Budgets & Saving
Maya keeps running out of money before payday. To map out her income against her spending, she creates this basic financial plan.
Budget
Leo uses a card for daily purchases like coffee and lunch, with funds drawn straight from his primary bank account. He is using this account type.
Checking Account
Jordan's job offer states he makes $20 an hour, but his actual paycheck is less after taxes are removed. His total earnings before those deductions is called this.
Gross Pay
Alex refuses to enter his Social Security number or date of birth on an unverified website to protect his private data. This sensitive personal information is known by this three-letter acronym.
PII (Personally Identifiable Information)
When 18-year-old Maya deposited $1,000 into an investment account, her money grew not just on her initial deposit, but also on the accumulated interest she earned year after year. This powerful financial phenomenon, which allows investments to grow exponentially over time, is known as this.
Compound Interest
Sam spends 50% of his paycheck on his apartment rent and electric bill. Under the 50/30/20 rule, these essential expenses fall into this category.
Needs
When Maya buys groceries, funds are instantly taken straight out of her checking account instead of being borrowed on credit. She is using this card.
Debit Card
When Taylor buys a $10 t-shirt at the mall, her total comes out to $10.80 at the register. The extra $0.80 added to her purchase is this type of tax.
Sales Tax
Jordan receives an urgent email claiming to be from his bank asking him to log in and confirm his password on a fake website. He is being targeted by this type of online scam.
Phishing
When Marcus creates his monthly budget, he lists his rent at $1,200 and his car payment at $350. Because these contractual payments stay the exact same price every single month, they are classified as this type of expense.
Fixed Expenses
Alex wants to buy a new laptop, so he sets a goal to save $300 over the next 3 months. By picking an exact dollar amount and a fixed deadline, he created this type of target.
SMART goal
Chris has $10 in his bank account but spends $15 on lunch, causing his balance to go negative. His bank charges him this extra penalty fee.
Overdraft Fee
Sam receives $5,000 for college that pays directly toward her tuition and never has to be paid back. She received this form of financial aid.
Grant/Scholarship
Maya spends $100 to buy a single share of Apple. By doing this, she now owns a tiny fraction of the company in this form.
Stock
Maya wants a lower-risk option for her portfolio instead of unpredictable tech stocks, so she lends money to the federal government by purchasing one of these fixed-income securities that promises to pay her back with interest.
Bonds
Sarah wants to build an emergency fund, so she cuts back on groceries and gas. Unlike fixed rent, these fluctuating monthly costs fall into this category.
Variable Expenses
Liam puts $500 aside for future emergencies and leaves it untouched so it can grow by earning interest over time. He is storing his money in this account.
Savings Account
When Alex checks his paystub, he notices a FICA tax deduction subtracted from his earnings. These funds go directly toward paying into these two major federal programs.
Social Security & Medicare
Alex picks a high-risk crypto asset over a safe savings account because it offers a much higher potential payout. He is acting on this core investing principle.
Risk v. Return
When Alex fills up his car at the gas station, he pays $3.50 per gallon. Unbeknownst to him, a state and federal tax on targeted goods is already baked directly into that listed price per gallon. This specific tax is called this.
Excise Tax
When Sarah unexpectedly lost her job, she was able to pay her rent and grocery bills for four months without going into debt because she had set aside this liquid cash safety net in a high-yield savings account.
Emergency Fund
When Marcus applied for a mortgage, the bank evaluated his financial history and looked at his three-digit number ranging from 300 to 850 to determine his interest rate and likelihood of repaying the loan on time.
When Sam's salary increased from $30,000 to $90,000, his income moved into a higher tax bracket, causing his overall tax rate to jump. His earnings are being taxed under this type of system.
Progressive Tax System
After a profitable year, a major company decides to reward its shareholders by sending them cash payouts for every share they own. The company is distributing these payments.
Dividends
Jordan wants to start investing in the stock market by purchasing a few shares of an S&P 500 index fund, but he can't do it through his normal checking account. Instead, he opens an account with Charles Schwab, a company classified as this type of financial institution.
Brokerage Firm / Stockbroker