Financial Literacy
What is financial literacy?
The ability to understand and manage your personal finances effectively
Fixed expense
A cost that remains the same each month, like rent
Per unit pricing
The cost of an item divided by its quantity or size
APR
Annual Percentage Rate
Credit report definition
Detailed record of your credit history
Ways to become financially literate?
Reading financial books, taking courses, and practicing budgeting
Variable expense
Costs that change from month to month, like groceries or utilities
Benefit of unit pricing
Comparing prices more accurately to get the best value
APR helps with
Determining the interest on credit card balances
Credit report bureaus
Equifax, Experian, and TransUnion
What is a budget and why is it important to have one?
A tool that helps you track income and expenses to reach financial goals
Pay Yourself First strategy
Setting aside savings before spending on other expenses
Credit card benefits
Rewards, building credit, and purchase protection
Credit score importance
Determining your creditworthiness for loans and credit cards
Credit history importance
Showing your reliability in repaying debts
How to budget and manage debt
Planning your spending to avoid overspending and accumulating debt
50/30/20 savings method
50% for needs, 30% for wants, and 20% for savings
Annual fees
Charges some credit cards require yearly for card membership
Improving credit score
Paying bills on time, keeping credit utilization low, and maintaining old accounts
Economic models
Simplified representations of economic relationships
Inflation
General increase in prices and fall in purchasing power of money
Reasons for economic models
Simplifying complex systems, predicting outcomes, and testing theories
Inflation effects
Decreased purchasing power and higher cost of living?
Negative credit score factors
Late payments, high credit utilization, and frequent credit applications
Law of Supply and Demand
Principle that quantity supplied increases as price increases; principle that quantity demanded decreases as price increases