credit
Annual Percentage Rate (APR)
The cost you pay each year to borrow money, including fees, expressed as a percentage
a real life Scenario is to imagine you are renting money instead of a car or an apartment for example
Total Cost: $100 (Interest) + $0 (Fees) = $100 total.
Total Cost: $80 (Interest) + $50 (Fees) = $130 total.
Paycheck Stub
A document attached to every paycheck that details your earnings and the amount withheld for taxes, health insurance, retirement funds, etc.
a real life Scenario is to think of it as a receipt for your labor it shows how your gross pay turns into net pay
Insurance
An agreement where you make regular payments to a company and the company promises to pay you money if you suffer a specified injury, illness, loss, etc.
a real life Scenario is balancing monthly costs (premiums) with the out-of-pocket expenses paid when a claim is filed (deductibles and coinsurance
Budget
A plan of your expected income and how you will use it to meet your expected expenses over a period of time
a real life Scenario is cutting other cost to save
Maintenance Fee
A monthly fee that some banks charge to provide access to checking or savings accounts
a real life Scenario is , a maintenance fee is a recurring charge used to fund the upkeep of shared spaces or services
Cosigner
Someone who legally agrees to take responsibility for a person's debt if they cannot repay it
a real life Scenario is say you just graduated and have a steady job but have no rental history so no landlords can prove she pays on time so your mom with a high credit score and years of stable financial history agrees to co sign meaning if she misses a payment he has to pay it
Income Tax
Taxes paid by employees to federal and state government through a direct deduction from their paycheck
a real life Scenario is
John's employer withholds FICA taxes (Social Security and Medicare) from his paycheck, totaling about 7.65% of his gross income Federal Income Tax Withholding His employer also withholds federal income tax based on the information John provided on his W-4 form
Coverage Limit
The maximum amount an insurance company will pay if you file a claim
a real life Scenario is the maximum amount an insurance company will pay for a covered loss. Any costs exceeding this limit are the policyholder's personal financial responsibility.
50/30/20 Budget
A budgeting method that allocates 50% to needs, 30% to wants, and 20% to savings and debt repayment
a real life Scenario is
50 need 30 wants 20 saving
Outstanding Check
A check that has been written but has not yet been cashed or deposited by the payee
a real life Scenario is n outstanding check is a check that has been written and recorded by the payer, but has not yet been "cleared" or cashed by the bank because the recipient hasn't deposited it
credit
An agreement in which a borrower receives something of value now and agrees to repay the lender in the future, generally with interest
say you have a poor credit score and go to buy a new car your total coast rate will be higher your monthly payment and the total you pay over the years but the opposite for if you had a good credit score
I-9
Form used by an employer to verify an employee's identity and to establish that the worker is eligible to accept employment in the United States
a real life Scenario is say a : A U.S. citizen is starting a new job hiring manager responsible for on boarding new employees says they need some mandatory paperwork including Form I-9 to verify your eligibility to work in the U.S.
Deductible
The amount of money you agree to pay towards your losses before your insurance coverage will begin paying
a real life Scenario is a deductible is the specific amount you must pay out-of-pocket for a claim before your insurance company starts to pay
Cost of Living
The amount of money needed to sustain a certain level of living, including basic expenses such as housing, food, taxes, and healthcare; often used when comparing how expensive it is to live in one city versus another
a real life Scenario is A single person typically needs $2,200 to $3,400 to cover all expenses.
Overdraft Fee
A fee charged to your account when it lacks the funds to cover a withdrawal, but the bank allows the transaction to go through anyway
a real life Scenario is An Overdraft Fee is a penalty charged by a bank when you spend more money than you actually have available in your checking account
Debt Snowball Method
A method of debt repayment whereby the borrower prioritizes paying down debts with the smallest balances first
a real life Scenario is say you have four different debts and manage to find an extra $500 a month in your budget by cutting back on non essentials like streaming services and dining out
Progressive Tax
A tax system that uses tax brackets to collect a larger percentage from the income of high-income earners than it does from low-income earners
a real life Scenario is say you pay a small amount in federal income taxes your effective tax rate (the actual percentage of the total income paid in taxes) is close to 10%. The system is designed to place a minimal tax burden on those with the lowest ability to pay.
Premium
The specified amount of payment required periodically by an insurer to provide coverage under a plan for a defined period of time
a real life Scenario is A Premium is the regular payment you make to an insurance company to keep your policy active. Think of it like a subscription fee; you pay it regardless of whether you actually use the insurance that month or year
Deduction
Any items subtracted from your paycheck, including state and federal income taxes, Social Security, health insurance or 401(k) contributions
a real life Scenario is a deduction is an amount you subtract from your total income so that you pay taxes on a smaller number.
Overdraft Coverage
A loan banks offer to their customers when they try to withdraw more funds than they have in their account, usually for a fee and with interest
a real life Scenario is Overdraft Coverage is a service where your bank agrees to pay a transaction even if you don’t have enough money in your account it prevents your card from being declined
Credit Bureau
A consumer-reporting company that collects and sells information about how individual people manage their credit (e.g. Equifax)
a real life Scenario is to think of financial reporting agency or a high school registrar for your money They don't lend you money they just watch how you handle it and write a report card on you
Standard Deduction
A standardized dollar amount that reduces your taxable income, specifically for individuals who do not receive additional benefit by itemizing their deductions into medical expenses, donations, etc.
a real life Scenario is the standard deduction is a fixed amount subtracted from your gross income to lower your taxable income
Beneficiary
A person designated as the recipient of funds or other property under a will, insurance policy,
a real life Scenario is A Beneficiary is the person designated to receive the money from an insurance policy or a financial account after the owner passes away.
Cash Envelope Budget
A budgeting method where money for monthly spending is taken out in cash and placed in labeled envelopes according to budget categories. Spending occurs only from the corresponding envelopes.
a real life Scenario is instead of buying things you don't really need with extra spending cash you put it away in categories and find to have a extra money for important expenses
Pay Yourself First
A method of saving whereby you put a fixed amount of income into a savings account before you pay monthly bills or make purchases
a real life Scenario is you treat your savings and investments as your very first bill of the month rather than waiting to see what is left over at the end.