Wealth Building
According to Maslow’s hierarchy we have physiological, esteem, self-actualization, social, & safety needs, which three needs are MOST essential and required before a person can work on their esteem and self-actualization? (Describe them, give examples and put them in the correct order.)
1st: Physiological - temperature, food
2nd: Safety - shelter, avoidance of harm & pain
3rd: Social - belonging to a group
Put the types of investment in order of risk: savings accounts, bonds & CDs, index funds & mutual funds, stocks & real estate.
Lowest Risk: Savings Accounts
2nd: Bonds & CDs
3rd: Index Funds & Mutual Funds
Highest: Stocks & Real Estate
What are some strategies students can use to get the highest post-secondary education at the lowest price?
Dual enrollment
Accelerated bachelors/masters
Community college & transfer
FAFSA
Living at home or apartment sharing during school
What is the difference between Net Pay & Gross Pay?
Who should fill out their FAFSA and how often?
Every student in post-secondary school, every school year.
If you want to “retire early” by living off capital gains from your investments, how many times your annual expenses do you need to save up and invest?
25 times
Put the types of investment in order of return: savings accounts, bonds & CDs, index funds & mutual funds, stocks & real estate.
Lowest Return: Savings accounts
2nd: Bonds & CDs
3rd: Index funds & Mutual Funds
4th: Stocks & Real Estate
How do students get federal aid for school? What is need-based AID?
They fill out FAFSA.
Need based means more aid is available to people with higher need or in other words lower financial stability/incomes.
What sections are required on a resume?
Education
Experience
How do you calculate net price of college per year? What options do students who don’t qualify for enough grants, scholarships and federal loans to pay for college have?
Net price = cost of attendance + any other costs related to attending - grants and scholarships
Students who don't qualify for enough federal aid will have to seek private loans to cover the difference
What’s the difference between wealth & income?
Wealth is the total value of how much someone owns (real estate, cars, etc) while income is the money they make regularly from their job.
What is compound interest and how does it impact investing?
Compound Interest is when an investor takes the interest they've earned on an investment and adds it to the principal sum of a loan or deposit to be reinvested. In other words, it's interest on interest. It's impact is that it makes investments grow much faster.
What are award letters and after what steps will students receive them from schools?
Award Letters are statements of aid, scholarships, grants and cost of attendance. Students can receive them by BOTH filing their FAFSA and applying to attend a school.
How does the college major someone chooses impact their employability and ability to pay back loans? What is the target percentage of take-home-pay that student loan payments should stay under in order to be generally "affordable"?
Majors that lead to higher paying jobs or jobs with high job-growth outlook will lead to higher employability and higher salaries. Since student loan payments should ideally be less than 10% of a person's take-home pay, jobs with a higher salary and take-home pay will support borrowers to repay loans without making other sacrifices.
Why do students with less wealthy families need to be more careful about borrowing money for post-secondary education compared to students from wealthy families?
What is debt? Are there good debts and bad debts? Give examples
Debt is the money that you owe someone else. An example of good debt is a home loan that you can afford or student loans for a valuable degree. An example of bad debt is debt that doesn't benefit you in the future such as credit card debt from buying things you didn't need and can't resell.
What is amortization and how does it impact borrowing?
Amortization is the way the banks spreads out interest payment over the life of a loan and specifically makes the payments in the first half of the loan mostly interest so that the borrower doesn't pay down the principal until the end of their loan term. This means the borrower will pay more in interest over time.
What is the function of placement tests in college? What is SAP and how is it typically calculated?
Placement tests assess the level of students and place them either in grade level or in remedial classes until they can bring their level up enough to take required classes.
SAP means "Satisfactory academic progress" and it is calculated both by grades and time in a program.
What are the two biggest taxes that are deducted from your gross pay on a pay stub?
Income taxes & Social Security Taxes
What is inflation and how does it impact investing?
Inflation is the rise in prices of goods around 2.5% every year. This means that investments must grow faster than 2.5% just to keep their value over time.
What is passive income? Give an example.
Passive income is money earned from things you don't have to work doing, such as owning real estate and charging rent.
Are high risk investments more or less appropriate when an investor has a long time-horizon? Why?
High risk investments are more appropriate because if the borrower doesn't need the money right away, they can afford some risk of depreciation of their investments in the short term in order to earn higher reward in the long term.
How does level of education correlate with lifetime income and unemployment?
Lower education leads typically to lower lifetime income and higher unemployment while higher lifetime education leads to higher lifetime income and lower unemployment.
What are examples of pre-tax deductions?
Healthcare & 401(k)
Describe ideas about how the average person can reduce their monthly costs for housing, food, entertainment and transportation.
Housing: Share a house
Food: Cook at home, bulk shop
Entertainment: Hang out with friends at someone's house
Transport: Take public transit or walk/bike