Rules of Thumb
The Rule of 72 is_______.
A rule for estimating how long it takes an investment or debt to double.
Experts recommend that the younger you are, the more you should invest in this asset type.
Stocks
What is the difference between saving and investing?
Saving is setting money aside; Investing is trying to grow your money
The best way to avoid paying interest on your credit cards is to...
Pay them on time every month
The first step in building a financial plan is to create this summary of all of the expenses you expect to incur over the next year.
Budget
The 2000 Hour rule helps you translate between an hourly wage and this
annual income
How much do financial experts generally recommend that you keep in an emergency savings fund?
3-6 months of your essential living expenses.
What is the difference between a stock and a bond?
Stocks are a share of ownership in a company, while bonds are loans to a company or government.
What's the largest contributing factor to your credit score?
Payment history (a.k.a. whether you pay your bills on time)
The income tax rate that the government charges you in based primarily on what?
how much money you make
The 20% Down rule usually applies to buying this.
A home or other real estate.
Experts recommend that you start investing as soon as you have saved enough money to cover what
3-6 months of expenses
This is a fund containing shares in many companies or other assets that trades on an exchange like a stock.
Exchange Traded Fund (ETF)
This is the term used to describe the cost of borrowing on a credit card, typically expressed as a percentage.
Annual Percentage Rate (APR)
What is a brokerage account?
An account that enables you to invest in stocks.
What is the 50/30/20 Rule?
A guideline for budgeting that says you should put 50% of your take-home pay toward needs, 30% toward wants, and 20% toward savings.
What is the recommended amount that wealth management firms say you should have saved for retirement by the time you turn 30?
An amount equal to your salary
What is a 401K?
A retirement saving plan offered by an employer.
What is the difference between compound interest and simple interest?
Compound interest is interest calculated on the principal plus interest earned, while simple interest is interest calculated only on the principal.
What is the difference between an insurance premium and a deductible?
A premium is a fee you pay every month to be covered by insurance. A deductible is the out-of-pocket costs you must cover before your insurance kicks in.
What is the 4% Rule of retirement savings?
If your retirement savings are invested properly, you can withdraw 4% of those savings every year in retirement and never run out of money.
What is the maximum percentage that financial experts recommend you use of your total credit card limit to avoid being seen as a risky borrower?
30%
What is the difference between and Traditional/Standard IRA and a Roth IRA?
In a Standard IRA, contributions are tax deductible and withdrawals are taxed. In a Roth IRA, contributions are not tax deductible and withdrawals are not taxed.
When might taking on debt and paying interest for an extended period of time be a good financial decision?
According to the Rule of 72, if I invest $100 at age 18 in an ETF earning an average of 8% per year, then at age 63, it will be worth this much.
$3200