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Personal Finance

Personal Finance Final

TermDefinition
Taxes Required charges of citizens by local, state, and federal governments; roads, police, schools, government, fire and emergency services
W-4 Form Filled out before job; Employee's withholding allowance certificate; determines the amount of money withheld for taxes
I-9 Form Used to prove the identity of people and avoid hiring non U.S. citizens; passport, driver's licence, U.S. military card, Social Security card, birth certificate
W-2 Form States the amount of money earned and taxes paid througout the previous year
Paycheck Paper check with stub; least secure
Direct Deposit Employers directly deposit employee's paycheck into the authorized employee's bank account
Payroll Card Electronically carries the balance of the employee's net income
Paycheck Pros Employee controls when the check is deposited
Paycheck Cons Least secure; employee is responsible for getting it to the bank; easy to lose
Direct Deposit Pros No direct handling of check; employee knows exactly when he/she will be paid
Direct Deposit Cons There could be a computer issue
Payroll Card Pros Money goes to the card automatically
Payroll Card Cons May charge fees for the card
Personal Information The employee's full name, address, and social security number or employee identification number
Pay Period The length of time for which an employee's wages are calculated; weekly, bi-weekly, or monthly
Gross Income Multiply hours by pay rate; Total amount of money earned before payroll withholdings
Payroll Withholdings Amount of money subtracted from the gross income for taxes
Withholding Tax Amount required by law for employers to withhold from earned wages to pay taxes
FICA Federal Insurance Contribution Act; Medicare and Social Security
Social Security Provides retirement income for the elderly and pays disability benifits
Medicare Health care program for the elderly and disabled
Net Income Amount left after all payroll deductions have been taken from the gross income; Gross income minus taxes
Year-to-Date Totals all of the deductions which have been withheld from an individual's paycheck from January 1st to the last day of the pay period indicated on the paycheck stub
Job A specific task done as a part of the routine of one's occupation
Occupation A wide category of jobs with similar characteristics
Career A lifetime journey of building and making good use of your skills, knowledge, and experiences
Human Capital Process of self-investment
Transferable Skills Skills acquired through the process of self-investment
Standard of Living Minimum necessities, comforts, or luxuries thought to be essential
Well-being State of being happy, healthy, and prosperous
Factors that influence a career Jobs, occupations, human capital, transferable skills, education, family/friends, and leisure activites
Goal Something a person intends to accomplish
Why Set Goals? Like a road map; provides direction, focus on important things, and keep the end result in mind
Short-Term Goals Can be accomplished within one year
Long-Term Goals Can be accomplished in more than one year
SMART Goals Well written goals that are Specific, Measurable, Attainable, Realistic, and Time bound
Educational Goals Help individuals prepare for success in the workplace; short and long term; provide guidance and direction; enable individuals to reach financial goals
Financial Goals A goal that guides financial planning; short and long term
Specific State exactly what is to be done
Measurable Include how the goal can be measured
Attainable Determine steps to reach the goal
Realistic Don't set goals for something unrealistic
Time Bound State when the goal will be met
Decision A choice that is made about things that affect a person's life
Routine Decisions Made on a day-to-day basis; don't require a lot of time to think through; can become a habit
Major Decisions Have long-term effects on your life; should be made very carefully and with a lot of thought
Financial Decisions Major decision; impact an individual's or family's well-being
Decision Making Process Guides individuals to think through all components of making a good decision
Identify the Problem 1st step in decision making process; Know problem or question before searching for an answer
List Alternatives 2nd step in decision making process; Brainstorm pros and cons for all of the possible choices
Decide 3rd step in decision making process; Make the best choice after thinking about all of the consequences
Evaluate the Results 4th and final step in decision making process; Will help in making the better decision in the future
Values Something that is desirable, worthwhile, and important; influenced by family, friends, teachers, coaches, tv, and movies
Need Something necessary or required for life
Wants Something unnecessary but desired
Bartering Direct exchange of one good for another
Lydians group of people that were the first in the Western World to make coins
Commodity Money Coins containing precious metals; traded because of its value
Mulberry Bark Tree Used by Chinese to make their paper money
Representative Money Tokens or pieces of paper that aren't intrinsically valuable; can be exchanged for commodity
Fiat Money Can't be redeemed for a commodity
Federal Reserve Responsible for maintaining the integrity of U.S. currency
Chinese First nationality to use paper money
Spanish 8-reale One of the most widely used coins during the 18th century; split into pieces
Needs Examples Water, food, shelter, and clothing
Wants Examples iPod, laptop, iPhone, car, tv
Spending Plan Financial statement individuals can use to assist with money management
Income Money going in
Expenses Money going out
Spending Plan Benifits Gives understanding of where money is going, tracks income and expenses, helps people meet financial goals, and helps people live within their income
Major Expenditures largest expenses in a spending plan; housing,transportation, insurance, food, other, & savings
Pay What First? Yourself
Insurance protects people financially from unexpected expenses caused by accidents or illness
Types of Insurance Health, Automobile,& Home
Housing Expenses Insurance, taxes, maintenance, utilities, move-in costs, & monthly payment
Car Expenses Monthly payment, maintenance, fuel, licence and registration, insurance, & optional upgrades
Food Expenses (Least Expensive to Most Expensive) Meals from scratch at home, convenience foods at home, fast food, sit-down restaurant
Savings Income not spent on current expenses
Pay Yourself First Set aside money for saving before spending any money
Savings % 10%
Insurance % 7%
Housing % 30%
Transportation % 20%
Food % 15%
Other % 18%
Other Examples Clothing, Donations, Personal Care, & Entertainment
Impulse Buying Unplanned buying, little consideration of product
Comparison Shopping Planned buying, careful consideration of product
Benefits of Comparison Shopping buy same product for less money, buy more goods with the same amount of money, buy a better quality product for the same amount of money
Steps of Comparison Shopping in Order 1) Decide exactly what is needed before shopping, 2) What is the quality of the product I am using? 3) What is the total cost? 4) How will the product be used? 5) Consider the opportunity cost and make a decision
Opportunity Cost Something an individual gives up to receive another
Created by: 16755