Budgeting Basics
What is a budget?
A plan for how to spend and save your money.
What is the purpose of a savings account?
To safely store money and earn interest.
What is a credit score?
A number that represents your creditworthines.
What is a stock?
What is gross income?
Income before taxes and deductions.
What are fixed expenses?
Expenses that stay the same every month (ex. Rent)
What is intrest?
Money earned on saving or paid on borrowed funds.
Name one thing that affects your credit score.
What is diversification?
Spreading investments to reduce risk.
What is net income?
Take-home pay after taxes and deductions.
Groceries, gas, entertainment, etc.
What is an emergency fund?
What is the difference in a credit card and debit card?
Credit uses borrowed money and debt uses your own.
What is a mutual fund?
A collection of stocks/bonds managed by professionals.
What is a W-2 form used for?
To report annual wages and taxes withheld.
What is the 50/30/20 rule used for?
Budgeting—50%
Needs—30%
Savings/Debt—20%
What does FDIC insurance protect?
Deposits in banks up to a certain amount.
What is APR?
Annual Percentage Rate (the cost of borrowing on a yearly basis)
What is the difference between a Roth IRA and a Traditional IRA?
Tax treatment—Roth is post-tax; Traditional is pre-tax
What is the purpose of income tax?
To fund government services and programs.
Why is tracking you spending important?
To know where your money is going and improve financial descisions.
What is compound interest?
Interest earned on both the original amount and previous interest.
What is a consequence of missing a credit card payment?
Why does investing early help build wealth?
Compound interest grows more over time.
What is the difference between a paycheck deduction and a tax credit?
Deductions reduce taxable income; credits reduce tax owned.