Financial Knowledge
Spreading investments to reduce risk.
Diversification
Expenses that are required for basic survival, safety.
Non-discretionary Expenses
(needs)
A revolving line of credit offered by a Financial institution that you can use, pay back and reuse..
Helps build your credit History if managed right.
Credit Card
Money earned from work or investments.
Income
The fixed amount of money paid to an employee for their work.
Salary
A charge imposed by the government.
Taxes
A budgeting method where every dollar of income is assigned a specific purpose.
Zero Based Budget
(Zero Sum Budget)
A tax-advantaged account used to pay for qualified medical expenses.
Health Savings Account (HSA)
The cost of borrowing money or the reward for saving it.
Money taken out of your pay for taxes, insurance, or retirement.
Paycheck deductions
A form showing how much you earned and how much tax you paid.
W-2 Form
A specific plan for what you want to achieve with money
Financial Goal
An individual retirement account funded with after-tax money.
Qualified withdrawals are tax-free.
Roth Ira
To pay off debt, list debts from smallest to largest.
Pay the smallest ones first!
The Debt Snowball
A retirement plan that an employer offers based on the years you worked and your salary.
(A fixed payout)
Pension Plan
What you take home after taxes (a.k.a. “take-home pay”).
Net Income
Nonessential expenses (e.g., entertainment).
Discretionary Spending
(Wants)
A different type of savings account offering a higher interest rate than traditional savings accounts.
Recommended (APY) of at least 4% to 5%
High Yield Saving Account
Interest earned on both the initial investment and accumulated interest.
(interest on interest - daily, monthly or annually)
Compound Interest
What you give up when choosing one option over another.
Opportunity Cost
This is the fee charged if you spend more money than you have in your account.
Overdraft Fee
A budgeting strategy dividing income into 50% needs, 30% wants, and 20% savings.
50/30/20 Rule
A retirement account where you contribute pre-tax income and the investments grow tax-deferred.
Money saved for unexpected events.
Typically 3 to 6 months of your personal living expenses.
Emergency Fund
Used for healthcare or dependent care. It is sponsored by an employer and comes from pre-tax income.
( use it or lose it)
Flexible Spending Account (FSA)