the amount you earn before taxes and other payroll deductions
Emergency Fund: a savings account set up specifically to be used to cover financial emergencies
Interest Rate: the percentage of principal charged by the lender for the use of its money
Rate of Return: the measure of an investment’s profit or loss, usually expressed as a percentage of the initial investment
Time Value of Money: concept that an amount of money is worth more today than in the future due to earning potential
Collateral: something owned (that has value) offered as security on a debt; if the debt is not repaid as agreed, the item is forfeited to the lender
Installment Credit: a loan for a fixed amount of money that‘s paid back in monthly installments
Revolving Credit: credit that automatically renews whenever a payment is made to reduce the debt
Principal: the original amount of a loan; the total amount borrowed before interest
Prefrontal Cortex: the part of your brain that controls memory, impulses, and thoughts
Amygdala: the part of your brain that helps regulate your stress responses
Impulse Buying: buying anything without planning to do so in advance
Buyer’s Remorse: a feeling of guilt, regret, or unease after making a purchase
Sweet Spot: the spot where what you love to do the most intersects with the things you do the best
Proximity Principle: the idea that you should connect with people who are doing what you want to do and get in the right places in order to find new opportunities related to your dream job
Private Student Loans: loans made by banks, credit unions, or other organizations with terms and conditions set by the lender, including higher or variable interest rates
Federal Student Loans: loans made by the government with terms and conditions set by law; often have a lower fixed interest rate
Forbearance: debt payments are held off for or until a certain time but interest continues to accrue
FAFSA: the federal application required to receive any financial aid, including scholarships, grants, or loans offered through a college or university
Gift Aid: any form of financial aid that doesn’t need to be repaid
Grant: financial aid that does not usually need to be repaid; usually awarded based on financial need
Work-Study: a program that allows students to work part time while continuing their studies
Insurance: an arrangement in which an individual will receive financial protection or reimbursement of losses from an insurer
Policy: the contract between an insurance company and the insured individual
Coverage: the amount of liability protection offered to an individual through an insurance policy
Premium: the amount of money paid for an insurance policy
Deductible: the amount of money you will pay out of pocket before the insurance company will make a payment
Claim: a formal request by a policyholder to their insurance company for compensation for a covered loss
Renters Insurance: protection for destroyed or stolen personal property for a renter
Health Insurance: coverage for an individual’s (or family‘s) medical expenses from illness or injury
Investing: the process of setting money aside to increase wealth over time for long-term financial goals, such as retirement
Stock Market: a financial market that trades shares of ownership of public companies
Stock: a security that represents part ownership or equity in a company
Individual Retirement Arrangement (IRA): a tax-advantaged investing account that people use to save for retirement
401(k): a qualified retirement savings plan offered by a company to its employees who contribute money from their gross pay
Diversification: the practice of dividing the money a person invests among different types of investments in order to lower risk
Dividend: a distribution from the net profits of a company to its shareholders