Income
What is income?
Income is money what an individual or business receives in exchange for providing labor, producing a good or service, or through investing capital.
What is the idea of "pay yourself first"?
To make a habit of saving money to reach your financial goals
What is investing? What are some common investment vehicles?
To invest is to allocate money with the expectation of a positive benefit/return in the future.
Bonds, mutual funds, stocks, real estate, retirement plans
Why do you want to budget (save money)?
To reach financial goals
In case of an emergency
To have the option of taking advantage of unforeseen opportunities
What are the two different types of interest?
Simple and Compound interest
What are the two types of income?
Active Income: When you do some work or provide a service, and someone pays you for it.
Passive Income: When the income is not directly tied to the work you do.
What is a savings account?
Define appreciation and depreciation.
Increase in monetary value, decrease in monetary value.
What do you have to balance in a budget?
Expenses and income
What is the formula for compound interest?
Dollar Amount x Interest Rate ^ Length of Time (in years) = Amount Earned
What are some factors that might affect income decision-making(both kinds of income)?
Age → Risk
Total Capital
Time Allotment
Goal → Retirement or Growth?
What is the relationship between interest rate and money accessibility while saving, and why?
The less accessible it is, the higher the returns will be. Banks want to keep the money in order to reinvest it.
What is a stock?
Stock represents ownership of a corporation. Stockholders own a share of the company and are entitled to a share of the profits as well as a vote in how the company is run.
What is goal setting, what ranges are there, and why might that be important for budgeting?
Goal ranges:
Short-term goals (1–4 weeks)
Medium-term goals (2–12 months)
Long-term goals (1 year or longer)
To plan in advanced and to ensure you are motivated to follow a budget.
If you put $500 in a savings account that paid 4.4% simple interest each year, how much interest would you earn in 5 years?
$610
$110 in interest
What are the four different types of active income?
Wages
Tips
Salaries
Commissions
What is an Certificate of Deposit (CDs)
Bank pays a fixed amount of interest for a fixed amount of money during a fixed amount of time.
What is a mutual fund?
Professionally managed portfolios made up of stocks, bonds, and other investments.
Individuals buy shares, and fund uses money to purchase stocks, bonds, and other investments.
Profits returned to shareholders monthly, quarterly, or semi-annually in the form of dividends.
What are the two types of expenses? Give some examples of each.
Fixed
Variable
What is the rule of 72? If I want to double my investment in 5.5 years, what interest rate would I need?
A simple way to estimate how money can grow.
Roughly 13 years
What is gross and net income, and what is the difference between both?
Gross income is all the money one earns in income, and net income is the money after taxes and deductions. The main difference is that net income is always less.
List different kinds of saving methods and account types
Statement Account
Passbook Account
Interest-Earning Checking Account
Money-Market Deposit Account
Certificate of Deposit
What is a bond? List at least two different kinds of bonds.
A bond is an “IOU,” certifying that you loaned money to a government or corporation and outlining the terms of repayment.
Corporate, Municipal, Federal
Degree of Risk
Rate and Stability of Return
Availability of Funds for Use
Amount of Protection Against Inflation
If you put $5000 in a savings account that paid 7% compounded yearly, how much interest would you earn in 15 years?
$8795