Presentation Transcript

1. FINANCING YOUR FUTURETERMINOLOGY Budget: A plan to manage income, spending and saving Gross Income: Total amount of income earned including federal income taxes, social security, etc. Net Income: Gross income minus payroll deductions Fixed Expenses: Expenses that must be paid on a regular basis such as rent, car payments, phone bill, insurance, etc
2. FINANCING YOUR FUTURETERMINOLOGY Variable Expenses: Expenses that change due to price and willingness and desire to purchase items such as food, clothing, entertainment Liabilities: Financial obligations that must be paid Assets: Possessions that have economic value Net Worth: Assets minus liabilities
3. FINANCING YOUR FUTURETERMINOLOGY Dividend: A payment of a portion of a company’s net profits, which is periodically made to stockholders Liquidity : The ease with which a financial asset can be turned into cash Compound Interest: Interest paid on the principle and on the interest earned in an account
4. FINANCING YOUR FUTURETERMINOLOGY FICO Score: A number applied to a person’s credit history to assess the person’s reliability to repay borrowed funds.
5. Table of FICO Credit Scores % of Population Credit Score 2% 300 – 499 5% 500 – 549 8% 550 – 599 12% 600 – 649 15% 650 – 699 18% 700 – 749 27% 750 – 799 13% 800 – 850 The Higher your FICO Score, The lower your interest rate on a loan
6. FINANCING YOUR FUTURETERMINOLOGY Minimum Payment: The smallest payment a person is required to make in a given month on a credit account (Credit card companies love it when you do this)
7. FINANCING YOUR FUTURETERMINOLOGY Human Capital: Knowledge and skills that a person obtains to better their future – Example is College, Trade School, or Military Annual Percentage Rate (APR): The interest rate charged, expressed as a percent per year, for the use of credit Credit Bureau: An organization that tracks the bill-paying habits of consumers
8. FINANCING YOUR FUTURETERMINOLOGY Credit Report: A written record collected by a credit agency that tracks a borrower’s bill-paying habits Revolving Credit: An open-ended account with a limit to how much one can borrow but no time limit for repayment: EXAMPLE is credit cards Installment plan: A closed-end loan for a specific product such as furniture or appliances
9. FINANCING YOUR FUTURETERMINOLOGY Capital Gains: A profit realized from the sale of property, stocks or other investments Rule of 72: Divide the annual interest rate you expect to earn into 72 to know approx. how many years to double your money Principal: The original amount borrowed Federal Income Tax – Taxes subtracted from your paycheck to help fund the federal government