Budgeting Basics
A plan that outlines income and expenses
What is a budget?
A number that represents your creditworthiness.
What is a credit score?
An account for everyday spending and debit card use.
What is a checking account?
A share of ownership in a company.
What is a stock?
Your total income before taxes or deductions.
What is gross income?
An expense that stays the same every month, like rent or car payment.
What is a fixed expense?
The interest rate charged on borrowed money, shown annually.
What is APR (Annual Percentage Rate)?
Used to set money aside for future needs or emergencies.
What is a savings account?
Spreading your investments across assets to reduce risk.
What is diversification?
A tax form showing your annual earnings and deductions.
What is a W-2 form?
A budgeting rule that allocates 50% to needs, 30% to wants, 20% to savings.
What is the 50/30/20 rule?
Paying bills on time and keeping credit balances low.
What is a way to improve your credit score?
A service that prevents transactions from being declined due to insufficient funds.
What is overdraft protection?
A pool of money managed by professionals to invest in stocks, bonds, etc.
What is a mutual fund?
Expenses you can subtract from your taxable income.
What are tax deductions?
You do this with apps or spreadsheets to see where your money goes.
What is tracking expenses?
Doing this can lead to long-term debt and high interest payments.
What is only paying the minimum on your credit card?
A type of account where money is locked in for a fixed term with interest.
What is a certificate of deposit (CD)?
One represents ownership, the other is a loan to a company or government.
What is the difference between stocks and bonds?
Social Security and Medicare taxes taken from paychecks.
What is FICA?
It helps cover unexpected costs like medical bills or car repairs.
What is an emergency fund?
It compares your monthly debt to your income.
What is the debt-to-income ratio?
Interest calculated on the principal and the accumulated interest.
What is compound interest?
An index tracking 500 of the largest U.S. companies.
What is the S&P 500?
Both are retirement accounts, but one is employer-sponsored.
What is the difference between a 401(k) and an IRA?