Budgeting
What is a Good Amount for an Emergency Fund?
$500-$1000
What is investing?
Putting money away now for your future.
A popular savings rule of thumb in which 50% of your income goes towards necessities, 20% goes towards saving and debt repayment, and 30% goes towards flexible spending
50-20-30 Rule
From the statements below, identify the way or ways in which making only minimum monthly payments on a long-term credit purchase can be a disadvantage.
I. It is illegal to make only the minimum payments for more than one year.
II. Repeatedly making minimum payments harms your credit score.
III. The total cost is higher if the length of the debt is longer.
a.
I and II
b.
II only
c.
I and III
d.
II and III
D
What are 4 advantages of credit?
- Emergency funds
- Establish credit records
- Record of purchase
- Shopping is safer
What is the 60-20-20 Rule
Put 60% of your income towards your needs (including debts), 20% towards your wants, and 20% towards your savings.
What are reasons why it's important to invest? (Give at least 1)
To make more money in the long run and the value of money decreases over time.
Reinvesting earned interest back into the principal to allow money to grow exponentially over time
Compound Interest
an estimate of income and expenditure for a set period of time.
Budget
What are 4 disadvantages of credit?
- Sometimes costs more than cash
- Reduces comparitive shopping
- Ties up future income
- May lead to over consumption
What are the 3 P's of budgeting
Paycheck , Prioritize, and Plan.
Why is buying bonds riskier than investing in a Savings Account or CD?
They have higher interest rates, which means if they go into too much debt they could default on the loan.
An automatic electronic deposit of net pay to an employee's designated bank account
Direct Deposit
You are considering making a major purchase on your credit card. You should ask yourself the following questions, except which answer choice?
a.
Would it cost me less if I came up with a different purchasing plan?
b.
What else can I purchase to reach my full credit limit?
c.
Will I receive any incentives from my credit card company for making this purchase?
d.
How much will my purchase really end up costing if I don't pay off the balance immediately?
B
What are the 4 kinds of credit? Give a short explanation of each.
- Open-Ended: Open 30 and Revolving (Pay in full or payments)
- Installment: Monthly + Finance charges
- Service Credit - Send bills out later for doctors
- Lay Away: Merchandize is held until you make all the payments for the product.
What Are The 5 Basic Elements Of A Budget?
Income, Fixed Expenses, Debt, Flexible And Unplanned Expenses, and Savings.
What does it mean to default on a loan?
They can't pay you back
Money set aside for unanticipated expenses or loss of income
Emergency Fund
Jenny used her credit card to buy a refrigerator with a base cost of $824. The refrigerator consumed an average of $0.09 in electricity every day. Jenny made regular monthly payments for three and a half years, at which point the refrigerator was paid off. Over the eight years that Jenny had the refrigerator, it needed repairs three times, costing $68.75 each time. If Jenny's credit card has an APR of 10.54%, compounded monthly, and sales tax in Jenny's area is 7.13%, what was the lifetime cost of Jenny's refrigerator? Assume that Jenny made no other purchases with her credit card, and round all dollar values to the nearest cent. (Remember that leap year occurs every four years.)
a.
$1,528.47
b.
$1,622.46
c.
$1,779.63
d.
$1,457.91
A
What are 3 examples of good debt?
- House
- College
- Car
What is the simplest budgeting method?
Rank the following investments from lowest risk to highest risk (1=lowest, 4=highest)
___________ Bonds ___________CD's ___________Savings Account ___________Stocks
3, 2, 1, 4
Certificate Of Deposit (CD)
Certificate Of Deposit (CD)
A bank product that earns interest on a lump-sum deposit that's untouched for a predetermined period of time
Ellen purchased a dishwasher, which cost $315 before the 9.22% sales tax. She used the machine an average of 10 times per week for the next six years, at which point she replaced it. Each time she ran the dishwasher it cost her $0.09 for water and $0.13 for electricity. What was the lifetime cost of Ellen's dishwasher?
a.
$1,030.44
b.
$686.40
c.
$1,093.73
d.
$749.69
What's the difference between a credit report and a credit score?
Score is a number from information, and report is the why behind the number