Budgeting
Are the three types of budget categories fixed, variable, and periodic?
Yes
What does FDIC insure?
Federal Deposit Insurance Corporation
Insures bank deposits up to $250,000.
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Name one negative impact of predatory lending practices, like payday loans.
High fees and interest rates can trap borrowers in a cycle of debt.
What is the difference between saving and investing?
Saving preserves principal, low risk; investing seeks higher returns, more risk.
Name three common types of insurance.
Health, auto, home/renter's, life, disability.
Why is it important to have an emergency fund in your budget?
To cover unexpected expenses without going into debt.
What is the main difference between a bank and a credit union?
Banks are for-profit; credit unions are member-owned nonprofits.
What is the purpose of a co-signer on a loan?
To guarantee the loan; if the main borrower doesn't pay, the co-signer is responsible.
Help you get a loan in the first place
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Name two types of retirement accounts.
401(k), IRA, Roth IRA, Roth 401(k).
Name two sources of income besides salary
Wages, Investment Income, Self-Employment, Inheritance, Gifts/Awards
What is the 70-20-10 rule in budgeting?
70% for living expenses, 20% for savings/investing, 10% for charitable giving or debt.
Explain the term “overdraft” and its consequences.
Spending more than your account balance; results in fees or declined transactions.
What is APR and why is it important?
Annual Percentage Rate; shows the yearly cost of borrowing, helps compare loans.
Explain the relationship between risk and return.
Higher risk can bring higher potential returns and vice versa.
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What is the purpose of a W-2 form?
Shows annual wages and taxes withheld for employees.
Use it to fill out 1040
How can social media and advertising influence your budgeting decisions?
They can encourage impulse buying or shift your priorities, making it harder to stick to your planned budget.
What is “pay yourself first” (PYF) and how can it help you reach long-term goals?
Saving before spending; helps you build savings and reach goals faster.
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What is the difference between secured and unsecured credit?
Secured is backed by collateral (e.g., car loan); unsecured is not (e.g., credit card).
What is compound interest?
Earning interest on both your original amount and the interest already earned.
Interest on interest
What is the difference between gross income and net income
Gross: total before deductions; Net: take-home after deductions.
What is comparison shopping, and why is it important for consumers?
Comparing prices, quality, and features from different sellers to make informed, cost-effective purchasing decisions.
Why can over-saving sometimes be a problem?
Inflation can erode savings if not invested; you might miss out on living or investing.
What are the 5 C’s of creditworthiness?
Character, Capacity, Capital, Collateral, Conditions.
What does “diversification” mean in investing?
Spreading money across different investments to reduce risk.
What is a deductible?
The amount you pay before insurance covers the rest.