Budgeting
What is the 50-30-20 rule
50% of income should be allocated towards-Necessities
30% of incomes should be allocated towards-Investments/savings
20% of incomes should be allocated towards-Wants
What is owning a stock?
Owning a piece of a larger corporation
What is a high-yield savings account?
An account where allocated money earns interest at a significantly higher rate than traditional savings accounts
You lose your job and have no income for 3 months, but you have a basic emergency fund saved. What is the main purpose of that money used for?
Covering essential living expenses until income returns
What is an asset?
How long should your emergency fund be able to last?
3-6 months
What is a mutual fund?
It pools money from a variety of people to purchase assets.
What is a 401(k)
An employer-sponsored retirement account that lets you invest/save a portion of your salary before taxes. Generally, able to be withdrawn at 59½ years old without penalties and with lower tax rates.
You invest money in a retirement account starting early in life. What is the main financial advantage?
Compound growth over time greatly increases total savings
What is an IPO
an inital public offering, where a company is going public into the stock market for investors
What are fixed expenses?
Consistent costs such as rent or mortgage.
What is compound interest?
What is a Roth IRA?
A retirement account that lets you invest money you've already paid taxes on. Once invested, your money grows tax-free. After age 59½, you can withdraw your funds without taxes or penalties.
You keep a large amount of money in cash for 20 years without investing it. What happens to its purchasing power?
It decreases due to inflation
What does the term "lifestyle inflation" mean?
Overspending on non-essential items due to an increase in salary
What are variable expenses?
Expenses that change in price. ex) Gas, Groceries
What is diversification?
Diversifying investment portfolio to reduce risk
What is a pension?
Employer-sponsored retirement accounts that provide a guaranteed income after retirement based on salary and years of service.
You invest all your money into a single company’s stock. What is the main financial risk?
High risk of major loss if that company performs poorly
Name 3 stocks of the Magnificent 7
Microsoft, Apple, Google, Meta, Nvidia, Tesla, Amazon
Being in budget deficit means that...
Your costs exceed your total revenue over a given amount of time
What would you have if you invested $10,000 at 10% interest after 40 years?
~$450,000
Nationally, what is the advised amount of money for retirement in the United States?
have 10-12x your final annual income saved to be comfortable
You start a job that offers a retirement plan, and your employer matches part of your contributions.
What is the main financial effect of taking full advantage of the employer match?
You receive free extra money added to your retirement savings, increasing your total wealth immediately
What is the S&P 500 at right now? (+/-50)
Lets look right now!