Money
Opportunity cost
Next best alternative – it is what is given up when a choice is made.
Institutions that give loans:
banks, credit unions, pawnshops, finance companies, payday lenders, tax
preparers
Credit card cash advances
provided by credit card companies – withdraw cash with credit card – you pay a
higher interest rate
How insurance works—Transfer of Risk
Insurance policies transfers all or some of the financial impact of unexpected events. Insurance exists to help
individuals recover from the financial consequences of these events by pooling the resources of a large group to pay for the losses of a small group.
Diversification:
Is when an investor has different types of investments (stocks, bonds, mutual funds, Treasury Bills, etc.) it reduces risk of investing – not putting “all your eggs in one basket”
Sources of income
wages, rentals, interest, capital, profits, investments, entrepreneurship
Pay yourself first
Automatically route money from paycheck to savings (before paying bills)
Consequence of paying the minimum payment due on a credit card bill or paying a bill late:
Impacts credit score if paid late. If you are only paying minimum payment each month you will take a much longer time to pay
off balance – you will greatly increasing the total amount paid back due to APR charged per month.
How to reduce the cost of auto insurance:
Get good grades, no accidents, good credit, and drive a certain type of car.
Investment portfolio:
A portfolio is a diversified (hopefully) set of investments held by an individual or
institutional investor
Liquidity- what does is mean and what products are liquid?
The degree of ease in which assets can be sold.
Compound interest
Interest earned on interest
Credit reports
A number representing the creditworthiness of a person, and the likelihood that person will
pay his or her debts. Lenders, such as banks and credit card companies, use credit scores to evaluate the potential
risk posed by lending money to consumers.
Disability Insurance:
Disability insurance will cover your bills while you are disabled or cannot work, with an injury or illness for a certain amount of time. Doesn’t replace income.
Bear Market
A bear market refers to financial markets that are experiencing a prolonged period of contraction or loss.
Role of the Treasury Department
collects taxes, prints money, issues treasury bonds
Rule of 72
How long (many years) will it take to double an investment? Divide 72 by the interest rate to be
earned: 72 divided by 3% interest = 24 years (if you are given the number of years and need to determine the
interest rate needed to double your money, then divide 72 by the given number of years: 72 divided by 24 years
= 3% interest).
Debt to credit ratio
A credit-to-debt ratio is the amount of available credit you have relative to the amount of
debt you carry.
Collision coverage—when do consumers normally terminate this coverage:
Collision coverage on your car insurance policy that will repair damages to your vehicle when something collides with your vehicle. Consumers terminate/cancel the policy when the value of the car is less than the replacement pay out by insurance company.
Bull market
Bull market refers to a financial market that
experiences an extended period of growth above the historical averages.
Money orders (high rate of counterfeits):
A money order is a payment order for a pre-specified amount of
money and is purchased at different types of stores – it is used like a check. They are usually limited in
maximum face value to some specified figure (for example, the United States Postal Service limits domestic
postal money orders to US $1,000.00. US Postal money orders are hard to counterfeit.
Reconciling a checking account- why and when?
To view what activity has occurred in your account. Keep
current with your check register to know what your current balance is at all times. When you receive your bank
statement, you reconcile your check register against the statement to be sure no errors have been made and to
record any bank fees and/or interest earned in your register.
Three leading credit reporting agencies -
Equifax, TransUnion, Experian
Whole life insurance:
Whole life insurance is a policy that is also a way to invest money. It is referred to as a permanent life insurance policy because, as long as you pay your premiums, the policy is yours for life,
providing your loved ones with a guaranteed benefit upon your death.
Dividends:
Dividends are the earnings given to the people who are shareholders of the company stock.