Personal Finance

1. Personal Finance Exam A

2. Cash Card • Specific amount of $, Dunkin Donuts, MacDonald's, Phone Card, Re- loadable, Replenished, Disposable- only use up to amount. • Barter is a method of exchange by which goods or services are directly exchanged for other goods or services without using a medium of exchange, such as money.

3. Pawnshop • A pawnbroker is an individual or business (pawnshop or pawn shop) that offers secured loans to people, with items of personal property used as collateral. • Collateral, especially within banking, may traditionally refer to secured lending (also known as asset-based lending).

4. Open End Credit • An agreement by a bank to lend a specific amount to a borrower, and to allow that amount to be borrowed again once it has been repaid. also calledrevolving credit or revolving line of credit.

5. Having trouble paying your bills? Getting dunning notices from creditors? Are your accounts being turned over to debt collectors? Are you worried about losing your home or your car? You’re not alone. Many people face a financial crisis some time in their lives. Whether the crisis is caused by personal or family illness, the loss of a job, or overspending, it can seem overwhelming. But often, it can be overcome. Your financial situation doesn’t have to go from bad to worse. Take first action contact creditors

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7. Financial literacy is the ability to understand finance. More specifically, it refers to an individual's ability to make informed Judgements and effective decisions through consciousness of the financial dimension of economic undertaking. By contrast, raising interest in personal finance is now a focus of state-run programs in countries including Australia, Japan, the United States and the UK.[1] Personal finance is to financial literacy what being able to read one's own handwriting is to literacy. People who are not Financial literacyfall prey to scams and Have excessive consumer debt

8. Bankruptcy • Bankruptcy is a legally declared inability or impairment of ability of an individual or organization to pay its creditors. Creditors may file a bankruptcy petition against a business or corporate debtor ("involuntary bankruptcy") in an effort to recoup a portion of what they are owed or initiate a restructuring. In the majority of cases, however, bankruptcy is initiated by the debtor (a "voluntary bankruptcy" that is filed by the insolvent individual or organization).Adverse information on a credit report for 7 years, • DECLARED BANKRUPTCY– ON REPORT 10 YRS

9. The Federal Reserve System (also known as the Federal Reserve, and informally as the Fed) is the central banking system of the United States. It was created in 1913 with the enactment of the Federal Reserve Act, and was largely a response to a series of financial panics, particularly a severe panic in 1907.[1][2][3] Conducting the nation's monetary policy by influencing monetary and credit conditions in the economy in pursuit of maximum employment, stable prices, and moderate long-term interest rates. Supervising and regulating banking institutions to ensure the safety and soundness of the nation's banking and financial system, and protect the credit rights of consumers.

10. Dividend Reinvestment Plan • A dividend reinvestment program or dividend reinvestment plan (DRIP) is an equity investment option offered directly from the underlying company. The investor does not receive quarterly dividends directly as cash; instead, the investor's dividends are directly reinvested in the underlying equity. (The investor must still pay tax annually on his or her dividend income, whether it is received or reinvested.) • Buy more shares of same stock

11. Apartment Rent • Any empty apartments-the investor loses income • Less profit on investment.

12. Defined Contribution Plan • In economics, a defined contribution plan is a type of retirement plan in which the amount of the employer's annual contribution is specified.[1] Individual accounts are set up for participants and benefits are based on the amounts credited to these accounts (through employer contributions and, if applicable, employee contributions) plus any investment earnings on the money in the account.

13. Budget Variance • When effect of variance is concerned, there are two types of variances: • When actual results are better than expected results given variance is described as favorable variance. • When actual results are worse than expected results given variance is described as adverse variance, or unfavourable variance.).

14. Roth IRA- traditional IRA • Contributions to a Roth IRA are not tax deductible. By contrast, contributions to a traditional IRA are tax deductible • Direct contributions to a Roth IRA may be withdrawn tax free at any time. • a Roth IRA can reduce estate taxes since tax dollars have already been subtracted. A traditional IRA is valued at the pre-tax level for estate tax purposes. • WITHDRAW ROTH IRA –EDUCATION, MEDICAL SERVICE, PURCHASE 1ST HOME-NO PENALTY

15. Capital Gain • A capital gain is a profit that results from investments into a capital asset, such as stocks, bonds or real estate, which exceeds the purchase price. It is the difference between a higher selling price and a lower purchase price, resulting in a financial gain for the investor.[1] Conversely, a capital loss arises if the proceeds from the sale of a capital asset are less than the purchase price.

16. capital gains tax • Capital gain if asset held 1 yr or longer- taxed at a lower rate. • Capital gain if asset sold in less than 1 yr Taxed at a higher rate. A capital gains tax (CGT) is a tax charged on capital gains, the profit realized on the sale of a non-inventory asset that was purchased at a lower price. The most common capital gains are realized from the sale of stocks, bonds, precious metals and property.

17. DEBT RATIO • Debt Ratio is a financial ratio that indicates the percentage of a company's assets that are provided via debt. It is the ratio of total debt (the sum of current liabilities and long-term liabilities) and total assets (the sum of current assets, fixed assets, and other assets such as 'goodwill'). The lower the debt ratio the greater off the person is financial ratio

18. Excise Tax • to protect people – • from harming their health by abusing substances such as tobacco and alcohol, thus making excise a kind of sumptuary tax • from harming themselves and others indirectly and morally by engaging in activities such as gambling and prostitution (see below) (including solicitation and pimping) – thus making it a type of vice tax or sin tax • from harming those around them and the general environment, both from overuse of the above-mentioned substances, and including curbing activities contributing to pollution (hence the tax on hydrocarbon oil and of other environmental taxes, as in the UK), or from harming the natural environment (hence the tax on hunting) - thus also making excise a kind of pigovian tax

19. Excise Tax • to provide monies needed – • for the extra healthcare and other public expenditures which will be needed as a direct or indirect result of excisable activities, such as lung cancer from smoking or road accidents resulting from drunk driving • for defense - including taxation directly levied on other countries' militaries and/or governments, such as the UK's taxation on "visiting forces"

20. Excise Tax /CREDIT SCORE • Also known as SIN TAX • Items not considered necessities • Alcohol, Cigarettes, luxury items • CREDIT SCORE : A credit score is a numerical expression based on a statistical analysis of a person's credit files, to represent the creditworthiness of that person. A credit score is primarily based on credit report information, typically sourced from credit bureaus. • Lenders, such as banks and credit card companies, use credit scores to evaluate the potential risk posed by lending money to consumers and to mitigate losses due to bad debt.