Money Management
What is a budget?
A plan for managing income and expenses.
A tool for managing money to achieve short and long-term goals; includes a list of all types of income and expenses over the course of a time period, usually a month
What is an emergency fund? How long does it take to establish an emergency fund?
Money is set aside for unexpected expenses. 3-6 months
What is a checking account used for?
Everyday spending and paying bills.
What is credit?
The ability to borrow money and pay it back later.
What is the difference between Secured Loans/Credit cards and Unsecured Loans/Credit cards?
Secured Loans: Require collateral
Unsecured Loans: Based solely on credit rating
What is the difference between Fixed Expense/cost and Variable Expense/cost (give me an example as well)
Fixed cost: Anticipated expenses that are same each month and usually require payment around the same time each month Ex: Rent, Car payments, and Insurance
Variable Costs: Anticipated expenses that are expected, but may vary in amount each month (Fluctuate) ; Ex: Utility Bills
What does SMART stand for in goal setting?
Specific, Measurable, Achievable, Relevant, Time-bound.
What does FDIC stand for and what does it do?
Federal Deposit Insurance Corporation; it insures bank deposits up to $250,000.
Fraud protection services
Account monitoring and alerts
Secure online banking encryption
Name one factor that affects your credit score.
Payment history, credit utilization, length of credit history, new credit, or credit mix.
what is the most important thing about a restrictive endorsement
For Deposit Only
What is the calculation of Net Worth
Net Worth= Total Assets-Total Liabilities
What is compound interest?
Interest earned on both the original principal and the interest already earned.
What is the difference between a bank and a credit union?
Banks are for-profit; credit unions are member-owned non-profits
What does APR stand for and what does it represent?
Annual Percentage Rate; the yearly cost of borrowing money.
What does Discretionary Income mean?
Income that is leftover after expenses have been paid
What is the difference between gross income and net income?
Gross is total earnings before deductions; net is after deductions.
What are the mandatory taxes that are deducted from your paycheck?
Federal Income Tax, State Income Tax, FICA
What are the three types of endorsement?
Blank Endorsement, Special Endorsement, and Restrictive Endorsement.
What are the three credit bureaus
TransUnion, Equifax, Experian
What happens if you only pay the minimum balance on your credit card each month?
You pay more in interest and it takes longer to pay off the debt.
Why is tracking your spending important?
It helps identify where money goes and prevent overspending.
What does the U.S Department of Treasury do?
Manages government finances and economic policy
Prints and mints U.S. currency
Collects taxes and manages government debt
Enforces financial and tax laws
Who are the FEDs and what do FEDs stand for?
Federal Reserve (The Feds): The central banking system in the United States which consists of the 12 regional banks, Federal Reserve Board, and the Federal Open Market Committee (controls money supply)
Name the 5 C's of credit
Character, Capital, Capacity, Collateral, and Conditions
What is Bankruptcy? How long does it stay on your credit?
Legal declaration of inability to pay debts. 7-10 years