Econ Unit 0 (Personal Finance, Macro, International)

Personal Finance

—Types of income: Wages/salaries (w-2 form), interest from bank accounts/bonds/loans (1099), dividends (stocks/bonds/mutual funds, etc. —> on 1099), capital gains (profit on sale of assets/stocks/houses, etc. —>on 1099), independent contracting work (1099)

—Income taxes:

> a 1040 is filed every April

—Paychecks: a pay stub shows your income and deductions (gross earnings=before taxes; net income=after taxes)

—Fixed expenses: don’t change month to month

—Variable expenses: change from month to month

—Net worth= assets - liabilities (assets: what you own; liabilities: what you owe)

—Financial institutions: bank checking/savings/credit/debit cards/home/car/personal/business loans= for profit companies; credit unions (same as bank but owned collectively by members w/ competitive rates)'; payday loan companies (borrow upon your next paycheck); title pawn lenders (borrow against your property/car usually at higher interest rate)

—3 C’S OF CREDIT:

1. Character: timely payments, stay under limits, good credit history

2. Capacity: ability to pay back loan (based on income/finances)

3. Collateral: something of value you can forfeit for not paying the loan

   —> make up credit worthiness; credit score is a # between 300-800 based on your credit history

—Revolving credit: drawn on as needed; credit card, or home equity line of credit

—Installment loans: borrow money and pay it back in increments, such as car loans

—Fixed interest rates= same payment throughout the loan; Variable interest rates= changes over time

—Social security: monthly check given by the government; qualify if you’ve worked at least 10 years; 67 is the retirement age (but you can take from 62-70, and the more you wait the more you get); replaces at least 40% of pre-retirement earnings

—Human capital: knowledge, skills, training, experience, personal potential

—Tax advantaged savings accounts:

—> 401(k): company retirement plan; deposit savings and invest; employer may match (traditional=tax deduction given now, money grows tax deterred, pay taxes on withdrawal; roth= no tax deduction now but no future tax on contributions/earnings)

—> 403(b): a 401(k) for non-profit employees

—> IRA: individual retirement plan= set up on your own with an investment company; works like a 401(k); has traditional/roth options

—> HSA: health savings account; contributions are tax deductible and there are no taxes on withdrawals for healthcare

—> 529: used to save money for children’s education with tax advantages

— Certificates of deposit (COs): commit money for a rime period, get back with interest

—Health Insurance:

—> those over 65 qualify for Medicare with you and the government paying for care

—> those at or near poverty level may qualify for Medicaid, government provided insurance

—> some with low income (not low enough for Medicaid but not high enough to purchase on their own may qualify for subsidies to buy their own insurance —> Obama)

Macroeconomics

—Goals: