Study Guide for Final Exam

Whats the yellow for?

Is that what I have to do?

No seI think you should do the rest of the assignment

FINANCIAL DECISIONS:

How can you improve your financial Create a budget, set goals, create a
well-being? savings

Difference between opportunity cost and

trade off

Best chance of accomplishing goals

Values, goals, needs, and wants Values- something that is desirable,

worthwhile, and important
Goals- the end result of something a
person intends to acquire, achieve, do,
reach, or accomplish
Needs- something required for life
Wants- something unnecessary but
desired

Short term goal, long term goal

Elements of a SMART goal S- specific

M- measurable
A- attainable
R- reasonable
T- time

Financial planning definition On-going process

It's a process used to achieve financial
success based on financial goals

Financial success tips: spend less than you

earn

CAREERS, EDUCATION, AND INCOME:

Relationship between education, income, and

employment
Calculate paycheck amounts
Gross income vs. net income
Medicare-who does it benefit?
Purpose of income taxes: funds public goods
and assistance programs for needy
Dependent
Inflation
Examples of human capital
PLAN AND MANAGE MONEY:
First step to making a budget/spending plan
Emergency savings
Pay yourself first
Fixed (contractual) and variable expenses
examples
Employees receive their gross pay, which is
the amount they earn before any deductions
such as taxes, benefits, and other payroll
deductions are taken out. The net pay, or
take-home pay, is the amount that remains
after all these withholdings have been
accounted for.
People who are 65 or older.
A dependant is a person who relies on
another as a primary source of income. A
common-law spouse who is financially
supported by their partner may also be
included in this definition.
Inflation is the rate of increase in prices over
a given period of time.
Transferable skills
- Creativity
- Organization
- Cooperation
- Listening
Set a financial goal
While the size of your emergency fund will
vary depending on your lifestyle, monthly
costs, income, and dependents, the rule of
thumb is to put away at least three to six
months' worth of expenses.
set aside money for savings before paying
bills and making other purchases
Fixed expenses are costs that largely remain
constant, such as your monthly rent or
 mortgage. Variable expenses, on the other
hand, are costs that may vary or be
unpredictable, such as a car repair or a
medical bill.

Minimum amount of money set aside to save three to six months' worth of basic living
for emergencies (three times monthly expenses. That's only the essentials: rent or
expenses) mortgage payments, bills, basic groceries,
child care and the like.

How to increase your net worth Update Your Budget. If you already have a
budget – and hopefully you do – analyze and
update it. ...
Boost Your Savings. ...
Pay Off Debt. ...
Increase Your Retirement Contributions. ...
Invest in Yourself. ...

Assets- Liabilities= Net Worth
Your net worth is your assets minus your
liabilities. It's what you have left over after you
pay all your liabilities. Net worth is a better
measure of someone's financial stability than
income alone.

Income statements– what to do with a net With net gain it is good to put money towards
gain your; debts and savings, and after that get
some of your wants

Depository institutions- products and services
These banks offer a range of services to
consumers and businesses such as savings
accounts, consumer and commercial loans,
credit cards, and investment products. These
institutions accept deposits and primarily use
the deposits to offer mortgage loans,
commercial loans, and real estate loans.

FDIC account coverage The standard deposit insurance coverage

limit is $250,000 per depositor, per
FDIC-insured bank, per ownership category

Savings tools and liquidity: What is a checking account?

- Checking account
- Savings account It is an account that provides an easy method
- Money market account
- Certificate of deposit
for withdrawing and depositing money.
- Savings bond
Interest:

- Most do not, but if it is offered rates

are low

Liquidity:

A checking account is the most liquid account

Features:
- It reduces the need to carry a large
amount of cash in your pocket
- Different types of checking accounts
are available but some include fees
- Checking accounts are also known as
a share draft account at a credit union
- This isn't recommended as the only
account used to save money
What is a savings account?

It is an account designed to hold money that

you aren't planning on spending soon.

Interest:

- Earns interest
- Rates are often low

Liquidity:

More liquid than other saving tools except for

checking accounts

Features:
- It is very effective for storing
emergency funds
- It may require a minimum balance or
it may have a limited number of
withdrawal each month
- Savings accounts are also known as a
share account at a credit union
What is a money market deposit account?

It is an account that usually has a minimum

balance requirement and tiered interest rates

Interest:

Often tiered interest rates

- The amount of interest earned depends

on the amount of your balance

Liquidity:

Less liquid then the checking and savings

accounts because of the minimum balance
that is required and the transaction limits.

Features:
- You would usually have to deposit a
minimum amount to open this
account. It would typically be $1,000.
- It is similar to a savings account but it
earns a higher interest rate and has a
higher minimum balance or deposit
requirement.
What is a savings account?

It is an account that is used for a fixed period

of time and it has restricted access to the
funds.

Interest:

- The interest varies depending on time

and amount of money being deposited

Liquidity:

Least liquid saving tool

Features:
- Deposits must be held for a certain
length of time. Which usually is 7
days to 10 years.
- Deposits can range from $100 to
$250,000

Security level of savings tools
Characteristics of e-banking
MANAGE CREDIT AND DEBT:
Borrowing- short term and lower interest rates
result in least debt
How to build a positive credit history
Secured credit card
Co-signer
Open-end credit (credit cards)
Closed-end credit (contracts): examples and
characteristics
- If funds are being held for the
designated time period then there is a
limited risk and no fees
Savings accounts, insured money market
accounts, and CDs are viewed as very safe
because they are federally insured. You can
easily get the money in savings if you need it
for any reason. But there's a tradeoff for
security and ready availability
It indicates items on the predictor variable
(E-banking service quality). The dimensions
include perceived innovation, technology
competence; perceived security risk,
convenience, reliability, and tangibility.
As interest rates move up, the cost of
borrowing becomes more expensive. This
means that demand for lower-yield bonds will
drop, causing their price to drop. As interest
rates fall, it becomes easier to borrow money,
and many companies will issue new bonds to
finance expansion.
pay your debts on time and in full whenever
possible.
A co-signer is a person – such as a parent,
family member, or a friend – who adds their
information, including income and credit
record, to the loan application and pledges to
pay back the loan if you're unable to.
Open-end credit is the idea that you get to
withdraw funds up until a certain limit and as
you repay it back, the funds are available to
you again
Results of paying a minimum payment on
credit card

Significance of a low credit score

Benefits of using credit wisely

Avoid interest on credit cards

Difference between debit cards and credit

cards

Availability of free credit reports

How to decrease fraudulent use of credit

cards

Credit card liability when card is lost or stolen,

Identify theft-next step

Upside down on a loan

MANAGE RISKS (INSURANCE) AND PRESERVE WEALTH:

Benefits of insurance

Calculate deductibles and co-insurance

percentages

Renter requirements

Security deposit

Lease

Renter’s insurance
Maximum amount to pay for a home (2.5 x
salary)

Value of home- mortgage debt= Equity

Amenities (may be included in rent)- Ex.

Internet

Tips for car buying

The base price of a car- standard equipment,

no extras

Auto insurance required to drive

Factors that affect car insurance rates

When to purchase life insurance

CREATE AND BUILD WEALTH (INVESTING):

Investing- long term and high interest rates

result in most money earned

Diversified portfolio

Relationship between risk and return